I own both stocks.

As I was writing yesterday, WMT stands out as the retailer best able to cope with the current economic environment.

I thought TGT was also putting its pandemic-related issues behind it. But no! The company reported earnings per share of $1.85 for 3Q24 this morning. This compares with analyst estimates of around $2.30. And the company said it expects to earn the same during the traditionally stronger holiday season quarter that we’re in now. That compares unfavorably with the $2.65 Wall Street had penciled in for the three months. To my mind, it’s the latter that explains the sharp negative reaction in opening trading.

In a nutshell, sales are flat and margins are being squeezed. The earnings call now under way will likely have more detail.

What I read this as saying about the general economy, comparing these results with WMT’s:

–although I lumped the two retailers into the same category in yesterday’s post, WMT is a bit more don-market than TGT. My guess is that WMT (maybe the overall economy has a role, as well) has been more than usually successful in persuading TGT customers who have traded down during the pandemic not to trade back up

–WMT sells a lot more food items than TGT, and food has been particularly strong

–TGT’s attempt to mimic Amazon’s online presence is less far along than WMT’s. Though online sales for TGT are strong, unit profits are lower than from in-store sales–maybe forever, but for now at least while TGT continues to build online and delivery infrastructure.

–also, TGT has much more exposure than WMT to California and the Northeast, as well as to city dwellers

–TGT’s inventory issues, which I had thought were in the rear view mirror, have emerged again. Hard to know what to make of this.

I’d like to hear more before I decide what to do with TGT. The general message, though, is that the overall economy seems to be more fragile than I’ve been thinking. WMT’s and Lowe’s’ recent statements that Trump tariffs will be bad for business–stating the obvious, but noteworthy that conservative managements would take the risk of offending the Trump-leaning part of the customer base–underline this.