It was the best of times, it was the worst of times

By David Pinto

This is a tale of two mass retailers — Walmart and Target — arguably two of the most important and influential retailers in the United States. Note that neither of them can be even loosely classified as a drug chain.

The intent in telling this story is not to draw any conclusions nor to reach any judgments. Rather, it is simply to pass along the retailers’ financial results for their most recent (third) operating quarter — and make any observations that this columnist regards as significant.

To begin, let’s examine Walmart’s third quarter performance — which, as a passing comment, are impressive indeed. For openers, the retailer posted a sales increase of 5%, to $114.9 billion. More impressive still, Walmart’s e-commerce volume advanced by 22%, aided by appealing (to the customer) pickup and delivery options and an expanding online advertising program.

Equally impressive, at store level, Walmart’s customer visits and the amount of money spent per visit both increased, undoubtedly a factor in the company’s decision to raise its full-year sales and earnings forecast. Further, the performance prompted Wal­mart chief executive officer Doug McMillon to reinforce these results with these words: “In the U.S., in-store volume grew, pickup from store grew faster, and delivery from store grew even faster than that.”

Withal, the retailer used these third quarter results to forecast a strong holiday selling season. 

Now, on to Target, whose third quarter performance left the retailer’s senior managers — and many industry observers — somewhat disappointed.

During the period, the retailer’s sales fell by 1.9%, though online volume increased by 10.8%. These numbers prompted Brian Cornell, Target’s chief executive, to note that the company was enduring a “volatile operating environment.”

But wait. Although the number of visits to Target stores increased by 2.4%, the average amount that customers spent declined by 2%, prompting Cornell to concede that the retailer had faced some “unique challenges” in the just concluded quarter.

What does all this mean? And what does it portend for the critical upcoming holiday selling season? This column doesn’t pretend to know — or even guess at — the answers.

But among the prevailing theories, the two retailers’ sometimes striking contrast in the merchandise they sell and the emphasis each places on product mix and pricing philosophy get lots of attention. In the context, Walmart’s strong performance in its grocery categories and, by contrast, Target’s relatively weak results from the discretionary categories that constitute some 50% of that retailer’s product have come in for much discussion and debate. The initial consensus, though by no means unanimous, is that Wal­mart’s merchandise business, about 60% of which is grocery oriented, offers that retailer a clear advantage entering the holiday selling season.

What all this means for America’s drug chains is, of course, anybody’s guess.