Second quarter retail winners and losers

Who won the trophy and who walked away with a consolation prize? We asked our Retail reinvented team to give us the truth:

The winner: Despite the issuance of earnings warnings last month, walmart sits pretty out of Q2. Is this a case of under-promising and over-delivering? Or has the economy taken a meaningful recovery? It’s a bit of both, according to analyst Andrew Lipsman. The retailer did its best to prepare the market for less than stellar results, but managed to break through the lowered bar. Additionally, “relief at the gas pump means consumers have cash back to spend in brick-and-mortar retail,” Lipsman said. “So it’s not a big picture but a better picture.”

CEO Doug McMillon told CNBC the retailer’s sales have increased new clients from households with an annual income of $100,000 or more. Although Walmart is not targeting this cohort, it has benefited from value-seeking shoppers. “If you can buy something of equal quality but at a lower price, why wouldn’t you?” asked analyst Suzy Davidkhanian.

The loser (well, not really): Target didn’t have such a good second quarter. Earnings fell short of expectations and profits fell dramatically. But that’s not a huge surprise. “We knew they had worse excess inventory,” Lipsman said. “They had to aggressively discount to move it and take this affected product.”

But all is not gloomy. Although things aren’t looking great from a shareholder perspective, the retailer has a strong merchandising strategy, Davidkhanian said. Leveraging its private label and partnerships with national brands, Target has prepared well for the second half.

Secret sauce: Walmart+ may be the key to success for the retailer in the future. With service at the center of its flywheel, the retailer can keep customers within its ecosystem and fuel other business areas.

For Target, it must continue to do what it does, invest in its brand partnerships and expand its assortment of house brands. “Target has a sweet spot with its private label,” Lipsman said. “These are brands that customers have an affinity for and they can save money.”

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This was originally featured in the Retail By the Numbers newsletter. For more retail news, stats and trends, subscribe here.

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