Target & Walmart Earnings Figures Will Indicate How Depressing Holidays May Be For Retailers

The statistics that will be released this week by Walmart and Target are likely to suggest that major retailers are poised for a difficult holiday season. This is because rampant inflation has made it more expensive for buyers to purchase everything from toothpaste to Christmas sweaters.

Wall Street is placing bets that the retail bellwethers will anticipate a season of profit-squeezing promotions and discounts as they strive to eliminate stocks of clothes and electronics that have piled up as a result of consumers cutting back on spending on discretionary items.

According to Bill Smead, chief investment officer of Smead Capital Management, which holds Target shares valued at more than $200 million, “We have our expectations set pretty low, it’s a difficult market.” Recent warnings regarding demand from FedEx and Amazon, according to Smead, do not auger well for the success of merchants during this season.

Even though consumer prices in the United States climbed by a less amount than anticipated in October, the battle against inflation is far from done because consumer mood is still in the dumps and unemployment is on the rise.

The economic slowdown has led to forecasts of a more subdued holiday shopping season, which has resulted in retailers such as Amazon and Walmart beginning holiday sales earlier than usual in an effort to get rid of surplus inventory.

Evercore ISI analysts predicted that Target would likely have higher clearing activity in the fourth quarter as a result of the company’s reliance on discretionary goods and the need to clear an inventory that had been built up over the course of more than six months.

According to analysts, Walmart and Target’s scale and ability to undercut smaller retailers on price may still help them fare better than others as they attract more cost-conscious consumers looking to do their Christmas shopping on a budget. This is because Walmart and Target have the ability to undercut smaller retailers on price.

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According to statistics provided by Refinitiv IBES, Target has failed to meet the earnings forecasts of industry analysts for the past two quarters.

According to statistics provided by Placer.ai, a location analytics company, the number of customers that visited Walmart and Target locations during the month of October decreased by 2.1% and 3.5%, respectively, as compared to the same month in the prior year.

It is anticipated that Target’s third-quarter sales at its same stores will increase by 2.2%. Same-store sales are predicted to rise by 3.8% for Walmart in the United States, thanks to the retailer’s increased emphasis on the sale of food and other necessities.

According to data provided by Refinitiv, Wall Street brokerages have an average “buy” recommendation for Walmart stock and have set a median price target of $155, which represents an 8.7% premium to the firm’s most recent closing price.

Wall Street brokerages have given Objective an average “buy” rating, and the company is expected to reach a median price target of $190, which represents a 9.6% premium to the firm’s most recent closing price.