What's the key differences between Target and Walmart?

$Target(TGT)$ fell 3.29% in premarket trading on Wednesday and ended up with -2.69% the whole day, after a 4.57% gain following its peer$Wal-Mart(WMT)$ on Tuesday.

Apparently, situation's got some differences.

The big retailer's operating margin fell to 1.2%, which reflected gross margin pressure from actions to reduce excess inventory as well as higher freight and transportation costs.

Besides, gross margin was also pressured by increased compensation and headcount in distribution centers, the costs of managing excess inventory, and higher per-unit last-mile shipping costs.

One day earlier, Walmart just improve inventory levels in the U.S., along with a heavier mix of sales in grocery put pressure on profit margin for Q2 and our outlook for the year.

It seems like the operation capability being the most important point.

For WMT, Comparable sales rose 6.5% in Q2 to top the consensus estimate for a 6.2% increase. Two years same store sales as high as 12.78%, transactions were up 1.0% and average ticket rose 5.5%. Comparable sales rose 9.5% at Sam's Club locations in the U.S. off transaction growth of 9.8%.
For TGT, Comparable sales rose only 2.6% during the quarter to fall short of the consensus expectation for a rise of 2.8%. Two year same store sales lowered to 11.73% Comparable sales at stores were up 1.3% during the quarter, while digital comparable sales rose 9.0%.

Let's compare.

Target didn't sell well.

Another vital factor, is estimate management.

Like we said yesterday, Walmart is following a bad example, but useful.

Walmart has just issued a profit warning last month due to concerns over consumer spending, which might cause a plunge at that time (together with the whole sector), but indeed lowered the market estimate.

When the result comes, it seems like a bad earning still beat the estimate, with a little bit lift in guidance, its stock price could easily rally. Maybe Targer should do the same.

Also, it creates the opportunity of arbitrage, by buying the"estimate management" stock before earnings, and sold it when released.

But Target didn't get this, it has to bearing the loss on both performance and stock price.

How interesting!

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