Wal-Mart reported earnings this week. Quarterly performance was solid -- with better-than-expected top-line and bottom-line numbers. But same-store sales were down 1% ex-gasoline, and company officials continue to point to weakness and additional vulnerability on the consumer front. Consider comments made by CEO Mike Duke (as reported in The Wall Street Journal):
"Our customers, particularly in the US, are still concerned about their personal finances and unemployment, as well has higher fuel prices..."
"More than ever, our customers are living paycheck to paycheck..."
Target is perceived to have a more upscale demographic -- and is believed to have lost customers to Wal-Mart during the downturn. But those customers may be coming back. Mike Duke generically acknowledged the possibility during the Wal-Mart earnings call. Targets first quarter results seemed to affirm the notion. From The Wall Street Journal:
Target Corp. sounded decidedly upbeat about what it called a "stronger-than-expected economic environment" as it reported healthy profit and sales gains in its fiscal first quarter.
The company benefited from customers slowly returning to buying more profitable products, such as apparel and home furnishings.
The results were in sharp contrast to the latest performance at Wal-Mart Stores Inc., which on Tuesday reported its fourth consecutive quarter of lower sales at its U.S. stores, citing customers who are still pressured by gas-price increases and high unemployment.
By contrast, Target's profit rose 29% for the quarter ended May 1 as its sales increased 5.5%. Sales at stores open at least a year, an important measure of a retailer's health, rose 2.8%.
Economy bears are, naturally enough, focusing on WMT's comments; bulls, as might be expected, are touting TGT's showing as representing reality. The stocks are trading within a dollar of each other.
Getting a pulse on consumer sentiment and behavior remains as elusive as it is important...
