Wal-Mart, the world’s biggest retailer, is due to issue earnings results today November 13th 2008 and is expected to report higher third-quarter profit, as shoppers head to its stores for deals on necessities like groceries and medicine. The economic downturn has seriously dented consumer confidence and consequently resulted in a more value conscious shopper! This is playing well for Wal-Mart who are fast becoming that consumer’s location of choice for value purchases.
When their biggest rival, Target, issue their results in 4 days time, it will be a study of contrasts.
After years of economic prosperity in which Target’s sales outperform
Wal-Mart,is expected to report higher third-quarter profit, as shoppers head to its stores for deals on necessities like groceries and medicine.
But Target is facing its fifth consecutive quarterly profit drop. Its shoppers, following more austere budgets, are cutting back on trips to the retailer and avoiding purchases of its once-hot cheap but chic clothes and home decor.
Investors are watching to see if Target can get its sales on track for the fourth quarter, which includes the holiday season and accounted for 36 percent of its profit last year.
They are also waiting to see if Target will bow to pressure from William Ackman, an investor who has proposed that Target spin off a separate company that would own the land on which its stores are built.
Meanwhile, analysts are dialing back expectations for Wal-Mart as a stronger U.S. dollar lowers the value of its international sales.
“We expect foreign currency exchange risk could serve as a headwind to sales and profitability for the remainder of the year and into 2009,” wrote Barclays Capital analyst Robert Drbul in a research note.
ed those at larger rival Wal-Mart, the economic downturn has flipped the fortunes of the two retailers. Target was seen as a higher quality offering and experinece when shoppers were willing to pay a little more.