Beating the street a new possibility

Expectations can be a funny thing, as Target and Wal-Mart proved last week. Analysts and investors have been piling on Wal-Mart since the beginning of the year due to the weak economy, the company’s emphasis on low prices and a product mixed skewed toward food and consumables. Conversely, several months of negative results from Target and the company’s more discretionary product mix caused investors to avoid the company. Of course there were more factors in play at both companies, but generally speaking Wal-Mart has been regarded as a beneficiary of the current economic climate, while Target was regarded as a loser and expectations were created accordingly. As a result, when Target’s March numbers weren’t as bad as expected and Wal-Mart’s weren’t as good as expected, the companies’ stock prices headed in opposite directions in advance of the Easter weekend. Share’s of Wal-Mart opened sharply lower last Thursday at $50.04 from the previous day’s close of $52.61, before regaining some ground to end the day at $50.66, after the company reported a 1.4% same-store sales increase for its U.S. stores and Sam’s Club divisions that was less than half the 3.2% increase analysts expected. Conversely, Target shares opened sharply higher at $38.59 from the prior day’s close of $37.60, and would end the day at $39.89 after the company reported a 6.3% same-store sales decline that was better than the company’s guidance for a high-single digit decline and analysts’ estimates of a 7% decline. It also helped that the company forecast flat same-store sales for April. Meanwhile, Wal-Mart, which no longer provides monthly updates regarding its sales outlook, indicated that its first quarter same-store sales would be at the upper end of the range of 1% to 3%.