Target vs. Wal-Mart

Although monthly same-store sales results would appear to suggest otherwise, Target is not losing market share to Wal-Mart, according to a report out by Bernstein Research analyst Uta Werner.

Target’s same-store sales for the past five months have declined at an accelerating pace, culminating with a 10.4% decline in November. Conversely, Wal-Mart’s same-store sales have increased every month since January and hit 3.4% in November. A logical assumption, therefore, would be that Target is losing share to Wal-Mart. However, Werner said she strongly believes that that conclusion is incorrect.

“Instead, we believe that both retailers continue to gain share from competitors in key categories and that Target’s lower total comps are driven by its much more discretionary merchandise mix, rather than by relative underperformance in any one category,” stated Werner. “In fact, our analysis indicates that in the grocery and health categories, both Wal-Mart and Target have comped in line with, or better than, national food and health retailers, implying that both continue to take share from grocers and drug stores.”

Although Target currently is suffering from the pullback in discretionary spending, which has affected its apparel and home businesses, Werner said she expects Target to disproportionately benefit when the economy rebounds. “We expect that Target will gain considerably from a surge in discretionary spending given its apparel and home-rich offering,” stated Werner.