Those things, rather than the raw numbers, will drive the overall market’s reaction on Wednesday and Thursday, but the comparative post-earnings performance of the two stocks will be more about the things that have driven the disparity over the last three months: vision and execution. Are consumers “trading down” and favoring Walmart, or is the resilience that we have seen so far in the rate tightening cycle still evident? Are people still buying big ticket items, or are they focused on the basics? Any difference in the tone of the earnings and accompanying statement and guidance will therefore be seen as a commentary on the state of the consumer in general, as will the mix of sales reported by both. In very general terms, Target is traditionally seen as the more “upmarket” of the two stores, with Walmart being more of a value-based discount retailer, while the mix of spending at both stores, whether on basics like food or more discretionary spending on electronics and houseware goods, says a lot about the overall optimism and confidence of lower-end consumers. That is something that will be closely watched as both report, because it has implications beyond just these two stocks. Still, that advantage is now fully priced in, so any widening or narrowing of the performance gap in the two stocks next week will probably be a result of other factors, most notably the spending patterns of consumers. That dominance is based mainly on Walmart’s greater success in developing their online platform, and at this point it is hard to see how Target can catch up in that regard.
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