Target Vs. Wal-Mart Earnings: One Surprises, One Disappoints

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Target and Wal-Mart both released their latest earnings reports this week, with Target’s report coming this morning. The big box retailer surprised to the positive, sending shares up by as much as 3.57% to $83.17 per share. It was a different story with Wal-Mart, however, as the stock fell by as much as 1.44% after the company’s earnings disappointed.

Target beats guidance

Target reported adjusted earnings of $1.22 per share, beating management’s guidance and the consensus estimate of $1.11 per share. Comparable store sales climbed 2.4%, edging out the consensus estimate of a 2.3% increase. Sales amounted to $17.43 billion, compared to the consensus estimate of $17.4 billion.

Target also increased its estimated range for full year adjusted earnings. The previous guidance was between $4.50 and $4.65 per share, while the new guidance is a range of $4.60 to $4.75 per share.

Wal-Mart disappoints by a wide margin

Wal-Mart reported earnings of $1.08 per share for its second fiscal quarter, compared to the consensus estimate of $1.12 per share. The big box retailer said higher-than-expected costs weighed on its gross margins and, as a result, its bottom line. U.S. comparable store sales rose 1.5%, however, beating Cowen and Company analyst Oliver Chen and his team’s estimate of a 1% increase. Traffic was also positive at a 1.3% increase.

Chen and his team said they were encouraged by the positive traffic as it was the third consecutive quarter in which traffic was positive. They think lower gas prices resulted in more visits by consumers. Also Wal-Mart has been investing in improving the overall shopping experience at its stores.

Sam’s Club comparable store sales declined 2.3%, excluding fuel, missing Cowen’s estimate of a 1.3% decline. One area in which Wal-Mart struggled was pharmacy sales, which caused an 11-cent per-share headwind to the retail chain’s overall gross margins, according to the firm’s analysts.

Also contrary to Target, Wal-Mart actually lowered its guidance for the full fiscal year. The company now expects earnings of between $4.40 and $4.70 per share. The previous range was between $4.70 and $5.05 per share. Guidance for third quarter came up short of expectations at a range of between 93 cents and $1.05 per share.

Wall Street had been expecting earnings of $1.08 per share for the third quarter. However, one bright area in Wal-Mart’s guidance was comparable store sales in the U.S., which management expects to rise by 1% to 2%, compared to the consensus estimate of a 0.8% increase in comparable store sales.

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