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Why Walmart and Target are still winning with consumers

McKenzie DeGroot
·Segment Producer
Updated

Retail is in focus this week as companies report earnings ahead of the much-anticipated holiday shopping season.

On Wednesday, Target (TGT) reported earnings that crushed analysts’ expectations on sales, earnings, same-store sales, and gross profit margins for the third quarter. This came after Walmart (WMT) reported expectations-beating earnings last week that sent the stock to new highs.

What do Walmart and Target have in common? They’re well-known brick-and-mortar discount brands that have pushed same-day in-store pickup for online orders.

“I think they're doing a really good job of understanding how to utilize their physical footprint and how to rethink it, which is really what's needed today in retail,” The Lionesque Group CEO Melissa Gonzalez told YFi AM on Wednesday, referring specifically to Target.

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Gonzalez says the key to Target’s success has been its rethinking of how to be “a fulfillment center, in addition to being a retail experience.”

NEW YORK, NY - NOVEMBER 20: A Target retail store is seen on 14th street in Manhattan on November 20, 2019 in New York City. Target has announced its 3rd quarter results, a 4.5% increase in sales and a 15% growth in revenues.  Targets strong earnings has raised their stock value 67% in 2019. (Photo by David Dee Delgado/Getty Images)
NEW YORK, NY - NOVEMBER 20: A Target retail store is seen on 14th street in Manhattan on November 20, 2019 in New York City. Target has announced its 3rd quarter results, a 4.5% increase in sales and a 15% growth in revenues. Targets strong earnings has raised their stock value 67% in 2019. (Photo by David Dee Delgado/Getty Images)

Low-cost retailers like Walmart and Target have tended to thrive in the current economic environment, along with luxury retailers, Gonzalez acknowledged. “People are value-oriented. And, you know, brands like Target and Walmart really still lean into that. And they have strong relationships with those customers,” Gonzalez says.

At the same time, mid-range retailers like Urban Outfitters have struggled — a trend that Gonzalez said reflects the fact that “the middle class is kind of getting squeezed.”

Retail earnings will stay in the spotlight Thursday with department store giants Nordstrom (JWN) and Macy’s (M) releasing their results.

McKenzie DeGroot is a producer at Yahoo Finance. Follow her on Twitter: @degrootmckenzie

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