Workflow
Better Buy: Walmart vs. Target Stock
The Motley Foolยท2025-05-26 08:30

Core Insights - Walmart has significantly outperformed Target over the past three years, with Walmart's stock rising over 140% while Target's stock has declined nearly 40% [2] Company Comparison - Walmart operates 10,784 stores across 19 countries, making it a larger and more globally diversified retailer compared to Target, which has only 1,981 stores all located in the U.S. [4][6] - Walmart generates substantial revenue from international markets, including Mexico, Canada, and China, while Target's operations are solely focused on the U.S. market [5][6] - Walmart has a growing digital advertising business, Walmart Connect, and has expanded its advertising ecosystem through acquisitions, such as Vizio [5] - Target operates a smaller advertising business called Roundel and has previously exited international markets, indicating a more limited growth strategy [6] Business Strategies - Walmart's core strategy focuses on "everyday low prices" and a higher mix of essentials and groceries, while Target targets more affluent consumers with slightly pricier goods [7][8] - Both retailers have launched private label brands to enhance gross margins and are expanding online, curbside, and in-store pickup options to compete with Amazon [9] Financial Performance - From fiscal 2022 to fiscal 2025, Walmart's revenue had a compound annual growth rate (CAGR) of 6%, with earnings per share (EPS) growing at a CAGR of 14% [10] - Walmart's comparable-store sales in the U.S. showed consistent growth, with increases of 6.4%, 6.6%, 5.6%, and 4.5% over the respective fiscal years [11] - For fiscal 2026, Walmart expects net sales growth of 3% to 4% and adjusted EPS growth of 13% to 17% [12] - In contrast, Target's revenue from fiscal 2021 to fiscal 2024 had a CAGR of only 0.1%, with EPS declining at a negative CAGR of 14% [13] - Target's comparable-store sales peaked at 12.7% in fiscal 2021 but have since declined, with expectations for flat comps and only 1% net sales growth for fiscal 2025 [14] Market Challenges - Both companies faced boycotts related to their diversity, equity, and inclusivity initiatives, but Target's domestic focus may make it more vulnerable [15] - Target's smaller size and reliance on the U.S. market could hinder its ability to negotiate with overseas suppliers amid tariff pressures [16] Valuation Outlook - Walmart's stock is valued at 37 times forward earnings with a forward dividend yield of 1%, while Target's stock is cheaper at 11 times forward earnings and offers a higher yield of 4.7% [17] - Despite Target's lower valuation, Walmart is expected to continue outperforming due to its size, growth rate, diversification, and clearer business strategy [18]