Will Target and Walmart top 2020’s record results in 2021?

Discussion
Photo: Walmart
May 21, 2021

Strong, better than expected first quarter sales and earnings results for Target and Walmart may be further proof that, for most every rule (or widely held belief), there are exceptions.

Target posted a 22.9 percent jump in same-store sales on top of 10.8 percent growth last year as both its physical and digital revenue generators climbed higher. Physical store locations recorded an 18 percent gain on top of just under one percent growth in 2020. The chain’s same-day services (Order Pickup, Drive Up and Shipt same-day delivery) rocketed up more than 90 percent, with Target’s curbside offering growing 123 percent. More than 95 percent of the retailer’s digital sales were fulfilled by its stores.

Walmart’s comps for its U.S. stores were up six percent on top of record results last year, with its e-commerce sales up 37 percent, more than double what the retailer was generating just two years ago.

Both Target and Walmart raised their financial guidance for 2021 based on the strength of their first quarters but also based on the belief that they are well positioned to meet the needs of American consumers at a time when shopping behaviors have changed and the economy appears set for its strongest performance in perhaps decades.

Conventional wisdom maintains that retailers that posted record results in 2020 as a result of being labeled “essential” during the novel coronavirus pandemic will likely take a step back in 2021. This thinking is based on a number of factors, starting with last year’s hard to replicate astronomical gains.

It is also based on the assumption of a return to normalcy with consumer demand and product supplies being aligned, thereby avoiding 2020’s turbulence. It is further expected that we will see a shift in spending, as dollars previously spent for groceries at home, for example, go to restaurants.

As 2021 moves closer to the half year mark, retailers have benefited from the money Americans received from President Biden’s $1.9 trillion CARES Act. Mass COVID-19 vaccinations have also given millions of consumers a further boost of confidence as they return to normal activities without mask requirements.

DISCUSSION QUESTIONS: What is your current assessment of what the 2021 retailing year will look like? Where do you see the greatest opportunities for Target and Walmart to further improve their sales, profit and market share numbers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It will be tough to beat the 2020 sales results in 2021, but they have definitely expanded their customer bases."
"Supply chain is the key to the future of these companies. I continue to think that Target is making better and faster investments in this realm than Walmart."
"One of the participants in the CXO Council meeting asserted that the economy post-vaccination would look like putting Mentos into a Coke bottle."

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14 Comments on "Will Target and Walmart top 2020’s record results in 2021?"


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Neil Saunders
BrainTrust

All of the first quarter retail results are inflated by the stimulus payments which were a huge shot in the arm for the consumer economy. Unless there are more payments made across the remainder of this year, I expect the heady growth will moderate. However this will remain a good year for retail – there will be growth and gains at major retailers are feasible.

With regard to Target, I expect growth will come down a bit but it should continue to do well. Its success isn’t just a function of the pandemic or people having more cash, it’s down to all the great things Target has done to make itself a compelling retail destination. Walmart can make gains, but I think they will be shallower: it is more reliant on grocery where growth will be tougher and its proportion, while reasonable and improving, is nowhere near as good as Target’s.

David Naumann
BrainTrust

The pandemic was a boon for Target and Walmart as consumers flocked to these and other discount department stores that remained open when other “non-essential” specialty retail stores were closed. Many consumers appreciated the convenience of a one-stop shop for most of their needs and some customers that weren’t loyal to Target and Walmart became more loyal. It will be tough to beat the 2020 sales results in 2021, but they have definitely expanded their customer bases.

Cathy Hotka
BrainTrust

One of the participants in the CXO Council meeting asserted that the economy post-vaccination would look like putting Mentos into a Coke bottle. Customers will roar back, and they’ll reward the retail companies that made shopping easy for them over the last year and a half.

Gene Detroyer
BrainTrust

I don’t know how big or long the roar back will be, but they’ll reward the retail companies that made shopping easy for them over the last year and a half.

Venky Ramesh
BrainTrust

Love the mentos in a coke bottle analogy.

Gene Detroyer
BrainTrust

Both David and Neil clearly explain the reality of the first quarter and reasonable expectations for 2021.

What also should be considered is the new habits of shoppers who tried and liked the services of these giants, the smaller retailers who have gone out of business and the new customers that say to themselves “these guys took care of me when times were tough.”

While 2021 will not reflect the first quarter, the easy part to forecast is that the gains Walmart and Target made in market share will continue.

Jeff Sward
BrainTrust

The momentum that both Walmart and Target carry into 2021 is pretty extraordinary. There is no doubt that their designation as essential retailers gave them a significant tailwind. Given that momentum and all the stimulus money that was injected into the economy, I think the real question is about 2022, not 2021. Some kind of “new normal” will be emerging by then and the competitive market will be working over time to recapture market share lost to Walmart and Target.

Suresh Chaganti
BrainTrust

Target and Walmart may get hit in absolute terms depending on the macro demand factors. But in relation to their competition, we can expect them to perform much better. They are well run companies and continue to build their capabilities in the last-mile delivery and omnichannel capabilities.

Jennifer Bartashus
BrainTrust

Sales are off to a strong start, but may start to normalize a bit in the second half of the year. Right now, Target and Walmart are reaping the benefits of the one-stop shop, all of their omnichannel investments, the price/value they offer, stimulus spending, eat-at-home trends, and home improvement among others. Retail store closures put market share up for grabs, and both are executing strategies well. In the next few months, we will see sales events to rival Amazon’s Prime Day and what could turn out to be a huge back-to-school/college season as parents and kids prepare to get back into schools, which should also help sustain some of the momentum. This could start to slow as we get closer to the holidays and have to lap last year’s extended holiday season. Regardless, both retailers are gaining market share and are now embedded in the regular habits of millions of shoppers.

David Mascitto
BrainTrust

Could be a record year for retail as businesses begin to reopen and customers are ready to get out and shop. This could also be the peak for the likes of Target and Walmart as specialty retailers who were not given special status should start taking market share back from them. Next year if life is back to pre-pandemic habits, retail could see some decreases as customers opt to spend their disposable income on experiences such as restaurants, hotels, concerts, car trips, flights, etc.

Mohamed Amer
BrainTrust

2020’s consumer demand met a skewed available supply of physical stores and abundant online options, especially in the second and third quarters. 2021 brings a more expansive, if not fully normalized, supply of physical stores and continued popularity of online purchases. Matching 2020’s record results by the major players, such as Walmart and Target, will be difficult. However make no mistake that these players’ gained market share will require creativity and substantial effort to recapture by the rest.

Rick Watson
BrainTrust

Supply chain is the key to the future of these companies. I continue to think that Target is making better and faster investments in this realm than Walmart.

Venky Ramesh
BrainTrust

The statement that caught my attention was “More than 95 percent of Target’s digital sales were fulfilled by its stores.” I don’t know what that number looked like pre-pandemic, but I am assuming it was mostly fulfilled from a central DC. The rapid growth of store fulfillment should have dragged the margins down, yet they saw a sevenfold increase in net income, which was intriguing. The reason for that they said was customers are beginning to spend on higher-margin items like apparel, home goods, and their private label brands.

Craig Sundstrom
Guest

Candidly, I think it’s going to be hard for Walmart to improve its market share numbers much: one of the disadvantages — if that’s the right word! — of great size is that at some point you’re really as big as you can get. The many initiatives we see for smaller stores and such – which seem to come and go without doing much — demonstrate the nature of the problem.

Target, OTOH, being much smaller would seem to offer more potential (although even here the “different format” mania has taken hold). As long as JCP and Macy’s — Gennette’s enthusiasm notwithstanding — continue to giveth, there will be opportunities to taketh.

wpDiscuz
Braintrust
"It will be tough to beat the 2020 sales results in 2021, but they have definitely expanded their customer bases."
"Supply chain is the key to the future of these companies. I continue to think that Target is making better and faster investments in this realm than Walmart."
"One of the participants in the CXO Council meeting asserted that the economy post-vaccination would look like putting Mentos into a Coke bottle."

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