DJ Why Walmart and Target Look Like Big Winners This Holiday Season -- Barrons.com
By Avi Salzman
Walmart and Target stocks have been on a tear this year, and one analyst expects the momentum to last through the holidays.
The big-box retailers are uniquely positioned to profit as Americans express more concern about the economy and look to discount stores for their holiday shopping, wrote Cowen analyst Oliver Chen.
Walmart (WMT) is up 28% this year and Target (TGT) has gained 66%. Both have improved their web-based offerings and services, adding more options like faster delivery, and allowing people to pick up items in the store after ordering online. Curbside pickup "should help both retailers win over late holiday season shoppers," Chen said.
Both companies have also benefited from the closures of other retailers, allowing them to take market share in several areas. Toys in particular have helped lift sales at Target. Several toy chains have gone out of business since the start of 2018.
There are other reasons to like the stocks, Chen argues. The U.S. economy remains strong and employment has continued to rise, although some data indicates growing concern about the economy, a factor that could affect shopping.
Consumer surveys that Cowen has reviewed "suggest an uptick in concern over future economic uncertainty year over year, which could lead to lower absolute spending levels, plus higher promotions to entice shoppers," Chen wrote. "With this caution in mind, we favor value-oriented stocks this holiday, and believe that the environment is favorable for value momentum to continue at both Walmart and Target."
Other retailers could fare worse. A relatively warm November may be hurting apparel sales, Chen said, noting that several companies that sell apparel are marking down prices. He said he is particularly worried about Macy's (M), J.C. Penney (JCP) and Gap (GPS).
Write to Avi Salzman at avi.salzman@barrons.com
(END) Dow Jones Newswires
November 12, 2019 12:38 ET (17:38 GMT)
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