The impact of the epidemic has made it more difficult for the US physical retail industry, which has been eroded by e-commerce.

On May 7, 2020, Neiman Marcus, a veteran US department store group, filed for bankruptcy; 8 days later, the century-old brand JC Penney filed for bankruptcy, initially reporting debts of more than $1 billion.

A total of 38 US retailers filed for bankruptcy between the beginning of this year and July 14, a three-year high, according to data released by S&P Global Inc. Market Intelligence in July.

As more and more cities and states in the United States implement "blockade orders", the cold winter of retail is expected to continue. In addition, the monthly rate of July retail sales in the United States, due to be released on Friday (August 14), may further dim the outlook for the retail industry.

Some industry insiders estimate that total US retail sales will fall 10.5 per cent to $4.9 trillion this year from a year earlier, the lowest level since 2016 and larger than the 8.2 per cent decline seen during the recession in 2009.

However, the COVID-19 pandemic has led consumers to hoard groceries and other necessities during the blockade, which have partly benefited WMT.US and TGT.US.

As one of the few enterprises, Walmart Inc and Target Corp have not only adapted to the ever-changing industry dynamics, but also achieved certain growth.

With the second-quarter results approaching, Walmart Inc and Target Corp's e-commerce sales are expected to remain strong, and brick-and-mortar store sales are also expected to improve due to the relaxation of the ban.

Walmart Inc

Walmart Inc is expected to release second-quarter results on Tuesday, Aug. 18.

Thanks to the low-price strategy and active investment in e-commerce, Walmart Inc has maintained a leading position in the highly competitive retail market. The company's cost control and productivity gains have also helped to improve its performance.

Looking back on the first quarter, when the retail industry was under pressure, Walmart Inc's total revenue rose 8.6 per cent year-on-year to $134.62 billion and net profit rose 3.9 per cent to $3.99 billion, both exceeding market expectations. Among them, the epidemic led to a surge in demand for food and necessities, with same-store sales in the United States up 10% year-on-year, and sales of products such as video games, toys and televisions also increased towards the end of the first quarter.

Although Walmart Inc has achieved strong growth in the e-commerce business, the emergence of the epidemic has pushed his e-commerce sales to another level. Driven by pick-up and delivery services, Walmart Inc's website and marketplace, Q1 ecommerce sales rose 74 per cent year-on-year.

Michael Lasser, an analyst at UBS, believes Walmart Inc's strong performance is likely to continue into the second quarter. He expects comparable sales to grow by 6% in the second quarter, higher than market expectations of 5.5%. In addition, the demand for food will continue to benefit Walmart Inc's grocery sales.

It is not difficult to find that Walmart Inc's daily low price (Every Day Low Price) strategy can continue to bring value to customers, especially when many competitors reduce promotions and raise prices. At the same time, more and more shoppers are flocking to online shopping, and Walmart Inc's same-store sales will also grow sharply due to a strong surge in online sales.

Lasser expects Q2 online sales to grow by 55 per cent. The analyst reiterated his "buy" rating on Walmart Inc on Aug. 4, with a target price of $135. In terms of other ratings, Morgan Stanley maintained its "overweight" rating on Walmart Inc on July 20, raising its target price to $150 from $140a.

Taken together, Wall Street is optimistic about Walmart Inc's overall prospects.

Target Corp

Target Corp is expected to release second-quarter results on Wednesday, Aug. 19.

Like Walmart Inc, Target Corp also benefited from the soaring demand for food and groceries. However, it is worth noting that Target Corp has less business in groceries and is slightly inferior in the competition with Walmart Inc.

However, in 2020, Target Corp's revenue rose 11.3 per cent year-on-year to $19.6 billion, exceeding market expectations; same-store sales rose 10.8 per cent year-on-year and online same-store sales soared 141 per cent.

It was noted that Target Corp's "same-day delivery" service, which includes order taking, driving and transportation services, boosted the company's e-commerce sales as customers avoided going to brick-and-mortar stores to contain the spread of the virus.

These services have won 5 million new customers for Target Corp's e-commerce website on Q1. At the same time, Target Corp's acquisition of last mile platform from startup Deliv is expected to further enhance its order delivery capacity.

However, the company's Q1 profit margins have been hit by a slowdown in demand for higher-margin goods such as clothing and growth in demand for lower-margin goods such as food and necessities. At the same time, raising wages and benefits in order to support employees also puts a lot of pressure on the company.

Still, Oliver Chen, an analyst at Cowen, is optimistic about Target Corp's prospects because of the company's business in home decoration, food and necessities.

Oliver says there are some weaknesses in back-to-school spending, but it will also be a key driver of the company's performance growth in the coming quarters. The analyst reiterated his "buy" rating, with a target price of $150.

In other ratings, Morgan Stanley maintained its "shareholding wait-and-see" rating on Target Corp on Aug. 11, but raised its target price to $135from $120. UBS maintained a "neutral" rating on Aug. 10, raising its target price to $135a.

Buy Walmart Inc? Or Target Corp?

Judging from the stock price increases over the past year, Target Corp's rate of return (2019.1.7-2020.8.11) is higher than that of Walmart Inc (2019.1.7-2020.8.11).

However, from the fundamentals and analysts' expectations, Walmart Inc now seems to be a better choice.