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Walmart, Target, and Nordstrom: On Track?

Thomas Paulson
Oct 21, 2022
Walmart, Target, and Nordstrom: On Track?

This week, Walmart, Target, and Nordstrom each indicated that sales are tracking to plan. For Walmart, this is a +3% comp-store increase for the U.S. For Target, this is a +3.5% increase in 2H22. For Nordstrom, this is a low-single-digit to flattish decline.

  • On Wednesday, Walmart U.S.CEO John Furner said, "We certainly are watching the market very closely, but what we see from customers is that spending is still strong. There’s a lot of demand in the United States and we think that’s going to continue." When pressed on whether consumers were hitting their financial breaking points, he said that circumstances vary. "Some customers have been switching to private brands and smaller-pack sizes, and then other customers are in better shape, so it’s really different depending on where you are around the country". (This is similar to what Walmart said on their 2Q22 update.)

  • Target CEO Brian Cornell was asked about any indications the chain might be seeing with respect to a recession: "Well, everyone's talking about recession. And sitting here today, there's different points of view. You talk to bank CEOs, some gloom and doom. Others are saying really healthy consumer. What we've seen all year long is really healthy traffic. And our guests are shopping in our stores and shopping online. So that strength in traffic has been driving our business. We've delivered solid comps throughout this year. We expect that to continue over the balance of the holiday season."
  • Healthy traffic growth is also what shows for Target. Moreover, Target is lapping its most difficult comparisons of the 2H22 in October. Given that the comparisons ease by nearly 10 ppts into next month and beyond (compared to 2019), one should expect its traffic growth on a 1-year basis to accelerate over the next several weeks.

  • Nordstrom reiterated its guidance for 5%-7% sales growth and 4.5%-4.9% adjusted profit margins for the year. The reiteration of the margin rate was key as it suggests that promotional levels and discounting have not deteriorated beyond plan and hitting that plan implies that 2H22 margins will be better than 1H22 and 2H21. Should this come to pass, that’s a major positive for its competitor Macy’s/Bloomingdale’s.
  • Similar to our analysis on Saks and Neiman Marcus last week, we've compared visitation trends for Nordstrom and Nordstrom Rack this week. Our data shows both of Nordstrom’s banners challenged from a footfall perspective thus far in 2H22, with the Rack down more given that its less affluent customer base pulled back starting in 2Q22. Both banners are counting on higher ticket and higher average unit retail (AUR) to drive sales growth in 2H22 and that is to come from "newness" and offering something unique. As a reminder, Nordstrom was in a good position with inventory flow when 2Q22 was reported. The reiteration of the 2H22 margin target suggests that the newness and unique are occurring.

  • Nordstrom also announced that CFO Anne Bramman was departing the company. This is the latest in a long list of CFO departures. We have no knowledge of what Anne intends to do next or the reasons for her departure.

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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