Target will slash prices on thousands of essential household items as inflation lingers and Walmart emerges as a more potent competitor. Target stock fell with Walmart stock sliding back into buy range. Other notable discounters, including TJX Cos. and Dollar General, also retreated.
The big-box retailer announced on Monday that it is lowering prices on roughly 5,000 everyday items ranging from milk, meat and bread to diapers, paper towels and pet food. Some 1,500 reductions have already been made, with more coming over the summer. Target said it routinely adjusts prices to stay competitive.
Amid stubborn inflation, Target also faces increased competition from Walmart. That larger rival last week reported robust earnings as price-conscious shoppers continue to search for cheaper essentials.
Notably, Walmart said it continues to attract more frequent and new shoppers, while it's starting to see more higher-income shoppers hit its stores.
Target uses a low-pricing strategy similar to Walmart but enjoys a more upscale image.
"We know consumers are feeling pressured to make the most of their budget, and Target is here to help them save more," Target Executive Vice President Rick Gomez said in Monday's news release.
Target reports earnings for the first quarter early Wednesday. Analysts expect the retailer to report a 3.7% decline in same-store sales.
Meanwhile, nearly two dozen analysts have hiked price targets on Walmart stock since the company's Q1 earnings report, FactSet shows. Walmart "has what all cohorts are looking for," Bank of America analysts said, reiterating a buy rating and raising the PT from $67 to $75.
Target Stock, Walmart Stock
Shares of Target fell 2.1% to 156.71 on the stock market today. Target stock continues to work on a 181.86 flat-base buy point, but it's below the 50-day line and near the bottom of the consolidation. Walmart stock gave up 0.7% to 64.21, back in range from an earnings breakaway gap-up from a double-bottom base last week.
Jefferies analyst Corey Tarlowe said on Monday that Target's price cuts may hurt margins but could improve efficiencies, driving more profitable growth ahead.
Tarlowe expects Target to affirm its prior full-year guidance.
The retailer's price reductions could ripple across the value-oriented and off-price merchandise chain. This week, TJX, BJ's Wholesale Club and Ross Stores all report earnings, with investors eager to learn the latest on still-high inflation.
Costco Wholesale, Dollar General and Burlington Stores report next week. Dollar Tree and Kroger have yet to announce dates.
Amazon has already reported. The e-commerce giant said its customers continue to shop though they are cautious, trading down to lower-price items and seeking out deals.
Off-price giant TJX fell roughly 2.4% with earnings expected Wednesday, while peers Ross and Burlington edged lower. Dollar General stock sank 3% while Dollar Tree retreated 3.3% to a six-month low. Warehouse membership chain Costco nudged lower and BJ's edged higher. Grocery giant Kroger and Amazon lost a fraction apiece.
