Walmart (WMT) and Target (TGT) earnings show mixed performance

Target‘s stock tumbled to a 52-week low on Wednesday, a day after Walmart shares soared to an all-time high — as the rival retailers’ earnings reports again underscored how their performance has diverged.

Target posted its biggest earnings miss in two years and cut its forecast. The company spoke about a “deceleration in discretionary demand” and blamed higher costs caused by the rush to move inventory ahead of the short-lived port strike in October.

On the company’s earnings call, CEO Brian Cornell described U.S. consumers who are “shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation” and holding out for the best possible deal.

Walmart, on the other hand, hiked its full-year forecast. It said it’s gaining upper-income shoppers and seeing better trends for sales of merchandise outside of the grocery department, even as consumers look for value.

Customer traffic gains were similar at the two stores, yet Walmart’s sales trends looked much better than Target’s. Walmart’s traffic growth edged out its rival’s, with a gain of 3.1% at Walmart U.S. versus 2.4% at Target. Walmart’s same-store sales rose 5.3%, while Target’s increased only 0.3% year over year. Walmart’s e-commerce sales in the U.S. rose 22%, a bigger increase than the nearly 11% at Target.

The sharp differences between the two big-box retailers — and how their businesses are executing in the same economic backdrop — illustrate where consumers are willing to spend money and where they are pulling back as they remain selective about spending. That sharp divergence of the winners and losers in the industry could become even starker as retailers enter their most crucial sales season of the year.

Michael Baker, a retail analyst at D.A. Davidson, said Target’s disappointing results reflect the company’s performance rather than the health of consumers.

“It’s as simple as this: They are losing share,” Baker said. “They are losing share to Walmart, Amazon and Costco.”

He said Target’s inconsistent results over the past year are a warning sign about execution. The company has missed Wall Street’s quarterly sales and earnings expectations in two quarters and beat on them in two other quarters.

“That kind of back and forth makes you wonder if there’s something going on internally,” he said.

Several equity research analysts, including Citi Research, Deutsche Bank and HSBC Global Research, downgraded Target’s stock Wednesday, citing concerns that the Minneapolis-based retailer has lost shoppers and sales to competitors. Its stock dropped more than 20% in trading Wednesday.

In a research note, Paul Lejuez, a retail analyst for Citi, said the company’s poor results and weak outlook show Target is “likely losing share” to Walmart and risks losing more of the market unless it steps up promotions.

One of the roots of Target’s troubles is the company’s merchandise mix, said Kate McShane, a retail analyst for Goldman Sachs. About 60% of Target’s sales come from…