February 21, 2005-- Home Textiles Today,
Not too long ago, when the subject of powerhouse retailers came up, the talk revolved around the mighty triumvirate of Wal-Mart, Kmart and Target.
Then when Kmart floundered and fell from the magic circle, many wondered whether Target would suffer by direct comparison to Wal-Mart and the Bentonville giant's relentless growth pace.
Some argued — this column among them — that Target had, in a sense, been shielded by Kmart. It wasn't as big, but its financials were a whole lot better. And when Wall Street looked at the field, the head-to-head comparisons almost always were made between Bentonville and Troy.
As both companies reported their year-end results last week, Target officially closed the door on any such notion.
Both beat Wall Street earnings expectations, and both posted double-digit sales growth. But Target's comp store sales were far more robust — up 5.4 percent to Wal-Mart's 1.4 percent.
Wal-Mart's earnings for the full year topped $10 billion for the first time. Target's $3.2 billion in earnings for the fiscal year pale in comparison, but they represent a 77 percent jump from 2003.
True, the sale of the Marshall Field's and Mervyn's divisions contributed about $1.2 billion to the kitty, but earnings also got a boost from Target's credit card business. That stream added $485 million to EBIT, a 14.4 percent increase.
From a home textiles perspective, both are roiling the industry.
Target's plans have been made the most clear. It's overhauling the department by adding new captive brands and more quick-hit brandettes. It's also pushing ahead to develop as much product as possible in-house.
Wal-Mart, by several accounts, is not moving as concisely. Some programs that were to be moved into direct sourcing this year have reportedly been pulled back. On the branding side, the distinctions between its house labels aren't as cleanly delineated, and its presentation in domestics lags by a mile.
Each is said to have become wildly obsessed with what the other is up to. And each can learn a thing or two from its competitor.
Wal-Mart is superior in the amount of merchandise it keeps available on shelf.
Target appears to get in and get out of lines more nimbly.
As head-to-head competitions go, this fight leads the bill.
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