BOSTON — For discount giants Wal-Mart and Target, new strengths and familiar weaknesses showed through the tinsel of the holiday shopping season.
Still ahead: Both retailers anticipate that shoppers redeeming gift cards this month will help boost sales and continue what has evolved into a legitimate secondary season.
The rivals' December same-store sales results flip-flopped from November. Target rose on fashion and luxury in stores open at least a year, while Wal-Mart didn't deliver the promise of its early, bullish outlook and aggressive marketing campaign that started two weeks early on Nov. 1.
Wal-Mart's 2.2 percent December comp-store sales gain was within the company's 2 to 4 percent projection, but disappointed most investment analysts. Excluding Sam's Club, the domestic store division's comps rose 1.9 percent. The world's largest retailer, based in Bentonville, Ark., warned that its fourth-quarter earnings would be at the lower end of Wall Street's 82 to 86 cents per share expectations. Yet even with modest increases, Wal-Mart grew sales 6.7 percent, to $27.92 billion, adding $1.74 billion, compared with December 2004.
Wal-Mart executives have spent the past 18 months justifying their strategy to saturate particularly lucrative markets by building new supercenters as close as 1 mile from an existing store. These new stores compete with the old stores and initially dent comps, but ultimately grow Wal-Mart's market share, the company maintained.
"Is it more important to grow total sales and total profitability, or would you be better off if you did not impact your stores with new stores and ran higher [same-store] comps, which is what Wall Street is focused on?" Wal-Mart chief executive officer H. Lee Scott told the Associated Press in a defense of the company's strategy.
Target, which surprised investors in November by falling well shy of its 4 to 6 percent projection with a 2.6 comp gain, rebounded in December with a 4.7 percent increase.
In addition, retail same-store sales don't reflect online sales, which rose an estimated 25 percent through Christmas, led by eBay, Amazon.com, Wal-Mart and Target, according to Internet research firm Nielsen/NetRatings. In January, however, the main focus is on brick-and-mortar stores, where both discounters hope to coax gift card shoppers into high-margin purchases on full-priced spring apparel, home decor and electronics.
A Stella McCartney sketch of a custom dress made from protein-based silk in partnership with biotech lab Bolt Threads. The dress will be displayed at The Museum of Modern Art's upcoming design exhibition, "Items: Is Fashion Modern?"