BOSTON — Wal-Mart is making merry about its holiday prospects, while rival Target has put out the caution sign.
The different outlooks seem counterintuitive. Wal-Mart customers are particularly vulnerable to high energy costs and the retailer has had operational struggles in its U.S. division. Target has had a stellar year and serves shoppers who are less affected by energy prices, but the company warned that November sales would fall below its 4 to 6 percent projected increase.
Is there something wrong with this picture, or is it a question of controlling what investors anticipate during an uncertain retail period?
"Wal-Mart has taken one approach to managing analysts' expectations, Target took another," said Richard Hodos, president of Madison HGCD, a Manhattan-based retail consultant. "The truth is, neither may line up with reality and the whole season may fall somewhere in the middle. There are so many unknowns and an underlying tension out there."
The war in Iraq, hurricanes in the Gulf Coast and early indications of a housing market cooldown all have contributed to unease about consumer spending — even as same-store sales last month were strong. Some analysts believe, with roller-coaster energy costs, the holiday shopping season is one of the true wildcards in recent years. The National Retail Federation is predicting 5 percent growth this year, compared with 6.7 percent last year.
"We cannot recall the last time Target revised its outlook [to] 'below plan' this early in the month," noted William Blair analyst Mark Miller in a research note. "We understand that the recent sales softness at Target is relatively broad-based across product categories." Target's announcement prompted downgrades from Sun Trust Robinson Humphrey and Lazard Capital.
Wal-Mart, however, appears intent on telling an upbeat story.
Chief executive officer Lee Scott set the tone, saying on a recorded earnings call: "I believe we will have a good holiday season." And chief marketing officer John Fleming during an October presentation touted the "earliest and most aggressive launch in our history."
Last year, negative press trailed the world's largest retailer throughout the holiday season after Wal-Mart turned in a disappointing Black Friday. Executives have vowed to be aggressively promotional, innovative with merchandise and more attuned to the look of the stores. The company launched its "Home for the Holidays" ad campaign — featuring Destiny's Child, among others — two weeks earlier than ever before.
Hermès is launching a Laundromat pop-up shop in NYC - dubbed Hermèsmatic - where customers can bring their old scarves to be dip-dyed by an expert. Get all the details on WWD.com. #wwdnews (📷: @donstahl)