In the post-pandemic retail world, Walmart has outperformed Target on every metric, and that is expected to continue in 2026, according to Oliver Chen, equity analyst at TD Cowen. He said Walmart’s technology and grocery business is more stable than Target’s more discretionary business.
Walmart and Target are under new leadership, with Walmart playing offense and Target trying to recover lost ground. Target recently announced a new focus on food and beverage as a key growth category to build a distinctive grocery business, according to Cara Sylvester, Target chief merchandising officer. Last year, food and beverage sales increased 1.3% to $24 billion at Target. Grocery sales comprised roughly 30% of the retailer’s total revenue.
Sylvester said Target plans to double the number of exclusive items in its food and beverage assortment over the next three years to meet customer demand for new products. There are also plans to reset categories, clean the stores, and add 30 more locations in 2026. She said 40% of customers have said they are looking for something new when shopping for food at Target.
Target CEO Michael Fiddelke has forecast total sales growth of 2% for this year, with positive results in each quarter. Neil Saunders, retail analyst at Global Data, said Target’s plans resemble a corrective strategy more than a revolutionary change.
“The dial will not be moved immediately,” Saunders said. “Target will likely lose more share this year as no change can deliver uplifts overnight.”
WALMART SUCCESS
Walmart’s U.S. grocery business recorded sales of around $289.8 billion last year, up 6.27% from the prior year. Comp sales increased 4.6% for Walmart. Groceries account for roughly 60% of Walmart U.S. sales.
Walmart said it continues to do well with higher-income households that found the retailer for food savings and have since noticed the expanding marketplace offerings for a wide range of luxury and value-based goods, many of which can be delivered quickly.
Walmart is investing more in “agentic commerce” that uses artificial intelligence to help shoppers find items, compare prices, and even place orders.
Walmart forecasts net sales growth between 3.5% and 4.5% this year, slightly lower than analysts had expected. The retailer also forecast operating income growth between 6% and 8%, roughly twice the rate of sales growth.
Walmart’s comp sales have consistently outperformed Target in the past four years. Between fiscal 2023 through 2026, Walmart posted annual comp-sales growth of 7%, 5.5%, 4.8% and 4.6%, respectively. That compared with fiscal 2022 to 2025 at Target, in which choppy comparable-store sales rose 2.2%, fell 3.7%, increased 0.1% and declined 2.6%, respectively.
INVENTORY REBOUNDS
Each retailer had to battle inventory excesses in 2022 because of a major shift in consumer shopping behaviors as inflation ticked higher. Target reported 43% more inventory in 2022 from the prior year, forcing the retailer to slash prices, cancel vendor orders, and use closeout partners to clear overages in home and apparel categories.
Walmart inventory grew 32% in 2022. It canceled orders, aggressively priced goods, and reduced one-third of its excess goods between the second and third quarters of 2022. It took Walmart two more quarters to work through the excess inventory, which also hurt its margins.
The gaps in performance over the following three years are driven in large part by the growth rates of their respective e-commerce businesses, ancillary fulfillment services for suppliers and advertising revenue.
Walmart has grown its U.S. e-commerce business by 27% in the most recent quarter. The average growth totaled 25.5% exceeding $150 billion last year, comprising roughly 31% of the $483 billion Walmart recorded in total U.S. sales.
Walmart’s online sales have grown by 10% or more for 15 consecutive quarters. Walmart also grew its paid subscriptions to 28.4 million to start this year, up 12% from a year ago, according to analysts with J.P. Morgan. Walmart’s retail media business generated $6.4 billion in revenue last year, up 46% from the prior year. The company said ad revenue and membership income comprised roughly one-third of the retailer’s profits last year. Walmart reaches 270 million shoppers weekly with in-store and online sales.
It’s a different story at Target. E-commerce sales increased 1.9% in its fourth quarter and 3.1% for the full year. Target’s online sales averaged 7.4% in 2024, up from the 5.15% decline reported in 2023 and 3.5% growth for the full year in 2022. Target reported that online sales comprised 20.6% of total sales last year.
“Target is not an everything store,” Fiddelke said. “That’s not what guests want from us. They want a strong trend-forward assortment that they can trust to deliver quality and value.”
Target’s Roundel Advertising business was a bright spot, with revenue gains of $915 million last year, and the platform reached 165 million shoppers. Target’s annual sales declined 1.7% to $104 billion last year, with the ad revenues comprising less than 10% of that total. Target’s third-party marketplace, known as Target Plus posted 30% growth last year, reaching 200 million shoppers a month, the company noted.
REINVENTION NEEDED
Christopher Horvers, equity analyst with J.P. Morgan, favors Walmart in 2026. He cited the “harmonization” of wage growth, product replacement cycles, and tax stimulus as tailwinds for Walmart. He said Target’s negative comps and share loss over the past few years are problematic. More improvement is needed with in-stocks of consumable goods, which has also been a big issue.
“The worst thing the company can do is tighten inventory that will only lead to more share loss,” Horvers said. “Target needs to re-energize its private apparel brands business that used to set it apart from Walmart and Amazon as a retailer for cheap chic.”
Chen said he favors Walmart because of its combination of low prices and technology advantage. He said Walmart is also a gas retailer and could benefit from the sale of lower gasoline prices in the wake of price spikes following U.S. and Israeli strikes on Iran. He said Target needs a reinvention with a focus on turning comps positive and improving store experience to win back customers.
“We see consumers as fundamentally sound but sentimentally weak and very choiceful about their purchases, which favors Walmart’s low prices and assortment,” he said.
Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics.