Walmart‘s stock surged this week. Target‘s shares plunged.

The rival big-box players are both known for selling an array of products including food, clothing, home goods and kitchen appliances. Both their CEOs — Walmart’s Doug McMillon and Target’s Brian Cornell — stepped into their roles in 2014.

But the retailers issued starkly divergent outlooks this week that underscored their differences, most notably in how much each relies on grocery sales.

On Tuesday, Walmart raised its financial outlook for the year after U.S. same-store sales in the third quarter rose 8.2% from a year ago when excluding fuel. A day later, Target slashed its forecast for the holiday quarter after comparable sales rose just 2.7%, with executives noting weakening trends heading into the season.

Here’s a rundown of four key factors that help explain the split in the earnings results:

Grocery routine vs. Occasional stop

Walmart gets a far bigger share of its sales from groceries than Target, which is helping it draw shoppers looking to save money as inflation squeezes budgets.

Groceries account for 56% of Walmart’s annual revenue, compared with just about 20% at Target, according to company filings. Walmart is the country’s largest grocer by revenue.

Target's earnings highlight a decline in consumer discretionary spending

Target also sells groceries, but it doesn’t have the same breadth of offerings. For example, stores sell eggs, milk, fruits and vegetables, but do not have full-service bakeries, meat and seafood counters or delis where shoppers can get freshly sliced turkey and cheese.

More customers turn to Walmart to fill out the bulk of their grocery lists, said Neil Saunders, managing director of retail advisory firm GlobalData.

By contrast, shoppers tend to go to Target more for “top-up shopping” — grabbing a few food items when making a run for another reason, such as picking up diapers.

Even as shoppers decide not to buy a TV or a new outfit, they have had to keep replenishing the food in their fridges — a factor that is keeping Walmart’s sales steadier.

A man pushes his shopping cart past bread for sale at a Walmart SuperCenter store in Rosemead, California.

Frederic J. Brown | AFP | Getty Images

Low prices vs. Fun finds

Walmart vs. Target

  • Groceries as a percentage of sales:
    Walmart: 56%, Target: 20%
  • U.S. same-store sales in the third quarter vs. year ago:
    Walmart up 8.2%, Target: up 2.7%
  • U.S. store count 
    Walmart: More than 4,700,  Target: More than 1,900

Source: Company filings

Planned purchases vs. Impulse buys

Target has turned its stores into mini malls offering a range of “cheap chic” items.

It has launched exclusive private brands like All in Motion, a trendy, but lower-priced activewear brand and Hearth & Hand, a home decor line created with celebrity home renovation duo Chip and Joanna Gaines.

It also has shops for popular national brands, including Disney, Ulta Beauty and Apple. And it has a Starbucks where shoppers can grab a latte to sip as they browse.

The assortment has led to jokes about “Target runs,” where shoppers stop by for toothpaste but end up leaving with a lot more.

About 21% of sales at Target come from unplanned purchases, according to GlobalData research from before the pandemic. At Walmart, the figure is about 12%.

In an inflationary environment, those shopping sprees – and impulse buys – become a tougher sell.

“People are starting to say ‘Do I actually need this?'” Saunders of GlobalData said. “When people do that, that affects Target more so than Walmart.”

Shopper spending power

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