Rainey did caution in a CNBC interview the U.S. President-elect Donald J. Trump’s plan to increase tariffs on Chinese imports and other countries might force Walmart to raise prices, while emphasizing the priority on “everyday low prices.” U.S. retailers have been operating in a retail backdrop that has included higher tariffs since Trump became the 45th president back in 2016. And many since then, including Walmart, have been diversifying their sourcing outside of China. And the current administration under President Joe Biden has largely left those tariffs in place.

According to TD Cowen retail and luxury analyst Oliver Chen, two-thirds of Walmart’s product mix is sourced domestically. That’s a strategy that could reduce potential tariff and price increase risks. There’s still some uncertainty as to how high tariffs could spike under Trump 2.0. Wells Fargo senior economist MIchael Pugliese said in a webinar on Thursday that about half of Trump’s proposal for 10 percent universal tariffs and 60 percent for China likely goes into effect in the third quarter of 2025.

Walmart isn’t the only company concerned about tariffs. Columbia Sportswear CEO Tim Boyle said on “Bloomberg Open Interest” Thursday that prices will go up on imported products because tariffs “will be passed on to consumers. It’s a regressive tax.” TJX CEO Ernie Herrman said on Thursday in a post-earnings conference call that while his off-price model will ensure a value gap between TJX and the out-the-door price at competitors, branded goods that get hit by increased tariffs will raise prices and “then that price gets carried on to another retailer.” And Gildan Activwear CEO Glenn J. Chamandy said on Oct. 31 in a third quarter earnings call that while Gildan’s products are “still very attractively priced in the marketplace,” tariffs would create inflation and could impact “how many garments people can buy because costs will go up for consumers.”

During Chen’s post-conference call with Walmart management, he noted that the retailer’s digital marketplace has been attracting and retaining wealthier consumers. He said management attributed over 75 percent of share gains from 3Q to household incomes above $100,000, and noted that its U.S. marketplace platform grew 42 percent over 3Q, now at 700 million stock-keeping units versus Amazon’s 5 billion and representing five consecutive quarters of 30 percent-plus growth.

“During our callback, management mentioned wealthier consumers are increasingly searching for items that Walmart does not carry, a positive indicator for category growth potential and successful mind share traction versus Amazon,” Chen said, adding that the discounter acknowledged that a broader assortment of brands and items are more attractive to wealthier consumers and going forward will focus on home decor, apparel and automotive supplies.

Walmart CEO Doug McMillon told investors during the post-earnings call that omni-channel has enabled it to work with brands and increase the amount of market share in categories “where we should have had a higher share all along and that e-commerce opportunity is kind of bearing out as we grow our assortment. We’re able to appeal to more people and appeal to higher income levels.”

McMillon noted not just the opportunity that Walmart has in fashion, but also how consumers want to save both money and time. “Those that have more discretionary income and want to save time are liking what we’re doing with both pickup and delivery,” he said.

Target Corp.

Target has been making extensive investments in technology, and was one of the early birds to focus on last mile delivery. It acquired same-day service provider Shipt in December 2017 for $550 million. In June 2019, Target expanded its Shipt same-day service nationwide. In August 2023, Target, which already fulfilled 97 percent of online orders directly from stores, said its distribution network received a boost from using sortation centers to get orders to online shoppers even faster. Store-fulfilled pickup and delivery grew for both Walmart and Target during the pandemic and thereafter. But as retailers were focused on same-day, Walmart began eyeing how to measure those deliveries in hours instead of days as it looked to beat and capture share not just from Target but from Amazon too.

But despite cutting prices on 5,000 frequently shopped items earlier this year and an additional 2,000 in the third quarter, Target hit some snafus in the third quarter that its CEO Brian Cornell said was impacted by the East and Gulf Coast port strikes. Cornell told investors the discounter is confident in its proven long-term strategy and ability to move beyond current volatility. “We’re continuing to make the right investments in our business that will help us deliver profitable growth in the years ahead,” he said.

Profits in the third quarter fell 12.1 percent to $854 million on a revenue gain of just 1.1 percent to $26.7 billion. But it wasn’t just the port strike that was the quarter’s problem. Cornell said consumer budges remain stretched, and that they’re shopping carefully, and “waiting to buy until the last moment” and then focusing on deals and stocking up when they can. That also meant that when consumers pulled back on spending, inventory levels were piling up. Executive vice president and chief commercial officer Richard H. Gomez said consumers had become increasingly resourceful. “They know there are deals to be found. They’re willing to wait for sales and willing to search across multiple retailers to find them.”

“Some middle- and upper-income consumers might have shifted spending to other retailers, such as Amazon, Costco and Walmart in search of value and convenience,” Telsey Advisory Group retail analyst Joseph Feldman said. While he called those trends “a bit disappointing,” he’s still optimistic about Target’s future prospects and has an “Outperform” rating on the company’s shares. Highlights include Target’s traffic increase of 2.4 percent in stores and digital, along with healthy growth of new Target Circle loyalty members. Target also has a media business, Roundel Advertising, which increased in the mid-teens in the quarter.

“Target is taking steps to reconnect with consumers and improve performance, including more promotions, newness in merchandising, and improvement in execution,” he said, adding that the discounter should continue to benefit from its value-offering and strategic initiatives that include private brands, new stores and remodels, supply chain enhancements, and its digital/Drive Up program. “Target also continues to elevate the customer experience and enhance its product offering through partnerships with popular brands, like Apple, Disney, Levi’s, and Ulta,” Feldman said. “These actions should support solid growth in sales and earnings in 2025 and ahead.”

UBS’ Michael Lasser has a “Buy” rating on shares of Target. While third-quarter results and fourth-quarter guidance disappointed, Lasser said it is still reasonable to expect that the lost profitability will be retraced next year. He said the shortfall can be explained by heavy inventory that needs to be cleared out, as well as incremental costs associated with the port strikes. After working through those issues, “we still think there’s a good chance that Target earns $10-plus in 2025.”

And Jefferies retail analyst Corey Tarlowe said pulled forward inventory ahead of the holidays drove elevated supply chain costs. He also said apparel sales comped down less than 1 percent as “unseasonable warm weather weighed on demand,” adding that the discounter cited strength in its relaunched sleepwear-intimate brand and activewear.

“We are lowering our estimates and price target but believe that Target remains well positioned in the long term when broader discretionary spending improves,” Tarlowe concluded. “With a growing advertising business, robust loyalty program, valuation attractive relative to peers, and recent initiatives, we reiterate our Buy rating.”