(Bloomberg Opinion) -- It’s early October, which can mean only one thing for U.S. retailers (if not shoppers): Time to shift the focus to the holidays.
This year brings a confusing mix of signals about how the industry will fare during the annual seasonal shopping blitz. The unemployment rate is at its lowest level in 50 years, which suggests an upbeat consumer environment that should have many shoppers opening their wallets. But newly implemented tariffs — and the feeling that President Donald Trump could change course on those policies at any moment — loom as a giant question mark.
Despite this uncertainty, one prediction seems perfectly safe: No matter what, the holiday season is going to be to a merry one for Walmart Inc. and Target Corp. Both chains are in their best shape in years, and even if the consumer picture darkens, it doesn’t much threaten them.
The two giants of big-box retail have been on impressively long streaks of comparable sales growth. They are outliers in a sector littered with companies that are either withering (Forever 21, Bed Bath & Beyond Inc.) or struggling (Macy’s Inc., Kohl’s Corp.).
There’s no reason to think Target and Walmart won’t be able to keep up their steady performance in the fourth quarter. Both were successful last holiday season in capturing some of the toy sales that were up for grabs after Toys “R” Us had liquidated. Both have made investments this year to help them beat back competition in the seasonal showdown: Target is remodeling about 300 stores this year, making its aisles easier to navigate and freshening its look. Walmart has added one-day shipping on hundreds of thousands of items, answering Amazon.com Inc.’s promises of ultra-speedy shipping.
Speaking of e-commerce, both Walmart and Target stand to benefit from their relatively mature click-and-collect models. This service is helpful year-round, both because consumers like it and because it is often more profitable for the retailer to have customers pick up a product than to ship it to their homes. But they have a particular advantage during the holiday season. In the final days before Christmas, when many people would otherwise stop shopping online for fear their orders won’t arrive at their doorsteps on time, this format allows retailers to keep wringing more sales out of online shoppers.
Walmart and Target also stand out because, if the worst-case scenarios for retailers do come to pass this holiday season, they are especially well-equipped to withstand them. The biggest danger for the industry this season is unpredictable fallout from the trade war with China. If consumers see higher prices or feel more pessimistic about the economy, they could curtail their spending.
If so, Walmart and Target will be just fine, at least in the short term. Both are known for low prices, so cautious consumers looking to trade down will come their way. Their scale gives them particular power in negotiating with suppliers to keep their prices looking favorable compared to the competition.
Given that the enactment of some tariffs was delayed until after holiday merchandise was imported — and that many retailers say they have found ways to at least temporarily avoid passing on price increases to consumers — it’s likely that the retail industry will have a happy holiday season. But whatever happens, Walmart and Target will be a little happier than everyone else.
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Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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