Stephanie Wissink, Jefferies analyst, joined Yahoo Finance Live to break down Target's Q3 earnings report and her biggest takeaways.
ADAM SHAPIRO: So let's move back to the big news that we got regarding Target. Because it was a surprise. The Brian Sozzi headline used the word shock. And a lot of investors were very pleasantly surprised by it. So let's bring in Stephanie Wissink. She's a Jefferies analyst. And she covers a lot of retail in addition to Target, Walmart. Want to get your first impressions of this Target beat. I mean, the revenue number was really enormous, $22 plus billion.
STEPHANIE WISSINK: Yeah, I think to use their tag line, I think they hit the bull's eye with this quarter. 20.7% Comp was staggering, frankly. It really shows some good momentum carrying forward from the second quarter. And what I think is so fascinating about this as an observer of the retail industry is a couple of things. Number one, even as competing stores reopened coming out of the pandemic lockdown, Target retained its momentum. So there's some something sticky and intriguing about that market share they've captured.
The second thing is Target is a fantastic place to shop in store. But they have absolutely crushed it with their omnichannel initiatives. Things like buy online, pick up in store, buy online curbside, curbside utilization and pickup in sales were up over 500%. So I think what they're building here is an ecosystem of convenience for consumers. And it's really hard to argue that any other retailer has that proficiency that they're demonstrating.
And then the last thing, I think you have to give it to them. You know, "Tar-Jay" Boutique. They have an unbelievable way to curate merchandise. And in things like home and beauty and electronics, they're winning in those general merchandise categories alongside some of their core consumer staples categories. So those baskets are getting bigger. She's spending more at Target. And there's clear market share gains for Target this quarter.
SEANA SMITH: "Tar-Jay" Boutique. Stephanie, I like that one. What stands out to me, though, I think we go back to last quarter when we were talking about a lot of these retailers outperforming during the second quarter, a lot of questions going into the third quarter with whether or not that type of growth is going to be sustained when we go back to the fact what we mentioned at the top of the show, we still don't have a stimulus package. It's a little bit surprising that we're not seeing that reflected a little bit more in numbers, especially from a name like Target. Why do you think that is?
STEPHANIE WISSINK: Yeah, I think this is the eye-opening moment in that if you think of all of the things that moved from tailwinds to headwinds, quarter on quarter, they were still able to deliver the comp at a North of 20% level. So I think there's something more behind the numbers that we really need to explore. I think we saw the same thing at Walmart. You know, these companies were both deemed essential. They both carry food and basic commodities and consumables.
But they're gaining a customer. And that customer is proving to be a little bit more resilient and sticky. I think we also have to recognize when you look at Target versus Walmart, Target putting up a 20% comp, Walmart in the 6.5% range, Target is benefiting from stability in the employment picture among the upper income households. They do skew higher on an income basis. So there's not quite as much volatility.
But I also think we have to recognize that many consumers are what we call kind of lost shoppers right now. They used to shop at Bon-Ton, department stores or Macy's or Penney's or Kohl's or mall-based retailers. And they're entering those domains. And they're not finding those to be as enjoyable anymore.
And so when we look at the mass class of retail and look at merchandising and experience, Target tends to win. And so we are mindful that there might be a drifting consumer that is finding a new home at Target on a relative basis.
ADAM SHAPIRO: Stephanie, for the people watching in Cleveland, Ohio, I want to add Higbee's and Halle's to that department store list. But let me ask you a question. Why does your firm then have a hold rating on Target but a buy on Walmart?
STEPHANIE WISSINK: Yeah, I think we're going back and thinking through our valuation context. You know, we used to look at these two companies together and try to determine, you know, should one be worth more than the other. But I think we're starting to rethink that a little bit. You know, can Target actually co-exist and co-exist successfully well alongside Walmart?
And can they take share from a different domain of retail then maybe Walmart is taking from? So I think we're thoughtful about or going back and thinking through how the valuation needs to square up between the two. And maybe we don't need to benchmark them against one another anymore. Maybe we can start thinking about them on an individualistic and holistic basis around what their opportunity sets are.
SEANA SMITH: Stephanie, Target and other retailers, like Walmart like you were just talking about, a lot of them push forward their holiday deals started them earlier this year. We saw a number of deals beginning back last month in October. How much of the holiday sales do you think was pulled forward to the third quarter?
STEPHANIE WISSINK: Yeah, this was an unresolved question that we still have coming out of the quarters. I think some of the vendors are talking about upwards of 20% of the December business might be pulled forward into October. Certainly Amazon kicking off Prime Day in October was a kick start to the holiday. But I do think there is going to be some smoothing out of the average weekly sales across more weeks than what we typically see.
And when you look at some of the external studies, the National Retail Federation, some of our own proprietary studies, it does suggest that about 25% of holiday spending is already complete. So it would square up with some of those vendor measures that maybe there was a bit of a pull ahead. And we're not really going to know how impactful that pull ahead was until we get into the the core weeks of holiday, which really are, you know, living between Thanksgiving and Christmas. So and we're watching those weeks pretty carefully to see if we see some volatility in the retail measures.
ADAM SHAPIRO: All right, Stephanie Wissink is a Jefferies analyst. And I get to say, you're the first, have a happy Thanksgiving. It's a week early, but I don't think we're going to see you till after the holiday. So all the best to you and the team at Jefferies.
STEPHANIE WISSINK: Thank you.