Who knew that the rise of Amazon would turn out so well for Walmart and Target?
It was only a few years ago that both of those titanic big-box retailers were in peril, losing customers in droves to the e-commerce giant. But the past decade’s radical reshaping of how Americans shop, a change fueled by Amazon’s inexorable ascent, has paradoxically resulted in Walmart and Target—along with a few other big U.S. retailers—evolving to become stronger and more successful companies than ever. The massive shock of e-commerce’s encroachment, analysts agree, gave them the jolt they needed to reinvent themselves.
The result has been a stunning return to form for both Walmart and Target, each of which was founded back in 1962. Walmart is expected in February to report its 22nd straight quarter of comparable sales growth in the United States. Target, despite a disappointing 2019 holiday season, says it should post an 11th quarter of growth by that metric, which excludes the impact of newly closed or opened stores.
Most crucially: Both chains are getting more shoppers to come to their stores. Each company has poured billions into updating both the technology and the décor at their massive brick-and-mortar fleets—4,800 stores for Walmart U.S, and 1,800 for Target.
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“What they did that was brilliant was to leverage their stores and sales associates in way to compete against Amazon on convenience, defining convenience in a different way,” Barbara Kahn, a professor of marketing at the Wharton School in Philadelphia, says of the two companies.
Walmart’s shares have roughly doubled since October 2015 when it announced massive investments to counter Amazon. And the top line is also at record levels, with U.S. sales likely to top $340 billion for the fiscal year that’s about to end. Target’s shares, despite a recent mini-slump, are up 60% compared to last January.
The question now is: How long can Walmart and Target extend their winning streaks? Leaders at both companies know they can ill afford to rest on their laurels. In November, Walmart chief executive Doug McMillon, ranked by peers as one of the most underrated CEOs in a recent Fortune survey, expressed dissatisfaction with the company’s U.S. e-commerce progress. And Target got a rude awakening during the recent holiday season, when comparable sales rose only 1.4%.
Each company is also coping with big changes in the c-suite. Greg Foran, the architect of the vast improvement of Walmart’s U.S. stores, has stepped down to return to his native New Zealand to lead an airline there. He’s been replaced by John Furner, until recently CEO of Walmart’s Sam’s Club. Walmart’s well-regarded chief merchant Steve Bratspies is also on his way out. Target, meanwhile, also recently lost its chief merchant, Mark Tritton, who oversaw the creation of many of its successful new brands; he left to become CEO of Bed Bath & Beyond.
Both Walmart and Target have begun to telegraph how they plan to build on their success. The two companies will update investors on their respective plans with analyst days, Walmart next month and Target in early March. Each will likely be rolling out new strategies while building on current strengths. And each is painfully aware that hot competition and fickle customers can bring a sudden change of fortune. “At any moment, things can turn,” says Forrester analyst Sucharita Kodali.
Source: Fortune