The two biggest retailers in the U.S. beat third-quarter
earnings estimates this morning. And that bodes well for the
upcoming holiday shopping season.
posted impressive year-over-year earnings growth. Target grew its
profits by 15% last quarter. Wal-Mart's earnings increased by
But there was a caveat to those earnings. While Target's
revenues climbed 3% from a year ago, Wal-Mart's revenues - while
improved - fell short of Wall Street expectations. Its same-store
sales also improved only 1.5%, trailing the 4.6% analysts were
As a result, Wal-Mart's stock is falling today, while Target's
Target shares climbed 2.4% in early trading. Wal-Mart shares
fell nearly 4%.
Despite some of Wal-Mart's shortcomings, the average 14%
earnings growth among the top two U.S. retailers is encouraging
and the holiday shopping season approaches.
Last year Wal-Mart earned a whopping $5.1 billion in the
fourth quarter alone - a full billion more than any other
quarter. Target's fiscal fourth-quarter profits came in at just
under $1 billion - 39% more than any other quarter.
Whether the two companies can maintain such an impress clip
this year remains to be seen. The fiscal cliff is of course
weighing heavily on many people's minds. If a deal to avoid it
doesn't get done before the holidays - as
is hoping for - it could precipitate a slowdown in consumer
spending over the next six weeks.
So the true test of the U.S. economy's strength might not come
until these two retail behemoths report their next earnings.