It seems hard to remember now, but back in October 2007 the future of, the nation's largest retailer, wasn't looking too bright.
On Oct. 5, 2007, shares of the Bentonville, Ark., giant closed at $45.37 while its top competitor,-- better known to hordes of aspirational shoppers as "Tar-ZHAY" -- was enjoying a share price of $67.57 and a panache that Wal-Mart couldn't seem to beat. "They were out-competed by Target last Christmas," says Craig Johnson, the president of Customer Growth Partners, a New Canaan, Conn., retail research firm.
By Jan. 11, 2008, however, Wal-Mart had closed the gap between companies' stock prices to a mere $2.23 (Target: $49.95, Wal-Mart: $47.72). And over the next several months, the company engineered a radical reversal of fortunes. In August, when Target posted an 8% loss in quarterly income -- its fourth straight quarterly loss -- Wal-Mart was bragging about its 4.5% increase in U.S. same-store sales.
Then last month, with the financial crisis wreaking havoc on the economy, especially the retail industry, Wal-Mart saw its October sales increase 2.4% for stores open at least a year, while Target saw a 4.8% decline in same-store sales; Wal-Mart closed out the third quarter with a 10% increase in profits, while Target saw a nearly 24% decrease. And even as Wal-Mart's stock has slipped amid the economic downturn -- closing at $49.67 on Oct. 27, its lowest since the first quarter -- Target, with its "cheap chic" fashion, has fallen even further; its stock has mostly been stalled below $40 since early October.
According to retail analyst Marshal Cohen, there are two major factors that govern the fickle retail market. "It's all about results and momentum," says Cohen, of the Long Island, N.Y., marketing research firm NPD Group. "Target is only one good collection away from another good year. But Wal-Mart has gotten the results, and they've gotten the swagger in their step back."
That swagger equals momentum. And that is why, despite an unprecedented economic crisis hanging over the country, Wal-Mart could increase its market share for what is expected to be, by most accounts, a dismal holiday shopping season.
"One retailer's benefit is another's loss," says Carl Steidtmann, the chief economist and director of consumer business at Deloitte Research in New York.
So what exactly has Wal-Mart out in front? Industry experts say there are five factors contributing to the big-box flip-flop:
1. It's the economy, stupid
While average Americans hope that the U.S. government's bailout measures will ease the worst