Target and Walmart released their Q3 2024 earnings a day apart, and it truly was a tale of two cities.
In Bentonville, AR there were reasons to smile as total revenue increased 5.2 percent to $160.8 billion and comp store sales (ex-fuel) jumped a healthy (in these times) 4.7 percent. Virtually every metric that the “Behemoth” posted was positive including foot traffic (+3.4 percent; average ring (+1.5 percent); ecommerce (+24 percent); and its advertising arm, Walmart Connect, grew 26 percent. On the earnings front, the world’s largest retailer posted a net profit of $453 million, compared with a loss of $1.8 billion in the corresponding period last year. That loss was almost all attributable to settlements of opioid-related legal charges. That said, adjusted earnings per share was $1.53 this year versus $1.52 in fiscal 2023.
“I think what’s encouraging is that our traffic, our transaction counts remained strong and consistent throughout the quarter,” said Walmart CEO Doug McMillon, who added that ‘pressured consumers’ and unusual weather in late October were potential reasons for a shift in spending.
CFO John Rainey added some color to McMillon’s comments. “Recently, we’ve experienced a higher degree of variability and weekly performance in between holiday events in the U.S., including seeing a softening in the back half of October that was off trend to the rest of the quarter.”
Despite the strong numbers, Walmart was very cautious with its 4th quarter outlook, citing economic concerns with overall consumer spending. At rival Target, profits were strong but other measurables led investors and trade observers continue to worry about the future of the Minnespolis-based mass merchant. Yes, net earnings did increase 36 percent to $971 million, but same-store sales once again dipped, this time to an unhealthy 4.6 percent, while ecommerce revenue also decreased by 6 percent.
In Minneapolis, it’s been a rocky year for Target, which quite frankly has been slow to improve the look of its stores as well as its merchandising. However, a significant part of Target’s struggles is related to the tight economy and the stabilization (somewhat) of inflation.
Within 24 hours of Target’s financial release, I heard from a couple of supermarket retailers who are also uneasy about their sales in Q4 in what’s already shaping up as a challenging holiday season. More locally, Target said it will cancel plans to build a new Philly store near the University of Pennsylvania (37th and Chestnut Streets), because of ongoing retail theft. In September, the big mass merchandiser announced that it would shutter nine other stores for the same reason.
‘Round the Trade
…for those of you who grew up in the Boston area or spent many years living there (as I did), The Gillette Safety Razor Co. (its original name) has always been closely connected to its manufacturing plant and headquarters in South Boston. That’s about to change as the iconic razor and shaving-related products company, which was sold to P&G in 2005 for a then (and still) whopping $57 billion, will be relocating its manufacturing operations to another Gillette facility in Andover, MA, which will undergo a major expansion. The original campus in Southie will also be renovated and modernized and will oversee administrative, engineering and research & design functions. About 750 of the current 1,200-member workforce will remain in South Boston with the remainder shifting to Andover in the next 2-3 years.
Local Notes
At Ahold Delhaize USA there’s some news to report. Several months ago, we reported that the big Dutch-owned merchant was looking to consolidate merchandising in some categories to create more efficiency as its focuses more on an optimal omnichannel go-to-business model. Termed “common product hierarchy.” The process began this summer with a pilot transition of its home care category and has been expanding into other categories and sub-categories.
As part of the shift to this new alignment, ADUSA is also moving toward a “common desk structure” in which all category teams will be organized in a common way, where possible.
As stated by Roger Wheeler, president of the company’s Retail Business Services unit and its chief commercial officer, “…the team at Food Lion responsible for the snacking desk will be responsible for the same products as the team at The Giant Company who is responsible for the snacking desk. The same will be true for all brands.”
Although ADUSA blew up its former centralized merchandising model in 2018 (shortly after the merger between Ahold and Delhaize) for a structure where each division (brand) would control merchandising, much has changed over the past five years, especially the impact of digital/online sales. Some retailers’ new vision of omnichannel efficiency includes more centralized procurement as witnessed by a similar shift by Albertsons in 2021.
More ADUSA news: The Giant Company (TGC) announced it will open a new 68,000 square foot store in the South Mall Shopping Center in Allentown, PA (Salisbury Township), which will replace an older, existing store located at 3015 West Emmaus Avenue which was built in 1988. Construction is tentatively slated to begin in 2025 and the new supermarket will also include an adjacent fuel station.
At corporate Ahold Delhaize in Zaandam, The Netherlands, Jan Ernst de Groot, the international retailer’s chief legal and sustainability officer, will be retiring on May 31, 2024. de Groot first joined Ahold in 2015 after a career at TNT Express and KLM Royal Dutch Airlines. Ahold Delhaize said it will now split the legal and sustainability jobs with Linn Evans, currently chief legal officer and general counsel for ADUSA (and a good guy) becoming chief legal officer for the entire organization effective April 15. A search has begun to find a new sustainability chief.
At last month’s Weis Markets annual vendor meeting, in her excellent presentation, VP-advertising & marketing Maria Rizzo told the large group that Weis would be expanding its relationship with Amazon. On November 14, “Godzilla” announced it would begin same-day delivery service to selected Weis stores in New Jersey, Pennsylvania, Maryland and Virgina and is promoting its relationship with the Sunbury, PA-based regional chain on its website.
Weis is embracing its partnership with the Seattle-based juggernaut with a limited time promotion in which it is offering free delivery with all orders over $10. As it revamps parts of its grocery platform including the restarting of its Amazon Fresh openings, the world’s largest online seller is looking to broaden its relationship with more grocery-related third-party retailers.
After a four-year lull in its once-vaunted Mid-Atlantic expansion, activity by Grocery Outlet stores has really picked up over the past year. On December 7, the Emeryville, CA-based franchisor will open a new discount unit Rio Grande, NJ and has other Delaware Valley stores slated to open in Gibbstown, NJ, Vineland, NJ, Jamison, PA and Rehoboth Beach, DE over the next 6-8 months.
We have an obit from the food industry to report this month. Leo Sutera, who brought frozen ravioli to whole new level as owner of Louise’s Ravioli, has died at the age of 90. During my early career in Boston, I got to know Leo very well; he was a self-made entrepreneur who was always generous with his time, especially when it came to charitable causes. His story is quite amazing, too. In 1967, he purchased a small pasta store (Louise’s) in Revere, MA and transformed the company into the leading frozen ravioli company in New England. In 1979, he sold Louise’s to General Mills, which quite frankly had no idea how to run a regional specialty business at the time. When General Mills wanted out two years later, Leo bought the company back, ran it until 1987 before selling it to Labatt Brewing in 1987. Leo Sutera lived a great life – we mourn his passing.