Walmart, Target stocks diverge, highlighting difference between ‘staple’ and ‘discretionary’ labels

Shares of Walmart Inc. rose 0.4% in midday trading Wednesday, adding to the previous session’s 6.5% jump on a big earnings beat, even though so-called rival retailer Target Corp.’s stock tumbled 12.7% after another hugely disappointing earnings report. The divergence in stock moves appears to be primarily because while both are broadline retailers, they are actually part of very different sectors. As Stifel Nicolaus analyst Mark Astrachan noted, more than half of Walmart’s sales are from the grocery category, which is why the company is labeled a consumer staple, which is considered defensive during economic slowdowns as it sells what consumer’s need over what they want. But with only about one-fifth of Target’s sales in the grocery category, Target is considered a consumer discretionary, which is more susceptible to economic slowdowns. Year to date, Walmart’s stock has tacked on 2.2% and Target’s has tanked 32.5%. Over the same time, the SPDR Consumer Staples Select Sector ETF , of which Walmart is a components, has slipped 4.3%, while the SPDR Consumer Discretionary Select Sector ETF has tumbled 30.1%, and the S&P 500 has shed 16.8%.

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