Target or Walmart? Picking the Best Retail Stocks for 2025

Two of the most popular big box department stores in Retail/wholesale sector are Target Co. NYSE: TGT And Walmart Co. NYSE: WMT. On top of being the world’s largest employer, Walmart is the largest importer of products into the United States. When the U.S. dollar is strong, it’s a boon for Walmart because it’s more lucrative for merchants buying bucks overseas in U.S. dollars. However, when Import tariff is managed, as President Trump continues to threaten, Wal-Mart could face further pressure from rising costs. Their huge Retail footprint Can be a double-edged sword. While Walmart is 5 times larger than Target, Target’s stock may have more upside for 2025.

Goal: Nimble with less exposure to tariffs

As a smaller operator than Walmart, Target will naturally have less exposure to rising tariffs than Walmart. The tariff aims to encourage the purchase of domestically produced and sourced goods. This may push the target to go with more domestic suppliers. Arguably, the negative impact of imposing tariffs on imports is increasing costs for consumers, softening demand. 2024 has been a tumultuous one with Target’s recent earnings, which have caused its stock to decline 2.1% in 2025 compared to the S&P 500 index’s 26% gain in 2024 compared to Walmart’s stock gain of 71%. The target will try to correct the mistakes of Q3. .

Target’s Q3 2024 flop took the stock up 21%

Shares of Target fell 21% after its Q3 earnings report as earnings missed top- and bottom-line consensus estimates on declining revenue. For the third quarter of 2024, Target posted EPS of $1.85, missing consensus estimates by 45 cents. Revenue rose 1% year-over-year (YoY) to $25.23 billion, missing the $25.87 billion consensus estimate. Comparable sales rose 0.3% YoY as guest traffic rose 2.4% YoY.

The decline of steep comps surprised investors

Target suffers from higher exposure to discretionary categories than Walmart. About 60% of Walmart’s sales come from grocery, while only 25% comes from general merchandise. Target generates only 25% of its revenue from food and beverages, leaving it more exposed to a soft consumer spending environment, which continues to be affected by high inflation and high interest rates.

For big ticket items spending on staples is compromised. The sharp drop in comps surprised investors by just 0.3% after a strong Q2 2024, which had 2% YoY comps. The one-two punch of higher discounts and weaker sales reduced margins by 60 bps, compressing its EPS by 12% YoY. Apparel and home categories, its highest-margin segments, saw a 4% decline, respectively.

Silver Linings

Despite the doom and gloom, there were some silver linings in the results. Foot traffic continued to grow by low single-digit YoY. Digital comp actually grew 11% YoY. Same-day delivery service and drive-up service account for 8% of revenue. Beauty category comps saw 6% YoY growth. Food & Beverage and Essentials also saw low single-digit growth.

The bar is set low to move forward

Target may have delivered a “kitchen sink” quarter, given the anticipated challenges of the holiday shopping season. By issuing downside Q4 2024 EPS guidance of $1.85 to $2.45, compared to the consensus estimate of $2.65, Target has set the bar low, leaving room for upside if there is an improvement. The full results of the holiday shopping season will be reflected in the Q4 earnings report expected in March.

Walmart: Tariff tit-for-tat risk also affects international stores

The target is located domestically. However, Walmart is an international operator with stores located in more than 18 countries. It collects about 18% of its revenue from international sales, with Mexico being its largest international market. In the event that higher tariffs are imposed on imports, foreign trading partners have threatened to retaliate sharply with tariffs on US goods, triggering a trade war. approx Walmart sells 93% of its merchandise in Mexico are made domestically. That would be an additional threat facing Wal-Mart if Trump follows through with universal tariffs on all imports ranging from 25% to 60% for China.

Walmart has economies of scale

As the world’s largest importer, Walmart has the power to negotiate with suppliers due to its large size and scale to help mitigate some of the impact of the tariffs.

Also, Walmart beat the target for its grocery business in FQ3 2025.

According to, up to 80% of Walmart’s suppliers are located in China Alliance for American Manufacturing. Walmart has said it plans to buy 75% of its inventory domestically, as it currently buys two-thirds from the United States.

Walmart issued mixed guidance for fiscal 2025

For the full fiscal year 2025, Walmart forecasts EPS of $2.42 to $2.47, compared to the consensus estimate of $2.45. FY 2025 revenue is expected to grow 4.8% to 5.1% YoY or $673.5 billion to $675.4 billion compared to consensus estimates of $678.16 billion. With a solid 70% gain in 2024, there is little room for error for Walmart stock in 2025.

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