By Siddharth Cavale

Retail Competition in Holiday Season

NEW YORK (Reuters) – In the most competitive holiday season in years, major U.S. retailers Target (NYSE:TGT) and Walmart (NYSE:WMT) are increasing ad spending to engage shoppers on TikTok and streaming platforms.

Target's Struggles

Recent U.S. credit- and debit-card data show Target's slight gain this December, but investors express concern about its long-term disadvantages. Despite having over 1,950 stores and non-essential goods, Target has lost market share due to declining sales. Its shares have decreased by 7% this year, while Walmart's shares have surged by 72%.

Expert Opinions

“Target's funk has been in place for a couple of years now and doesn't have a quick fix,” remarked Charles Sizemore, chief investment officer at Sizemore Capital Management, which owns $220,000 in Target shares. He questioned the effectiveness of late advertising pushes to encourage gift card redemption.

Advertising Budget and Performance

With consumers tightening budgets, analysts expect Target's net advertising spending to rise only 0.11% in 2024. A Target spokesperson stated, “The fourth quarter is our biggest sales season of the year, and our marketing spend reflects that.” From October to mid-December, Target increased online advertising by 8% — including a 70% increase on TikTok — but Walmart outpaced this with a 30% boost overall and a 200% increase on TikTok.

Holiday Sales Outlook

Target forecasted holiday quarter sales and profits below estimates as thrifty consumers flocked to competitors like Walmart. Despite modestly higher spending early December, foot traffic declined by 6.8% after Cyber Monday.

Shoppers' Spending Trends

From Black Friday to December 11, shoppers at Target spent 5.5% more year-on-year, while another firm reported only a 2.2% increase. According to Bernstein analysts, Target must lower prices to compete effectively.

Strategic Shifts Needed

Investors advocate for Target to realign its strategy over several quarters to regain its core customer base, particularly mothers. Bill Smead, chairman of Smead Capital, emphasizes the need for management to address this imperative.