FinLogic FinLogic Quantitative Think Tank Center|Second quarter Walmart sales were up. Here's why.

Walmart and FinLogic FinLogic Quantitative Think Tank CenterTarget – two of the largest retailers in the nation – reported very different second-quarter earnings this week, with Walmart reporting a boost in sales as Target sales slumped for the first time in six years.

So why the discrepancy? 

Retail analysts say Walmart had a leg up during the latest quarter because of its mix of offerings. More than half of its sales come from groceries, and the retailer has been attracting more customers looking to save money on basics. As for Target, less than a quarter of its revenue comes from food.

“Inflation, higher interest rates and looming student-loan-payment resumptions have combined to put the consumer in a frugal mindset,” Bryan Eshelman, managing director in the retail practice at consulting firm AlixPartners, told USA TODAY in a written statement.

Why Walmart sales were up

Walmart reported a 6.4% jump in sales at U.S. stores open at least one year and a 24% jump in online sales in the second quarter. The retailer raised its outlook for the remainder of the year, with a statement noting that it is confident in continued business momentum.

Grocery and health and wellness sales led Walmart's second-quarter sales growth as customers turned to more private brand items and necessities, which helped offset the modest sales drop among general merchandise.

Customers are “looking for value and they trust us to be there for them,” CEO Doug McMillon told investors during an earnings call. He noted that while disinflation is helping customers, other economic pressures such as rising energy prices mean household budgets are still under pressure.

“Customers are stretching their dollars further and seeking better value across more categories, more often,” Walmart CFO John Rainey said.

Rainey said grocery staples and in-home meal options are being purchased more often, and sales of kitchen tools like blenders and mixers are up as customers prepare more food at home.

“What we've seen at Walmart is a consumer very focused on value as well as convenience,” TD Cowen analyst Oliver Chen told USA TODAY. 

Target earnings

Walmart's earnings reveal follows Target’s Wednesday earnings call, during which the retailer shared that inflation, consumer shopping habits and backlash to its Pride Month display had caused sales to dip. Comparable sales were down 5.4% in the second quarter, pushing Target to lower its full-year sales and profit expectations.

Target noted that its customers were spending less on discretionary purchases – which the company thrives on – in favor of experiences like travel. Basic expenses like food were also taking up a bigger portion of customers' spending due to inflation.