Walmart and Target face similar problems — but only one is thriving

Target and Walmart are both catering to thriftier shoppers, but the two big-box retailers have seen very different outcomes when it comes to winning their dollars.

Target missed Wall Street’s sales expectations for the fiscal second-quarter. Walmart beat Wall Street’s revenue estimates for the three-month period. Target slashed its forecast for the year, while Walmart raised its outlook.

The companies’ diverging performances illustrate some of the retailers’ fundamental differences.

Walmart, the nation’s largest grocer, makes more than half of its annual revenue from selling groceries — a category that shoppers buy even when times are tight. Target draws only about 20% of its yearly revenue from grocery, making it rely more on sales of items such as clothing, earrings and throw pillows that customers may skip when feeling frugal.

Target, which tends to draw a more affluent customer than Walmart, may also be seeing a more dramatic swing in spending as consumers shell out on Taylor Swift tickets and European vacations. Those shoppers could also be trying to balance splurging on services with shopping at places perceived to be cheaper, such as Walmart or TJX Companies-owned T.J. Maxx, Marshalls and Home Goods, which posted year-over-year sales and profit growth earlier this week.

Yet Target’s and Walmart’s contrasting results also capture how some retailers are having more success than others catering to fickle consumers and navigating economic headwinds.

Wall Street added to the confusion with its own counterintuitive moves. After earnings reports, it snapped up Target’s stock on Wednesday and sold off Walmart’s shares on Thursday. The potentially surprising moves could reflect the companies’ recent stock performance, since shares of Walmart are up about 10% this year…