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Wal-Mart doesn't have Target's traffic problem

Wal-Mart's seventh-straight quarterly increase in foot traffic made Target's second-quarter shortfall look even more alarming.

The world's largest retailer on Thursday said more shoppers visited its stores during the three months ended July 31, as traffic grew 1.2 percent. That number stood in stark contrast to the results from Target, which Wednesday reported its first traffic drop in a year and a half. Using the number of transactions as a proxy for traffic, footfall at the bull's-eye retailer declined 2.2 percent in the fiscal second quarter.

"Our customers like what they're seeing in the stores," Wal-Mart CFO Brett Biggs said. "When you have higher in-stocks and your service levels are better the customers see that."

Wal-Mart has been investing big bucks to make its stores cleaner and more enjoyable to shop. That includes a $2.7 billion investment into training and wages for its workforce.

Biggs also cited the expansion of its online grocery business, which lets customers place their orders online and pick them up in the store. This service was rolled out to 30 new markets during the quarter for a total of about 60.

Shoppers look at merchandise at a Walmart store in Secaucus, New Jersey.
Lucas Jackson | Reuters
Shoppers look at merchandise at a Walmart store in Secaucus, New Jersey.

Wal-Mart's traffic gains have been "pretty consistent" across both its large format and smaller Neighborhood Market stores, U.S. Chief Greg Foran said. Same-store sales in those smaller shops rose 6.5 percent during the quarter, contributing to a 1.6 percent lift in that domestic comparable sales.

While the company is focused on its capturing more spend from its large base of existing customers, in some cases, Wal-Mart is attracting new customers, Biggs said.

"It's some of the basics that they're executing well on," Dana Telsey, CEO of Telsey Advisory Group, told CNBC.

That could be coming at Target's expense. Because of messaging that skewed too heavily toward its style and other discretionary categories, the bull's-eye retailer said Wednesday that it missed out on traffic to its grocery and consumables departments.

Target likewise saw a dip in traffic to its pharmacies, as it worked through a transition over to CVS branding. CVS acquired Target's pharmacy business in December.

"It's going to take awhile for Target to turn this around," UBS analyst Michael Lasser told CNBC Wednesday. "[Traffic's] not an easy problem to fix."