That’s an old saying that holds a lot of truth, but when consumers feel stressed out financially, they may not be thinking about the best long-term values. Instead, they’re focusing on making it through each day.
Retailers which have pricing power, however, have a major advantage over their rivals.
“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10%, then you’ve got a terrible business,” Warren Buffett said in an interview with the U.S. Financial Crisis Inquiry Commission.
Former J.C. Penney CEO Ron Johnson, who was not successful during his run in that job, had a clear belief on pricing and consumers.
“Pricing is actually a pretty simple and straightforward thing. Customers will not pay literally a penny more than the true value of the product,” he told the Associated Press in 2012.
Target executives, however, are betting that Johnson’s philosophy was wrong. And, instead of focusing on offering the lowest prices, the chain plans to show its customers that it offers the best value.
“Target is cutting prices on thousands of products and working to compete beyond pricing, ‘while allowing Walmart to maintain its low-price leadership,’ according to a note from Jefferies analysts shared with Retail Dive. The mass retailer’s focus on pricing as well as merchandising newness is ‘intended to prioritize value perception without sacrificing differentiation, Jefferies wrote.
It’s a strategy that’s doubling down on Target delivering a unique shopping experience that’s not solely focused on price.
New Target CEO Michael Fiddelke talked about this strategy during his company’s third-quarter earnings call.
“We are a design-led company. And that starts with our authority and merchandising. Our ability to build a unique assortment of the right, stylish on-trend products at incredible value that’s so central to who we are and key to our differentiation and future growth,” he said.
The new CEO believes that the chain can stand out without being the lowest-priced option.
“At Target, we believe that offering an assortment that’s distinctly ours is essential to maintaining our merchandising authority with our guests. Not every category plays the same role towards these efforts, but together, they create an assortment and experience that feels unmistakably Target,” he added.
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“Looking ahead, [Target] sees share-gaining opportunities by reinforcing its authority in product innovation and in-store experience, while leveraging technology for greater efficiency,” Jefferies analysts noted.
“The focus remains on driving differentiation through merchandising and experience rather than competing solely on food and price. In the longer term, [management] expects growth at Walmart, Amazon, and Costco to continue, but also believes that [Target] has opportunities to capture share ahead, supported by enterprise initiatives,” reported Retail Dive.
That may seem like a losing strategy given how focused on price consumers are, but in my 30 years covering retail and shopping at Target, I have found that the brand’s advantage has never been price. It’s having the right mix of merchandise that gives shoppers a reason to walk through the doors.
Target has focused on offering a differentiated shopping experience.Target Corp.
While Target has struggled, it’s still a profitable company.
“The company reported third-quarter GAAP earnings per share (EPS) of $1.51 and Adjusted earnings per share1 of $1.78, compared with GAAP and Adjusted EPS of $1.85 in 2024,” it shared in its Q3 earnings report.
Some highlights include:
Net Sales of $25.3 billion in the third quarter were 1.5% lower than last year, reflecting a merchandise sales decrease of 1.9%, partially offset by a 17.7% increase in non-merchandise sales.
Comparable sales decreased 2.7% in the third quarter, reflecting a comparable store sales decline of 3.8%, partially offset by comparable digital sales growth of 2.4%.
Third quarter operating income, which includes the impact of non-recurring items, was $0.9 billion, 18.9% lower than last year. Excluding those non-recurring items, operating income was $1.1 billion.
While Target is focusing on overall value, outgoing Walmart CEO Doug McMillon talked a lot about price during his chain’s third-quarter earnings call.
“We have about 7,400 active rollbacks in Walmart U.S. right now, with more than half of those in the grocery category. Often, our 90-day rollbacks lead to a permanent price reduction, a new EDLP,” he shared.
That has been a long-running strategy for Walmart.
“Since the beginning of the year, more than 2,000 rollbacks have become the new everyday price. We’ll keep strengthening our ability to save people time and money, and we’ll keep finding ways to keep our prices as low as possible and being strategic in our pricing actions. Everyone wants value,” he added.
McMillon also shared how his team keeps ahead of its rivals on pricing.
“Inventory management is always important, and it’s especially important in this environment as we reduce markdown risk to help fund stronger price gaps. Our team continues to do a great job. The ability of our Walmart U.S. team, in particular, to make good quantity decisions and manage pricing and mix well has been impressive,” he shared.
Related: Kohl’s defends Kohl’s Cash, a program that boosts repeat shopping
This story was originally published by TheStreet on Dec 28, 2025, where it first appeared in the Retail section. Add TheStreet as a Preferred Source by clicking here.
