Target Outshines Walmart as Prescription Drug Prices Continue to Fall

The recent earnings report from Walmart (WMT) shows that the company's same-store sales growth slowed to 2.6%, its lowest pace in years, despite beating earnings estimates and raising fiscal 2027 guidance.

This slowdown was largely due to lower prescription drug prices, which fell by 0.8% in July and 3.1% over the past 12 months, according to the Bureau of Labor Statistics. Walmart's own-brand pharmacy was negatively impacted by these price declines.

In contrast, Target (TGT) reported a same-store sales growth of 3.8%, outperforming Walmart and benefiting from not having an in-house pharmacy business. Target sold its pharmacy operations to CVS Health for $1.9 billion in 2015, avoiding the negative impact of falling prescription drug prices.

As long as prescription drug prices continue to decline, Target is likely to maintain its edge over Walmart. In fact, at least 15 prescription drugs used by Medicare recipients are scheduled to see price reductions in 2027, including popular medications like Ozempic and Wegovy, which could fall in price by 71% for Medicare patients next year.