Retail earnings have picked up pace this week with a packed slate as Home Depot (HD) reported Tuesday pre-market, followed by today’s reports from Lowe’s (LOW), Target (TGT), TJX (TJX), and Williams-Sonoma (WSM). Walmart (WMT) is scheduled for Thursday pre-market, while Ross Stores (ROST) reports after Thursday’s close.
Sell-side analysts caution that Q2 results may show weaker trends, reflecting uncertainty tied to tariffs and immigration. Still, several see potential for a stronger second half as card spending data has improved since summer, particularly in discretionary areas like travel and leisure, signaling some recovery in household confidence.
That optimism is tempered by mounting concerns over the health of lower-income consumers, who continue to lag higher-income households in spending growth. The Street is also focused on how tariffs will affect margins moving forward. Many retailers cushioned Q2 by drawing down pre-tariff inventories, but with that buffer fading, they may be forced either to pass higher costs to consumers or absorb margin pressure. Morgan Stanley recently flagged expectations for spending to soften later in Q3 and into Q4 as tariff-driven price increases erode purchasing power.
The retailers who have reported Q2 earnings this week have offered a mixed snapshot of consumer and sector trends:
Lowe’s (LOW): Comparable sales rose +1.1%, in line with expectations and peer Home Depot, with steady performance across both Pro and DIY channels. Like its rival, Lowe’s benefited from favorable sales linearity. Full-year operating guidance was maintained, while Street sentiment was boosted by the company’s planned $8.8B acquisition of Foundational Building Materials, which strengthens its position in the high-growth, complex Pro segment.
Target (TGT): Results came in better than feared but still weak, with comps down -1.9%, traffic off -1.3%, and gross margins under pressure. The company reiterated full-year guidance, but investor concerns remain around execution risk and limited progress on its turnaround strategy. Sentiment was further dampened by the decision to appoint current COO Michael Fiddelke as CEO, as reports earlier this month indicated shareholders favored an external candidate.
TJX (TJX): Delivered a +4% comp beat alongside stronger EPS, raised full-year guidance, and noted that Q3 is off to a strong start. Management emphasized the company’s value and brand-driven positioning, which continues to resonate with consumers even in a challenging retail and macro environment. The performance validates the positive sentiment around the off-price sector, which is benefiting from heightened consumer trade-down activity.
Home Depot (HD): Missed but reiterated guidance as Q2 results came in a bit below expectations. Comps increased +1.0% vs the +1.3% consensus, though takeaways noted this was largely in line with buyside expectations. In addition, there seemed to be some comfort with the US performance, as comps increased +1.4%, with big ticket accelerating to +2.6% from +0.3% in the prior Q. Linearity was a bright spot as company noted comp growth accelerated to from +0.3% in May to +0.5% in June and +3.3% in July. CFO talked up momentum in core categories throughout the Q and noted that reiterated FY guidance does not bake in any tailwind from potential Fed easing. Pickup in Fed easing expectations has provided a tailwind for housing levered stocks in recent months and in some cases, helped the market look beyond soft results out of the homebuilders. On the tariff front, CFO reiterated that company continues to expect that it will not have to implement price increases across its store. Company believes it is relatively well positioned if it has to absorb higher costs given the financial strength of its consumer base. This fits with the consumer bifurcation theme that is expected to get a lot of attention this earnings season.
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