It has been a volatile year for American retailers, but their latest round of earnings reports show an emerging divide that could define the crucial holiday season.
Retailers that focused on value, even at the high end, did well, according to quarterly earnings calls and statements this month. Companies that didn’t meet sales or profit expectations missed key trends or suffered from poor management, analysts said.
“In today’s world, with these earnings across all the sectors, it does come down to how you’re running your business, and are you playing to the trends that the consumer is interested in,” said Jessica Ramírez, a retail analyst and co-founder of the Consumer Collective, a company that tracks consumers.
Here’s what the retailers had to say about what is shaping their outlook:
Walmart and Target illustrate the divergence.
Walmart, the largest retailer in the United States, outpaced its competitors as expected. Its revenue for its most recent quarter (the three months through October) rose about 6 percent from a year earlier. The company, which has about 7,400 rollbacks — temporarily discounted items — in place, with more than half of them in the grocery aisles, is benefiting from an influx of shoppers from higher-income families, its chief executive, Doug McMillon, said on a call with analysts last week.
“Middle-income households have been steady, and while lower-income families have been under additional pressure of late, we’re encouraged by how our teams are meeting them with greater value across necessities and doing what we can to help them stretch their dollars further,” he added.
But as Walmart raised its sales outlook for the year, its rival Target did the opposite.
“Our business has not been performing up to its potential over the last few years,” Brian Cornell, Target’s chief executive, said on a call with analysts last week. The retailer missed expectations and reported a slight decline — 1.5 percent — in sales, citing softness in demand for some discretionary items.
TJX Stores, which includes T.J. Maxx and HomeGoods, said sales in its most recent quarter had risen 7 percent from a year earlier. A continued emphasis on value was a major difference from other chains, Ernie Herrman, the chief executive of TJX, said last week on a call with analysts. The company also raised it sales outlook for the year.
Home improvement stores hit a dry spell.
Home Depot and Lowe’s reported challenges from an uncertain economy and said fewer storms had meant less spending on roofing materials and plywood. Home Depot missed earnings targets for the quarter and cut its full-year profit forecast. The company cited elevated mortgage rates and consumers’ reluctance to spend on housing. Sales increased 3 percent from a year earlier.
Sales at Lowe’s rose by about $600 million, but the company’s finance chief, Brandon Sink, said sales would be flat for the year because of several economic challenges.
“We are seeing a cautious consumer amid ongoing uncertainty in the macro environment, and the timing of an inflection in the home improvement and housing markets remains unclear,” he said.
Some shoppers are still making pricey purchases.
Retailers selling discretionary items, even high-end products, reported growth for their most recent quarter, a sign that shoppers will spend money on big-ticket items. In a report delayed by the government shutdown, the Commerce Department said on Tuesday that retail sales rose 0.2 percent in September from the previous month.
It’s indicative of a bifurcated economy. The top 10 percent of households in the United States make up nearly half of all spending, according to Moody’s Analytics. At the same time, consumer sentiment in other income groups has fallen steadily.
At Best Buy, sales rose on continued demand for computers, video games and mobile phones, the company said this week, but interest in home theater systems, appliances and drones softened. Still, the retailer raised its sales outlook for the year and had revenue of nearly $10 billion.
“While customers continue to be thoughtful about big-ticket purchases in the current environment, they are willing to spend on high-price-point products when they need to or when there is technology innovation,” Corie Barry, the chief executive of Best Buy, said on a call with analysts on Tuesday.
Williams-Sonoma reported a 4 percent increase in revenue, above expectations, which its leaders attributed in part to strong in-store experiences, incremental growth and the ability to pull back on promotions. West Elm and Pottery Barn, two of the company’s subsidiaries, had higher sales, even as the company braced for headwinds in 2026.
Tariffs were manageable this year, but 2026 could be a concern.
While holiday shopping insights and customer satisfaction took center stage on many earnings calls, some retailers were preparing for financial pressure from increased tariffs going into the new year.
Bath & Body Works took a $35 million hit from tariffs in the latest quarter, one of several reasons it underperformed. Its sales fell 1 percent, and it lowered its guidance for the year. The company’s chief executive, Daniel Heaf, said weaker consumer sentiment was “weighing heavily” on sales, while acknowledging that the lackluster results were due in part to an “overreliance” on promotional offers.
Gap, which owns Old Navy, said that it had made adjustments to its supply chain and products to help minimize the impact of tariffs and that consumers had responded well. Kohl’s praised its merchant and sourcing teams as instrumental in navigating tariffs, but braced for more pressure from tariffs in the coming months.
The future impact of tariffs cast a pall for some companies that did well this quarter.
“The tariff landscape has been incredibly volatile,” Jeffrey Howie, chief financial officer of Williams-Sonoma, said on a call last week. Questions about the future, he said, were still unanswered.
“India is one of our largest sources of goods,” Mr. Howie said. “And where that tariff is going, which is currently at 50 percent, is an open question.”
Emmett Lindner is a business reporter for The Times.
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