America’s biggest retailers see uneven results, with low-income consumers ‘feeling the squeeze’ of high prices

A slew of earnings reports from some of America’s biggest retailers this week showed the industry, like consumers visiting their stores, splitting into a series of winners and losers.

Retailers that are leaning into value and low prices reported strong results and were rewarded by investors as a K-shaped economy pushes consumer sentiment to near-record lows. Investors more harshly judged companies that reported flagging sales in their latest quarter.

“Higher-income households will keep spending, but middle- and lower-income shoppers are feeling the squeeze, pushing them toward discounters like Walmart, Costco, and TJ Maxx as tariffs and elevated prices make bargain-hunting essential,” Moody’s Mickey Chadha told Yahoo Finance.

“The disparity between the low-income cohort and the upper-income cohort has grown a little bit in more recent months,” Walmart’s (WMT) CFO John David Rainey told Yahoo Finance as lower-income earners spend less.

The company’s quarter beat Wall Street’s expectations, and Walmart raised its full-year outlook. Its stock rose 6% following the results.

Rainey added that, “Customers are willing to lean in and buy those higher ticket prices when they find value with them.”

Read more: What is a ‘K-shaped’ economy, and what’s causing the divide?

At Ross Stores (ROST), the company posted a 7% year-over-year pop in same-store sales, far higher than the 3.3% the Street expected, per Bloomberg consensus data. “While pricing has increased across the retail environment, our commitment to delivering value remains unchanged,” Ross Stores CEO James Conroy said. Ross Stores’ stock rose 8% in response to the results.

TJX Companies (TJX), which owns brands like T.J. Maxx, HomeGoods, and Marshalls, saw its sales increase 5%. CEO Ernie Herrman told investors that the company is appealing to all-income cohorts, but “it was the lower income demographic that was driving the [sales growth] in the majority of our geographies.”

Results weren’t only driven by low prices during the quarter, however. Gap (GAP) reported that the Gap and Old Navy brands saw same-store sales growth increase 7% and 6%, respectively, higher than forecast.

“We did take select pricing in Q3 in select categories — denim, which saw double-digit growth,” CEO Richard Dickson said. “And the strength of our execution is really resonating with customers, and we saw growth … across all income cohorts.”

He called the results “encouraging despite widely reported macroeconomic pressure on the low-income consumer.”

Read more: Holiday budget guide: How to save money and avoid debt this year

Data published Friday from the University of Michigan showed that sentiment in November remained near a record low.

Lowe’s (LOW) also offered a positive surprise to investors after the company posted better-than-expected results on the top and bottom lines and raised its full-year sales outlook.

CEO Marvin Ellison told Yahoo Finance that the company produced double-digit growth for pricey items, such as HVAC systems, water heaters, windows, and doors.

“This is a big-ticket business, and it’s doing well for us, but it’s doing well not because the market is dramatically recovering. It’s doing well because we’re taking share,” Ellison said.

At Target (TGT) and Home Depot (HD), results failed to impress the Street, with both companies citing the broader economic environment as the driver of sales declines.

Target reported another quarter of sales declines, with same-store sales falling 2.7% during the quarter.

CFO James Lee told investors on its earnings call, “We’re mindful of the challenges facing consumers as exemplified by recent declines in consumer confidence.”

Home Depot missed forecasts and lowered its full-year outlook. CEO Ted Decker said, “We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”

In the week ahead, investors will get a delayed look at retail sales for September, and the end of the government shutdown means a fuller picture of the US consumer and the labor market will finally emerge in the coming weeks.

The absence of economic data meant this week’s earnings from retailers — and the run of earnings expected next week — took on more importance in outlining the broader story of the US consumer going into the holiday period.

But like so many things in the economy right now, what emerged was a divide with little in between.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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