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.”
