The earnings season for retailers may be strong so far, but the question remains whether the major retailers reporting this week can continue that trend. Over 91% of the S&P 500 has posted second-quarter earnings, with 84% exceeding expectations, according to FactSet. Home Depot kicked off the season on a positive note, reporting a beat on both revenue and profit:
Other retailers set to report this week include Walmart, Lowe's, TJX, and Target. However, concerns remain about the K-shaped economy, where high-income households continue to do well while low-income families struggle:
On Friday, the Commerce Department reported that retail sales fell in July for the first time in nine months:
LSEG believes that the consumer is strong enough to support earnings growth, although this resilience is increasingly concentrated, said Jharonne Martis, the firm's director of consumer research:
“Strong profit growth is being driven by a handful of large, high-margin retailers, while guidance across the broader sector points to a more cautious outlook for discretionary spending in the second half of the year,” she said:
Wall Street analysts emphasize that selectivity is key. “Demand trends are signaling continued consumer pressure, most notably with a deceleration of traffic, sales, and an uptick in promotional intensity,” said Wells Fargo analyst Ike Boruchow:
Walmart, which is expected to report on Thursday, has high expectations. Analysts expect earnings of 74 cents per share, while the company’s guidance is 72-74 cents:
Target is also set to report, with analysts expecting EPS of $2.35 and revenue of $26.15 billion:
