Target, Walmart earnings reports tell different stories about consumer spend

You never know what someone else is going through.

Last week, if corporations had feelings, two major big-box retailers would’ve had drastically different emotional states: Target was the eternal optimist; Walmart was, well, that person who tries their best to put on a smile when they’re going through a rough patch.

Whenever the two retailers report earnings, they offer a glimpse into how the American consumer is holding up, and right now, they’re telling different stories. So let’s compare emotional states, shall we?

Words of encouragement. For anyone curious how an “eternal optimist” mindset might manifest in the corporate world, consider this: Target executives used the words “encouraged” or “encouraging” 20 times on the company’s August 19 earnings call, the Wall Street Journal observed.

That wouldn’t necessarily mean glass-half-full on its own, but it does when you add this to the equation: Target executives used those same words 21 times on the company’s Q1 call. Two quarters in a row of feeling “encouraged?” Now that’s some corporate optimism.

Earlier this year, Target unveiled a multiyear turnaround plan, and the words of encouragement were primarily in reference to those efforts.

“We’re encouraged by the progress made so far, and we’re also clear-eyed about the important work still ahead,” Target CEO Michael Fiddelke told reporters on August 19. “Q2 is an important step forward in the plan we laid out earlier this year to open a new chapter of growth for Target. What you saw from us this quarter reflects the level of change we knew would be needed to put our strategy in motion.”

It’s also easy to feel encouraged when you’re buoyed by a $752 million lift to net earnings from tariff refunds. Target upped its full-year fiscal outlook on the back of this boost and stronger sales trends.

Comparable sales rose 3.8% for the quarter, which Neil Saunders, managing director of GlobalData, called “healthy” and “largely the result of efforts made to improve the customer experience and strengthen execution.”

“Overall, the numbers provide growing confidence that Target’s difficult years are ending,” Saunders told CFO Brew via email. “The recovery will not necessarily be even and smooth, but there’s a path forward now in a way that there wasn’t a couple of years back.”

Smallest in six. And you know who could use a pat on the back and some words of encouragement? Walmart, of course.

On August 20, the retailer posted a comparable sales increase of 2.6%, marking the smallest quarterly gain since 2020. Walmart said that without new pharmacy-pricing regulations, it would’ve seen a 3.4% rise.

Saunders noted that “most eyes will be drawn” to the 2.6% metric, and that it’s actually “solid in the scheme of things, and especially given the relatively tough comparative Walmart is lapping from last year.” Still, he noted that “it is also the slowest pace of growth in 26 quarters,” and “the deterioration will set some alarm bells ringing over whether the consumer is running out of steam.”

“It also raises the question as to whether the helpful gains from more higher income shoppers migrating to Walmart are starting to fade,” Saunders added. “We think both things are true, in part, but should not be dramatically overstated at this point.”

In any case, they’re grinning and bearing it for now: Walmart CFO John David Rainey told CNBC consumers are cash-strapped due to high gas prices, but they’re “still spending, and real wage growth is keeping pace, and so they’ve been very resilient in this environment.”

“But all that said, we would love to be able to bring prices down more and see less pressure on their wallets,” he added.