Retail Earnings Round-Up
Jeff Buchbinder | Chief Equity Strategist
Last Updated: August 26, 2025
Additional content provided by Kent Cullinane, Analyst, Research.
Last week, some of the largest U.S. retailers reported earnings for the second quarter (Q2). Retail earnings offer valuable insights into the overall health of the U.S. economy and consumer behavior. Results across retailers this quarter were generally mixed as consumers continued to navigate tariff uncertainty, delay major purchases, and shift spending to other categories. We highlight some of the key retailers’ earnings and themes that impacted some retailers more than others.
Retail Earnings Come in Mixed, with Discount Retailers Outpacing Higher-End Retailers.
Source: LPL Research, FactSet, 08/22/25
Disclosure: Past performance is no guarantee of future results.
Impact of Tariffs
The announcement of tariffs in early April led to a steep sell-off in equity markets, with the S&P 500 falling over 12% from April 2 to April 8. Some retail stocks fared even worse, as retailers had to either eat the tariff costs, which would compress margins, or pass all or part of the levies on to the consumer via price hikes, which may reduce demand. While the initial tariff rates announced on April 2 have since come down, the effective global tariff rate is still projected to be in the mid-to-high teens, which could impact retailers’ bottom lines or consumer spending, or a combination of both.
Examining retailer earnings from last week, nearly all that reported mentioned tariffs as being a potential headwind in the near term. However, Walmart’s (WMT) CEO mentioned that the impact of tariffs has not been too notable thus far, as WMT and others front-loaded inventory purchases before the tariffs went into effect in efforts to keep margins and demand healthy. Additionally, approximately two-thirds of Walmart’s products are sourced domestically, minimizing the tariff impact. WMT, the largest retailer in the nation, exceeded Q2 revenue expectations and reported strong same-store sales growth, although slightly missed consensus earnings estimates.
Value-Driven Consumer
Target (TGT), often positioned as a slightly more upscale retailer than peers like WMT, beat earnings, revenue, and same-store sales expectations in Q2. However, the company noted a shift in consumer behavior, with shoppers becoming increasingly cost-conscious in the post-tariff environment. This shift has led to a greater focus on essentials and discounted goods, potentially challenging Target’s appeal to its core demographic, which traditionally favors a discretionarily focused consumer. Despite the earnings beat, same-store sales declined 2%, and transaction volume dropped 1.3%, indicating underlying softness in consumer engagement. In response to these headwinds, Target appointed Michael Fiddelke as its new CEO, signaling a strategic pivot toward sustainable, long-term growth and operational efficiency.
Deep discount retailers such as TJX Companies (TJX) and Ross Stores (ROST) fared slightly better than some of their higher-end competitors as sales increased mid-single digits year over year on strong consumer demand for off-price merchandise. TJX posted a sales, earnings, and same-store sales beat, as well as an expansion in profit margins despite tariff headwinds. Guidance was also raised for the rest of the year as the markdown retailer expects store traffic to continue throughout the fall and holiday seasons. ROST exceeded sales expectations as well; however, it saw margin compression largely due to tariff-related costs. While ROST was unable to mitigate some of the tariff-related costs that TJX was able to navigate, both discount retailers are cautiously optimistic as their value pricing strategies hope to benefit a more cost-conscious consumer.
Major Purchase Delays
Home improvement retailers Home Depot (HD) and Lowe’s (LOW) reported single-digit revenue growth and same-store sales expansion, however, they noted that larger discretionary purchases, typically those necessary in housing purchases and/or renovations, slowed. High housing prices and elevated mortgage rates are hurting HD and LOW because they directly impact consumer behavior and demand for home improvement products. Fewer home purchases, deferred renovations, and reduced do-it-yourself (DIY) projects all have led to lower big-ticket sales. Despite the slowdown in major purchases, HD and LOW have focused more on the professional contractor (pro) segment where there is still meaningful demand — HD continued to invest heavily in its pro segment with new digital tools and artificial intelligence (AI) capabilities, while LOW is acquiring Foundation Building Materials to expand offerings in drywall, ceilings, and interior finishes.
Conclusion
Q2 2025 retailer earnings largely were mixed, as deep discount retailers tended to outperform higher-end retailers, such as TGT. It’s notable that tariff-related costs have not entirely been felt by retailers and consumers, however, consumers are becoming more cautious, selective, and increasingly driven by price and necessity. Retailers are broadening their business segments and dependencies accordingly, hoping these strategic changes can benefit them in a post-tariff world. While the full tariff impact is unknown, retailers and consumers alike are navigating significant shifts in the economic landscape.
LPL Research’s Strategic and Tactical Asset Allocation Committee (STAAC) remains neutral on the consumer discretionary and consumer staples sectors. Consumer discretionary stocks trade at a steep multiple (30x forward earnings vs. the S&P 500’s 22x) given the potential headwinds (tariffs, cautious consumer spending), which we believe warrants prudent stock selection in this volatile market environment. Consumer staples equities continue to lag the broader market year to date, declining in July for the second straight month. The consumer staples sector faces the same headwinds as the discretionary sector, however, sales may be more stable as consumer spending on essentials has proven resilient in this economy.
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