Walmart, TJX earnings: Wealthy shoppers seek value

As more major retailers report earnings, one theme is becoming clear: Value players are winning over rich and cash-strapped alike.

Walmart And T.J.X.TJ Maxx’s parent company stood out from the crowd this week by raising its full-year forecasts and expressing optimism about the start of the holiday season. Both, like other major U.S. retailers that same week, said sales rose as they gained shoppers across the income spectrum. Home Depot, Lowe’s And Aim They lowered their profit outlook and said they saw a reluctance from consumers to make large purchases.

In an interview with CNBC, Walmart CFO John David Rainey said the major retailer has seen “value-seeking and selective” spending patterns of consumers over the past few quarters. “If there’s a little bit of increased pressure on the consumer, it’s going to get harder, they’re going to be looking for more value,” he said.

And TJX CEO Ernie Herrman said the company, which includes Marshalls and Home Goods, is off to a “strong start” to the holiday quarter and is “convinced consumers will continue to seek value.”

Shares of Walmart and TJX rose on Thursday even as the three major U.S. stock indexes turned negative.

The performance of two retailers, both strongly associated with attractive deals, comes at a moment when investors, industry watchers and economists are trying to forecast retail sales during the critical holiday season and the outlook for the U.S. economy next year. Their performance may bode well for other off-price chains. Ross And Burlingtonand including value-oriented players Dollar General, Dollar Tree, Five Below And costcowill report its latest earnings in the coming weeks.

In recent months, a variety of factors have made it difficult to gauge how retailers and the economy at large will perform in the coming months. This includes unrest in the job market following major layoffs at the following companies: Amazon, Verizon, POWER SUPPLY And Aimand concerns that the stock market is being promoted by artificial intelligence companies, contributing to bubble risk. The extended government shutdown also muddied the waters by delaying the release of the latest employment and inflation data.

There were also contradictions between what consumers said and what they did. Consumer confidence has fallen to almost its lowest level ever Retail sales strengthened in October According to CNBC/NRF Retail Monitor.

This led to blurred holiday expectations. For example, the National Retail Federation predicts that holiday sales will grow between 3.7% and 4.2% year over year and surpass $1 trillion for the first time, while consulting firm PwC said consumers plan to reduce their holiday spending average by 5% compared to the previous year’s holiday season.

Home Depot, Lowe’s and Target tipped the scales this week. All three cut their full-year profit forecasts and cited pressure on their businesses as customers hesitate to take on larger projects or make more expensive purchases.

For Home Depot and Lowe’s, a lack of consumer confidence could extend a period of cautious spending driven by lower home sales. For more than two years, they’ve seen customers take on smaller home improvement projects rather than taking on splurges like remodels and renovations that cost more or require financing. This model has remained valid, although it appeals to U.S. consumers who typically own a home and benefit from home equity gains.

Lowe’s CEO Marvin Ellison said even homeowners are “not immune” to the feeling of being shaken by news headlines about government shutdowns, higher tariffs and other policy changes that could hit their wallets; This can encourage price sensitivity and procrastination in purchases. He said the home decor retailer is focusing on ways it can make progress with its own strategies, such as expanding its product assortment and attracting more home professionals as customers.

Facing some challenges of its own making, Target expects customers to watch prices and make concessions during the holiday season, such as spending more on gifts and less on other areas like decor or food, Chief Merchandising Officer Rick Gomez said on a call with reporters. The retailer cut prices on 3,000 food and household items and tried to attract customers with low opening prices, such as $1 Christmas tree ornaments.

Rainey tells CNBC at Walmart the company is “winning” [market] share across all income groups, but as we have noted for several quarters, they are more pronounced in the upper income segment.”

For TJX, Herrman said the company’s focus on value provides a competitive advantage. The company’s earnings call says its “mix of brand, fashion, quality and price distinguishes us from many other retailers and has served us extremely well in many retail and economic environments throughout our nearly 50-year history.”

In a research note, retail analyst and Telsey Advisory Group CEO Dana Telsey said TJX’s recurring gains “highlight the strength of its value-focused offering that continues to resonate with consumers in an increasingly price-sensitive environment.”

Customers of all income levels came to TJX’s stores and website, but lower-income customers drove sales growth in most geographies in the latest quarter, CFO John Klinger said in an earnings call.

While Walmart and TJX have weathered the cracks in the economy better than many other retailers, they are not immune to economic weakness.

Walmart’s Rainey said that despite strong sales forecasts this year, the retailer has identified “pockets of moderation” among lower-income shoppers who feel more distressed than other shoppers. The company cited the stark disparity in wage growth between high- and low-income U.S. consumers in its earnings call on Thursday.

He also told CNBC that the retailer noticed a pullback from customers who stopped using Supplemental Nutrition Assistance Program (SNAP) benefits during the government shutdown. But “this is starting to pick up as people start receiving these funds again,” Rainey said.

“We’re seeing the same things others are seeing, and we’re watching it carefully,” he said on the company’s earnings call. “But I still think Walmart is better insulated than anyone else.”