Target and Walmart have very different quarters, Lowe’s pulls ahead of Home Depot, and off-price triumphs

Many of the biggest Q3 retail earnings reports dropped the week before Thanksgiving, and if you haven’t had a chance to pour over every SEC filing and earnings call, here is Retail Brew’s roundup of the biggest takeaways and data points from the quarter, with a focus on those offering hints of what we can expect for the rest of year and holiday season.

Big box is a mixed bag: Two of the biggest brick-and-mortar retailers continued to diverge in Q3. Target reported a Q3 decline in net sales YoY and lowered its profit outlook for the year, while Walmart’s sales blew past estimates, and it raised its profit outlook for the second time this year, a sign that the retail giant is confident despite economic headwinds such as tariffs and cautious customer behavior.

The core story is the same as it’s been for several quarters. Walmart is gaining market share with a range of incomes due to its value proposition and product mix, while Target is struggling due to its greater reliance on discretionary goods, even as it strives to add more affordability and newness to its assortment. 

The decline in comp sales at Target reflected “continued softness in discretionary categories like home and apparel,” Chief Commercial Officer Rick Gomez told shareholders, adding that the results were partly offset by a 7% bump in food and beverage, which were bolstered by consumers’ preference for prebiotic sodas and “better-for-you energy drinks.”

Walmart also acknowledged that grocery and health and wellness continue to sell better than general merchandise, but also noted that sales in the latter were positive across the company.

Outside of its physical stores, Walmart is also gaining ground. Global e-commerce sales were up 27% YoY in Q3, while they increased just 2.4% at Target.

This is the backdrop for the two companies’ somewhat contrary holiday expectations. Walmart CFO John Rainey said that despite “some pockets of moderation that we’re keeping an eye on,” the company is anticipating a holiday that is “pretty similar to the other quarters this year,” while Target CFO James Lee said the company expects a “continued volatile environment” in Q4, which is why it lowered its outlook for the year.

Off-price is on a roll: If recent earnings are any gauge, American consumers are in the midst of a love affair with off-price apparel. TJ Maxx and Marshall’s parent TJX Companies, which has a market cap nearly four times as big as Target, reported a 5% increase in comparable sales and raised its profit and sales forecasts for the year.

Rival discount outlet Ross Stores, meanwhile, saw comparable sales rise even more at 7% for the quarter, and raised its sales outlook for the year as well.

These brands offer value at a time when consumers are trying to stretch their dollar, but the deeper story is what’s happening behind the scenes in terms of how these companies are securing their quality off-price goods.

As TJX Companies CEO Ernie Herrman explained in an earnings call, with the rest of the retail market struggling there are ample buying opportunities. This allows the company to be “entrepreneurial and very opportunistic” in its purchasing. Ross Stores CEO James Conroy called out the brand’s purchasers as the key to its success. “The product team leads the charge,” he said.

Still needs improvement: Things are a little more complicated over in the home improvement category. Home Depot cut its profit and sales forecasts for the year, as it feels the brunt of macroeconomic headwinds such as interest rates and a lack of turnover in the housing market.

Rival Lowe’s is feeling more confident, however. The company raised its sales and profit outlook for the year, and CEO Marvin Ellison said he anticipated more homeowners to begin discretionary home improvement projects as they tap into lines of home equity credit.

“Looking ahead, lower interest rates, including for home equity loans, could begin to spur demand even as many homeowners remain reluctant to move and give up their historically low mortgage rates,” he said.

The wholesale picture: Lastly, BJ’s Wholesale had a solid quarter, even as its profits slipped. The warehouse and membership store reported a modest 1.1% bump in comp sales, but saw more success in other lines of business such as membership fee income (up 9.8%) and digital comp sales (up 30%). CEO Bob Eddy added that the company was “entering the holiday season with momentum.”