Cautious optimism and big investments mark Q4 earnings season

The snow has melted. The weather is warming. The Oscars were Sunday, and for most people, 2025 has just about disappeared in the rearview mirror. But there was one last bit of business to attend to before we could fully put the year to rest, and that was the Q4 earnings season. Most of the major retailers have turned in their results, and we’re picking through the data, earnings calls, and analyses to better understand the state of the industry and where it might be headed in the year ahead.

10,000-foot view: Despite the uncertainty in the broader economy last year, RJ Hottovy, head of analytical research at Placer.ai, told Retail Brew, “There’s a sense of cautious optimism and a sense that the US consumer is holding up relatively well.”

He added that while consumers are still “stretched from a household budget standpoint,” they are still finding reasons to go out and shop. In terms of earnings, this trend continues to benefit retailers that offer value, including off-price retailers such as TJX Companies, dollar stores such as Five Below, and mass retailers such as Walmart.

Taken together, the sector outperformed expectations. Zacks Retail sector scorecard found that as of February 25—when 22 of the 30 retailers in the S&P 500 index had reported—total earnings were up 6.9% from the same period last year, with 50% outperforming EPS estimates and 77.3% outperforming revenue estimates.

And while Hottovy said discounting is still a key sales driver, the group really “carrying the load” in terms of spending are higher-income shoppers, according to Christine Short, head of research at Wall Street Horizon. The strength of this consumer group, she said, is encouraging retailers to invest in product mix, so they can sell at full-price.

“Not everyone’s looking for a discount,” she said. “They’re looking for the right thing.”

Big moves: The focus on product mix and assortment was a consistent theme for retailers in Q4, as well as a willingness to make investments to ensure the right products are available to attract customers.

One of the biggest announcements to this effect came from Target, which said it’s investing more in its business and shifting its merchandising strategy to target “busy families,” with a renewed focus on its baby, home, and food and beverage categories.

“At its core, merchandising authority is about curation and playing to our strengths. Target is not an everything store,” CEO Michael Fiddelke told shareholders.

Don’t discount discounts though. Target also said it’s lowering prices on 3,000 items in the range of 5%–20%.

Walmart is also making some big investments, but it focused shareholders’ attention on those going into its supply chain, where capital expenditures are set to peak in the next two years, as it works to automate more of its distribution centers. The company also revealed that fast delivery, or those that are under three hours, grew 60% in 2025.

Tech-heavy: Investing in tech was another common priority among the biggest retailers. Best Buy CEO Corie Barry said it’s embracing Google’s new Universal Commerce Protocol, which means making bestbuy.com more “agentic friendly and ensuring our site is ready for AI agents to browse and discover.”

Amazon also said it plans to partner with third-party AI platforms, even as CEO Andy Jassy insisted that its own AI offerings would win the day with customers. And for Amazon’s sake, it better hope they do, because one of their bigger brick-and-mortar competitors is gaining steam in e-commerce.

Costco CFO Gary Millerchip credited investments in a more personalized digital experience in driving more than $470 million in e-commerce sales. “We have a clear road map for future digital enhancements and believe these will allow us to continue to grow digitally-enabled sales at a faster pace than overall sales,” he said.