Major US Retail Report Earnings

The US earnings saga continues, with the retail sector firmly in focus this week, three major US retailers reported earnings, and they are on fire ahead of the holiday season.

Walmart Inc. (WMT)

The people of Walmart will be smiling from ear to ear as their favorite retailer blew third quarter (Q3) earnings expectations out of the water and seems to have gained new shoppers. The retailer reported an increase of nearly 9% in sales for the fiscal third quarter and raised its full-year outlook.

EPS (adjusted): $1.50 vs. $1.32 (expected)

Revenue: $152.81 billion vs. $147.75 billion (expected)

The world’s largest employer set the tone for the retail sector this week with a surprising rise in the grocery category, showing continued market share gains. The company reported that grocery sales rose to the mid-teens, indicating that consumers from all income levels are starting to feel the brunt of the economy and are migrating to new cost-effective retailers.

The Home Depot, Inc. (HD)

Home Depot’s business model seems to work in the current economic environment, as the home improvement retailer increased revenue by around 6% in the third quarter (Q3).

Despite inflation woes, DIY sales increased, and professional sales grew, with backlogs in the professional segment still very strong.

EPS: $4.24 vs. $4.12 (expected)

Revenue: $38.87 billion vs. $37.96 billion (expected)

Despite a slowdown in housing across the US, Home Depot’s resilient business model seems to be weathering the storms for now and reaffirmed its full-year outlook. The retailer expects store sales to grow by about 3% and operating margins to increase roughly 15%.

Target Corporation (TGT)

All things were not as inspiring at Target over the third quarter as the general merchandise retailer battled with rising prices and warned that its holiday season sales could be weaker. Target’s profit tumbled by around 50% due to slower sales and the clearing of unwanted inventories over Q3.

EPS: $1.54 vs. $2.13 (expected)

Revenue: $26.52 billion vs. $26.38 billion (expected)

Macroeconomic factors are starting to creep in as Target’s reason for lower sales is attributed to consumers making trade-offs between what they essentially need and want. This could be a warning sign for the holiday season, which is traditionally a perfect time of year for retailers.

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