Retail Earnings Will Show What Stretched Consumers Protect

Seven American retail giants will release earnings on Tuesday, providing a six-company gauge of consumer resilience. July retail sales fell 0.6%, the first decline since October, slightly better than the 0.1% expected. Despite a 5% increase year-over-year, sales still fell 0.4% when adjusted for inflation. Online sales slipped 2.2%, while auto sales dropped 1.8% and gas station receipts declined 0.9%.

However, clothing sales rose 1.9%, building material sales grew 0.3%, and restaurant spending increased 0.5%. Consumer sentiment, as measured by the University of Michigan's sentiment index, dropped to 51 in August from 55.2 in July. Only 8% of consumers expect their income to grow faster than inflation this year. Lower-income consumers showed the greatest loss of confidence.

Home Depot's earnings are expected to be $4.73 per share on $47.2 billion in revenue. Analysts foresee slightly lower results and little evidence of a sustained home improvement recovery. Lowe's is expected to highlight professional customers, appliances, services, and online sales. Target, reporting on Wednesday, aims to demonstrate its recovery following the end of the spring tax-refund boost.

Analysts anticipate earnings near $2.32 per share. TJX and Ross Stores might report the most favorable results due to the tendency of consumers to flock to off-price retailers when cautious. Walmart, delivering the broadest reading on Thursday, is expected to show in-line earnings and potential reinvestment of tariff refunds into lower prices.

Analysts project Walmart's earnings at 74 cents per share on $186.9 billion in revenue. The earnings reports will likely reveal which retailers can maintain sales among consumers who are stretched financially and which can attract them with promotions and value-driven shopping.