Walmart and TJX Earnings: Wealthy shoppers seek value

As more major retail companies report earnings, one theme is becoming clear — that value players are winning over both the wealthy and the cash-strapped.

Walmart And the parent company of TJ Maxx TJX They stood out from the pack this week by raising their full-year forecasts and expressing optimism about the start of the holiday season. Both said sales grew because it wins shoppers across the income spectrum, in the same week as other major U.S. retailers Home Depot, Louie and goal They lowered their earnings forecasts and said they saw a reluctance to make large purchases.

In an interview with CNBC, John David Rennie, Walmart’s chief financial officer, said the big box retailer has seen “value-seeking and discretionary” spending patterns by consumers over the past few quarters. “It stands to reason that if there is a little extra pressure on the consumer, they will become more stressed, and will look for more value,” he said.

The company, which includes Marshalls and Home Goods, saw a “strong start” to the holiday quarter and is “convinced that consumers will continue to look for value,” TJX Ernie Herrman said.

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

The performance of the two retail companies, which are strongly linked to compelling deals, is jumping at a time when investors, industry observers and economists are trying to predict retail sales during the critical holiday season and the outlook for the US economy for next year. Their performance could bode well for other off-price chains, e.g rus and Burlingtonand value-focused players, including Dollar General, Dollar tree, Five below and Costcowhich will announce its latest earnings in the coming weeks.

In recent months, a combination of factors has made it difficult to gauge how retailers and the broader economy will perform in the coming months. These include concerns about the labor market following significant layoffs at companies including Amazon, Verizon, UPS and goal Fears that the stock market has been fueled by artificial intelligence companies, contributing to the risk of a bubble. The prolonged government shutdown has also muddied the waters by delaying the release of recent jobs and inflation data.

There were also discrepancies between what consumers say and what they do. Consumer sentiment fell to a near all-time low, even as retail sales grew stronger in October, according to CNBC/NRF Retail Watcher.

This has led to uncertain holiday forecasts. For example, the National Retail Federation expects holiday sales to grow 3.7% to 4.2% year over year and reach $1 trillion for the first time, while consulting firm PricewaterhouseCoopers said consumers plan to cut their average holiday spending by 5% compared to the holiday season a year ago.

Home Depot, Louie And Target put their thumb on the scale this week. The three companies cut their full-year profit forecasts and spoke of pressure on their businesses as clients hesitate to take on larger projects or make more expensive purchases.

For Home Depot and Lowe’s, a lack of consumer confidence may prolong the period of conservative spending due to lower housing turnover. For more than two years, they’ve seen clients take on smaller home improvement projects instead of splurges like remodeling and renovations that cost more or require financing. This pattern has continued, even though they cater to American consumers who typically own a home and have benefited from home equity gains.

Even homeowners are “not immune” from feeling shaken by headlines about government shutdowns, rising tariffs and other policy changes that could impact their wallets — potentially encouraging price sensitivity and procrastination on purchases, Lowe’s CEO Marvin Ellison said. The home improvement retailer has focused on ways it can move the needle with its own strategies, such as expanding its merchandise assortment and attracting more home professionals as customers, he said.

Target, which has faced some difficulties of its own, expects shoppers to watch prices and make trade-offs during the holiday season, such as spending more on gifts and less in other areas such as decor or food, Chief Commercial Officer Rick Gomez said on a call with reporters. It cut prices on 3,000 food and household supplies products and tried to attract shoppers with lower opening price points, such as $1 Christmas tree ornaments.

At Walmart, Rennie told CNBC that the company is “making gains [market] Share among all income groups, but as we have observed for several quarters, it is most pronounced in the upper income bracket.

For TJX, Herman said the company’s focus on value represents a competitive advantage. It’s a combination of “brand, fashion, quality and price that sets us apart from many other retailers and has served us very well through many types of retail environments and economic environments over our nearly 50-year history,” he said on the company’s earnings call.

In a research note, Dana Telsey, retail analyst and CEO of Telsey Advisory Group, said TJX’s recurring earnings “highlight the strength of its value-focused offerings, which continue to resonate with consumers amid an increasingly price-sensitive environment.”

Customers of all incomes are coming to TJX’s stores and website, but lower-income shoppers drove sales growth in most geographies last quarter, CFO John Klinger said on 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 expectations for this year, the retailer has discovered “pockets of moderation” among low-income shoppers because they feel the pinch more than other customers. At the company’s earnings call on Thursday, he pointed to the sharp disparity in wage growth between high- and low-income American consumers.

He also told CNBC that the retailer noticed a decline from customers who stopped receiving Supplemental Nutrition Assistance Program, or SNAP, benefits during the government shutdown. But he said: “This is starting to improve now that people are receiving that money again.”

“We’re seeing the same things everyone else is seeing, and we’re watching them closely,” he said on the company’s earnings call. “But again, I think Walmart is better insulated than anyone else.”