MW Walmart's earnings failed to please investors. Can Costco and these other retailers do better?

By Bill Peters

Earnings Watch: Costco, Target, Macy's, Gap and other retailers report this week, as consumer confidence sinks and boycott pressure intensifies

Most Wall Street analysts consider shares of Walmart Inc. a buy. But even as a safer bet in the retail world, the chain's first-quarter outlook last month made investors nervous. Now, earnings from lots of other retailers - some of whom aren't as safe - will fill in the gaps on a consumer landscape that has shown more signs of souring.

Among the retailers that investors still like a lot, membership warehouse chain Costco Wholesale Corp. reports results this week. As for those they like a little less, there's Target Corp. and Macy's Inc.

To some degree, the story for retailers reporting this week will be the same one we've seen over the past three years. That is, demand is still uneven for anything that isn't groceries, where prices are still high, particularly for eggs. The discount hunt remains intact, even for wealthier shoppers. Outside of the biggest retailers - like Walmart, Amazon.com and Costco $(COST)$ - analysts' expectations could be lower.

Moreover, some data over the past two months has pointed to more reservations from shoppers.

Retail sales in January fell by the most in nearly two years, amid a holiday-season hangover and cold weather that kept customers from venturing outdoors. Consumer confidence, by one measure, is at an eight-month low.

Prices, meanwhile, are still high. New tariffs from President Donald Trump could push them higher, as retailers grapple with how much of the hit to profit they want to absorb and how much of it they want to pass on to consumers.

"Inflation, while it is under control, as far as the consumer goes, their memory of what they paid for specific item off the shelf has not improved," Murali Gokki, managing director at the consulting firm BRG, said in an interview.

Aggressive efforts under Trump's watch to shrink the government have added to the uncertainty. Then there are boycotts - including Friday's "economic blackout," with more planned for later in the year - as some consumers use their wallets to push back against a corporate retreat from diversity goals and express broader dissatisfaction with unfairness in the economy.

As questions about the economy and consumer demand stay in the conversation, Wall Street has grown more cautious. Analysts are making bigger cuts than average to their earnings-per-share estimates for this year's first quarter, at least for S&P 500 companies, according to a FactSet report released on Friday.

Elsewhere during the week, electronics retailer Best Buy Co. Inc. $(BBY)$ reports, as analysts look for a bump from customers making technological upgrades. Discounters Burlington Stores Inc. $(BURL)$ and Ross Stores Inc. $(ROST)$ will also issue results, amid worries about disproportionate pressure on low-income shoppers. Results will also arrive from Foot Locker Inc., $(FL)$ as Nike Inc. $(NKE)$, a big sales driver for the athletic-gear chain, retrenches following weaker demand.

Elsewhere, earnings are forthcoming department stores Macy's and Nordstrom Inc., after Macy's (M) warned on holiday-period sales and announced plans to close more stores, and Nordstrom $(JWN)$ announced it would go private amid tough competition. Supermarket chain Kroger Co. $(KR)$ reports in the wake of its failed merger deal with Albertsons Cos. Inc. $(ACI)$. Abercrombie & Fitch Co. $(ANF)$, Victoria's Secret & Co. $(VSCO)$ and Gap Inc. $(GAP)$ also report.

Gokki said that even amid a shaky retail backdrop, consumer expectations for online shopping, pickup and delivery have only risen, and that building out the infrastructure for smaller store chains can ultimately be more costly.

There are other potential difficulties. For some purchases, shoppers might find that smaller upstarts and celebrity brands resonate more on a personal level than mass-retailer offerings. Consumers are struggling with credit-card debt. In the months ahead, more retailers could narrow their focus toward core customers, Gokki said, as clothing and other items sit on shelves, get marked down or get thrown out.

"As costs go up, they really need to pay more attention to: Are they really offering what the consumer wants?" he said.

This week in earnings

On the tech front, we'll get earnings from Okta Inc. (OKTA), Broadcom Inc. $(AVGO)$, Gitlab Inc. $(GTLB)$, Crowdstrike Holdings Inc. $(CRWD)$, Box Inc. (BOX), Marvell Technology Inc. $(MRVL)$, Zscaler Inc. (ZS) and Hewlett Packard Enterprise Co. $(HPE)$

Elsewhere, RV maker Thor Industries Inc. $(THO)$ reports, Campbell's Co. $(CPB)$, Jack Daniel's maker Brown-Forman Corp Class B. $(BF.B)$, Funko Inc. (FNKO), Smith & Wesson Brands Inc. $(SWBI)$ and Traeger Inc. $(COOK)$.

The call to put on your calendar

Target Corp., discretionary spending and consumer boycotts: Over the past 12 months, shares of Target have fallen around 20%, as essentials-focused shoppers shy away from things like clothing, electronics and other discretionary goods, which the chain depends on a bit more than Walmart. But as Target prepares to report results on Tuesday, analysts at BofA expect strong holiday-period sales and higher demand for winter-season items following a harsh January.

Still, after a 2023 boycott over its Pride-themed merchandise appeared to weigh on sales, Target has found itself yet again in the crosshairs. Some activists are calling for a boycott after the company rolled back its diversity, equity and inclusion programs. And the BofA analysts said that sales data through February showed a slowdown.

"We believe this deceleration reflects consumer focus on key promotional & seasonal moments, weather in certain markets, and potential impacts from February boycotts," they said.

The number to watch

Costco sales: Along with Walmart and Amazon, Costco, which reports results on Thursday, has been the rare retailer to do pretty well in a backdrop marked by shopper hesitation. Sales in the chain's last quarterly report missed analyst estimates, but trends so far this year have been solid. Management sees wealthier shoppers - who drive much of the economy but still like to save money - and its pharmacy business as bigger opportunities. Still, with the stock up nearly 40% over the past 12 months, expectations, similar to Walmart, could be higher.

-Bill Peters

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March 02, 2025 10:00 ET (15:00 GMT)

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