Tech, Powell, and retail.
Markets are eagerly awaiting Fed Chair Jerome Powell’s Jackson Hole speech on Friday, while keeping a watch on hot tech stocks, which have had a limp week.
Retail investor darling Palantir (PLTR) has notched six straight losing sessions going into Thursday, wiping away $73 billion in market value in the process.
But today’s focus is on the state of retail, with Walmart (WMT) reporting a mixed second quarter and Target (TGT) delivering another weak quarter on Tuesday.
Both of these earnings reports couldn’t have been more different, though each clearly showed the impact of President Trump’s tariff war and the more cautious consumer.
Walmart continues to trounce Target in every category. Store sales growth. Online sales growth. Profit margin expansion. Guidance.
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Walmart US sales vs. Target: +4.6% vs. -1.9%
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Walmart US online sales vs. Target: +26% vs. +4.3%
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Walmart gross profit margin vs. Target: up 4 basis points vs. down 100 basis points
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Walmart guidance vs. Target: earnings per share guidance lift vs. reiterated EPS outlook
Target’s new CEO, Michael Fiddelke, will have to move quickly to fix a host of problems to compete with Walmart. Chief among them is to run a more operationally sound business in stores and online.
“Target needs a kick in the ass,” retail expert and investor Jeff Macke told me on Opening Bid.
No deep dive on a retailer right now should exclude the great tariff debate.
Target’s business was hit because of tariffs, particularly since it sells a lot of apparel and home goods. In fact, about 50% of its cost of goods sold are imported items.
Read more: What Trump’s tariffs mean for the economy and your wallet
Walmart showed more resilience as it has a larger grocery business and overseas operations. The reality is neither retailer is out of the woods as merchandise at higher prices flows into the stores.
“Walmart’s second quarter print highlights strong traffic and price investments driving share gains with U.S. comp growth well ahead of peers,” Jefferies analyst Corey Tarlowe wrote. “Core margin levers remain intact, suggesting continued earnings durability & future upside. While tariffs introduce some near-term uncertainty, the focus on value and market share supports a favorable setup for sustained outperformance.”
The retail earnings parade will keep marching on next week.
Let’s take a quick look at Best Buy (BBY), which reports on Aug. 28.
The stock is down 35% in the past five years as the retailer struggles to compete with Amazon (AMZN). Electronics innovation has also slowed (see Apple (AAPL) still trying to figure out AI). Consumers now hold on to devices longer — not exactly great news for Best Buy.
