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Last week, the U.S. Census Bureau released the retail sales report, and the numbers were okay – not great, not terrible.

But, also last week, the University of Michigan put out its monthly Surveys of Consumers – which gauges consumer sentiment. The numbers for August were not good, dropping for the first time in four months. Both the survey of current conditions and future expectations were down significantly.

It just so happens that this bit of consumer news comes right before the largest retail stores in the country report their quarterly earnings.

This week, Home Depot (NYSE: HD) reports on Tuesday followed by Target (NYSE: TGT) and Lowe’s (NYSE: LOW) on Wednesday, and Walmart (NYSE: WMT) on Thursday.

Will it be a good summer for these retailers?

Headwinds for home improvement stores?

Home Depot and Lowe’s – the two leading home improvement stores – could face some headwinds as retail sales for home improvement stores has sputtered in recent months.

In July, retail sales for home improvement stores fell 1% from June and were down 2.6% from July 2024. The year-over-year numbers were roughly flat in June, but in May, big box home improvement stores saw a 2.8% sales decline year-over-year. For both of these companies, their quarters ended July 31.

What this portends for Home Depot and Lowe’s remains to be seen. Wall Street analysts expect earnings of $4.70 per share for Home Depot, which would be up 2.2% year over year. Revenue is projected to reach $45.3 billion, which would be 5% higher than the same quarter a year ago. So, those are pretty generous numbers, given the retail sales results and the potential impact of tariffs.

Lowe’s is anticipated to report $24 billion in revenue, which would be a roughly 1.7% increase from the same quarter a year ago. Earnings are targeted to come in at around $4.25 per share, which would be up some 25% year-over-year.

Both of these stocks are only up 1.5% YTD, but they have surged in recent weeks. Over the past month Lowe’s stock has gained 14% and Home Depot stock has risen 10%.

Walmart and Target on different tracks

The retail sales number in recent months proved to be better for general merchandise stores, the category under which Walmart and Target would fall.

In July, big box retailers saw sales increase 0.4% over June and 2.3% over July of 2024, according to the Census Bureau. Sales were also up overall for general merchandise stores in June and May. In June they rose 1.1% year-over-year, while sales increased 3.1% in May.

This could help lift revenue and earnings for Walmart and Target.

Analysts anticipate Walmart to generate earnings of 74 cents per share, which would be up 10% year-over-year. Revenue is pegged at roughly $174 billion, which would be a 4% increase. One thing to watch with Walmart is how much of a bite out of its earnings that tariffs take, since Walmart imports a lot of inventory from China.

The view is less favorable for Target as with analysts expect revenue of around $25 billion, which would be a 2.3%. However, earnings are projected to be around $2.05 per share, which would represent a 20% year-over-year decline. Target has struggled more than Walmart for several reasons, but basically, in a more uncertain economic and high inflation environment, shoppers tend to seek out discount retailers like Walmart and Dollar General.

Walmart stock is up about 12% YTD while Target stock is down around 21% YTD. However, Target stock is cheap with a P/E of 11. Investors should be watching for tariffs impact and any changes to guidance, as inflation is expected to tick up.

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