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To date, 156 of the 197 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2025, representing 79% of the index. Of those companies that have reported their quarterly results, 73% announced profits that beat analysts’ expectations, while 4% delivered on-target results and 23% reported earnings that fell below estimates. The Q2 2025 blended earnings growth estimate now stands at 6.5%.

The blended revenue growth estimate for the 197 companies in this index is 4.5% for Q2 2025. Of those companies that have reported their quarterly results so far, 71% announced revenue that exceeded analysts’ expectations and the remaining 29% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: LSEG Earnings Dashboard

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Source: LSEG I/B/E/S

The LSEG Retail/Restaurant Index is now projecting 6.5% blended earnings growth for Q2 2025, but this is expected to slow significantly to just 1.1% in Q3 2025, highlighting a deceleration in consumer spending (see Exhibit 2). Compared to previous summers, Q2 2025 is on track to deliver the weakest earnings growth in three years, following two consecutive years of robust double-digit gains. This is inline with August’s LSEG/Ipsos Primary Consumer Sentiment Index, which finds that overall American consumer sentiment remains below last year’s levels.

Exhibit 2: The LSEG Retail Earnings Growth Rate: Q4 2024 – Q4 2025 Est.

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Source: LSEG I/B/E/S

This week in retail

Target beat Q2 earnings, revenue, and same-store sales expectations, but underlying challenges remain. Same-store sales (SSS) declined by 1.9%, and total transactions both in-store and online (traffic) fell by 1.3%, signaling continued pressure on consumer demand.

Traditionally known for offering more stylish and slightly upscale products compared to other discounters, Target is struggling in an economic environment where shoppers are increasingly focused on value and everyday low prices. As consumers tighten their budgets, many are shifting toward retailers like Walmart and dollar stores that emphasize deep discounts and essentials, leaving Target’s more curated, mid-tier assortment less in demand.

Despite these headwinds, the company reaffirmed its full fiscal 2025 outlook and highlighted “encouraging signs of recovery,” including improved traffic and sales trends, particularly in physical stores, and disciplined cost management in a challenging retail landscape.

In a major leadership move, Target’s board unanimously appointed Michael Fiddelke as the company’s CEO, marking its first chief executive transition in over a decade. The retailer said the change is aimed at driving stronger store performance and long-term sustainable growth.

In contrast to Target, TJX continues to shine amid economic pressure, beating Q2 earnings, revenue, and same-store sales (SSS) estimates. The retailer reported broad-based strength across its divisions and raised its full-year guidance. It also noted that Q3 is off to a strong start, aligning well with the back-to-school season.

TJX’s off-price model positions it favorably to attract deal-seeking shoppers across income levels, allowing the company to benefit from ongoing economic uncertainty. As a result, same-store sales rose 4.0%, exceeding its 3.3% estimate.

Meanwhile, both Home Depot and Lowe’s reported mixed results this week, reflecting ongoing challenges in the home improvement sector. Demand has weakened as elevated borrowing costs and mortgage rates continue to deter both current homeowners and prospective buyers.

Home Depot CEO Edward Decker addressed concerns around pricing, emphasizing the company’s efforts to shield consumers from tariff-related increases. He noted, “It’s important to remember that over 50% of our products are sourced domestically and wouldn’t be subject to any tariffs. However, for some imported goods, tariff rates are significantly higher today than they were when we spoke in May” (Source: Home Depot Q2 2025 Earnings Call).

While Home Depot faced headwinds, Lowe’s beat its Q2 earnings estimate and announced the acquisition of Foundation Building Materials, its second deal in recent months aimed at expanding its reach among professional contractors. The move underscores Lowe’s strategic focus on the pro customer segment as a key growth driver.

Looking ahead, analysts polled by LSEG are already bullish on the Buckle’s Q2 performance. The consensus for Buckle Inc.’s Q2 2025 EPS is $0.81. However, the StarMine Predicted Surprise is higher than 2%. This suggests that it’s likely that the Buckle will beat earnings and post a positive surprise.

The StarMine SmartEstimate is a weighted average of analyst estimates, with more weight given to more recent estimates and more accurate analysts. Our studies have shown that when the SmartEstimate differs from the consensus (I/B/E/S mean) by more than 2%, the company is likely to post subsequent earnings surprises directionally correct 70% of the time. This percentage difference is referred to as the Predicted Surprise (PS%) (Exhibit 3).

Exhibit 3: The Buckle StarMine SmartEstimate and Predicted Surprise %: Q2 2025

Source: LSEG Workspace

Tariffs and pricing pressures

According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% month-over-month from June to July 2025, and 2.7% year-over-year. Retailers continue to face headwinds from weak consumer sentiment and a value-conscious shopper grappling with elevated living expenses. The CPI data highlights that consumers are contending with higher costs for essentials such as food, electricity, medical care, and transportation compared to a year ago.

However, apparel prices have bucked the broader inflation trend, only rising 0.1% month-over-month and declining 0.2% year-over-year. This trend is consistent with LSEG data, which shows widespread apparel price reductions. In collaboration with Centric Market Intelligence, we are tracking weekly average original prices across selected categories in U.S. mall stores. Since December 2024, average prices have been monitored weekly through August 2025. Among the categories tracked, Women’s Apparel has experienced the steepest decline, with prices falling 8.5%, followed by Footwear falling 6.7% (Exhibit 4). On the other hand, backpack prices did go up for the back-to-school season, rising 5.2%.

Exhibit 4: Average Price Changes: December 2024 – June 2025 Est.

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Source: Centric Market Intelligence.

Despite the recent stability in consumer prices, the latest Producer Price Index (PPI) data, which tracks price changes before they reach consumers, suggests that inflationary pressures may be building. Throughout 2025, consumer prices have remained relatively subdued, partly due to strategic actions by importers, such as preordering inventory and absorbing tariffs to shield consumers in the short term. However, this buffer is unlikely to last. The latest PPI figures indicate that higher costs are increasingly rippling through the supply chain, driven in part by ongoing tariff-related pressures. As these upstream costs accumulate, consumers may soon begin to feel the impact more directly.

Discount levels – U.S. online retailers

Despite declining apparel prices, retailers are offering fewer promotions. The discount penetration, defined as the percentage of merchandise on sale, has fallen below the historical range of 34% to 42% observed over the past decade (Exhibit 5). Year-to-date in 2025, the average discount penetration stands at just 27%, down from 34% last year and below pre-pandemic levels. This shift comes at a time when retailers are contending with increasingly value-conscious consumers, highlighting a strategic shift in promotional activity amid evolving demand dynamics.

Exhibit 5: Average Discount Penetration: U.S. Online Retailers

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Source: Centric Market Intelligence.

However, the average percent discount has remained relatively stable at 35%, just below last year’s average of 36% and below pre-pandemic levels.

Exhibit 6: Average Discount: U.S. Online Retailers

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Source: Centric Market Intelligence.

Guidance

So far, 156 retailers have reported Q2 2025 earnings. Among them, many have pointed to higher prices, challenging macroeconomic conditions and a cautious consumer as key headwinds. They also cited the impact of tariffs as a significant factor this quarter.

A key theme emerging this earnings season is that retailers are taking proactive steps to reduce their exposure to countries exposed to U.S. tariffs. For example, Target noted during its Q1 2025 earnings call that: “Going back to 2017, we were sourcing 60% of our goods from China. We’ve brought that down to 30%, and we’re well on our way to being below 25% by the end of next year” (Source: TGT Earnings Call, Q1 2025).

Using LSEG’s internal GenAI tool to analyze transcripts of these earnings calls, we found that many other retailers are following a similar trend (see Exhibit 7).

Exhibit 7: Sourcing % Reduction

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Source: LSEG Internal GenAI Tool

The bulk of retailers still have to report Q2 2025 results. Going into the quarter, 31 retailers issued negative preannouncements, while only seven issued positive EPS guidance for Q2 2025 so far (Exhibit 8). Of those retailers offering revenue guidance, 35 warned of disappointing results, while 12 said revenue might be better than previously expected in Q2 2025.

Looking forward to Q3 2025; sixteen retailers issued negative earnings preannouncements, while only six issued positive EPS guidance for Q3 2025. Of those retailers offering revenue guidance, sixteen warned of disappointing results, while seven said revenue might be better than previously expected in Q3 2025.

Exhibit 8: Earnings and Revenue Guidance: Q2 2025 – Q3 2025

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Source: LSEG I/B/E/S

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