Walmart and TJX Earnings: Wealthy Shoppers Look for Value

As more major retailers post earnings, one theme becomes clear: Value players are beating both the wealthy and the cash-strapped.

Walmart and TJXThe parent company of TJ Maxx, stood out this week by raising its full-year forecasts and expressing optimism about the start of the holiday season. Both said sales have grown as they gain buyers across the income spectrum, in the same week as other major U.S. retailers. house deposit, Lowe's and Aim They cut their profit outlook and said they saw consumer reluctance to make big purchases.

In an interview with CNBC, Walmart CFO John David Rainey said the big-box retailer has seen “value-seeking and choice” spending patterns by consumers over the past few quarters. He said, “It stands to reason that if there is a little bit of incremental pressure on the consumer, they will only become more so and look for more value.”

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

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

The performance of the two retailers, which are strongly associated with attractive deals, stands out at a time when investors, industry watchers and economists are trying to predict retail sales during the critical holiday season and the outlook for the U.S. economy next year. Its performance could bode well for other off-price chains, such as Ross and burlingtonand value-focused actors, including general dollar, dollar tree, Five down and costcowhich will report its most recent earnings in the coming weeks.

In recent months, a combination of factors has made it difficult to assess how retailers and the broader economy will fare in the coming months. That includes nervousness about the job market after major layoffs at companies like Amazon, Verizon, Universal Postal Union and Aimand concerns that the stock market has been propped up by artificial intelligence companies, contributing to the risk of a bubble. A prolonged government shutdown also muddied the waters by delaying the release of recent data on employment and inflation.

There have also been contradictions between what consumers say and do. Consumer confidence has fallen to nearly the lowest level ever recorded, even as retail sales strengthened in October, according to CNBC/NRF Retail Monitor.

That has led to murky Christmas expectations. For example, the National Retail Federation predicted that holiday sales will grow between 3.7% and 4.2% year over year and surpass $1 trillion for the first time, while consulting firm PwC said consumers plan to reduce their average holiday spending by 5% compared to the previous year's holiday season.

Home Depot, Lowe's and Target all put their thumbs on the scale this week. All three 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 a period of conservative spending driven by lower housing turnover. For more than two years, they've seen customers take on smaller home improvement projects instead of splurges like remodels and renovations that cost more or require financing. That pattern has continued, even though they serve American consumers who typically own homes and have benefited from gains in home equity.

Lowe's CEO Marvin Ellison said even homeowners “are not immune” from being shaken by news headlines about government shutdowns, higher tariffs and other policy changes that could hit their wallets, potentially encouraging price sensitivity and procrastinating purchases. He said the home improvement retailer has been focusing on ways to move forward with its own strategies, such as expanding its product range and attracting more home professionals as customers.

Target, which has faced some difficulties of its own, hopes shoppers will watch prices and make trade-offs during the holiday season, such as spending more on gifts and less on other areas such as décor or food, Chief Commercial Officer Rick Gomez said in a call with reporters. The retailer has cut prices on 3,000 food and household staples and tried to attract shoppers with low opening prices, such as $1 Christmas tree ornaments.

At Walmart, Rainey told CNBC that the company has “been gaining [market] are shared across all income cohorts, but as we have observed for several quarters, they are most pronounced in the high-income segment.”

For TJX, Herrman said the company's focus on value is a competitive advantage. He said on the company's earnings call that its combination of “brand, fashion, quality and price differentiates us from many other retailers and has served us extremely well in many types of economic and retail environments throughout our nearly 50-year history.”

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

Customers of all incomes are visiting TJX's stores and website, but lower-income shoppers drove sales growth in most of its geographies in its latest quarter, Chief Financial Officer 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 its strong sales forecast for the year, the retailer has seen “pockets of restraint” among low-income shoppers as they feel more pressured than other customers. On the company's earnings call Thursday, it addressed the stark disparity in wage growth between high- and low-income American consumers.

He also told CNBC that the retailer noticed a pushback among customers who stopped receiving Supplemental Nutrition Assistance Program, or SNAP, benefits during the government shutdown. But Rainey said “that's starting to pick up now that people are getting those funds again.”

“We're seeing the same things as others, and we're keeping an eye on it,” he said on the company's earnings conference call. “But again, I think Walmart is better insulated than anyone else.”