Walmart and Home Depot Earnings Highlight Diverging Consumer Trends

Despite the S&P 500 hitting an all-time high this month, consumer sentiment remains uncertain. This is reflected in July's retail sales data, which saw a decline of 0.6% from the previous month to $763.6 billion.

The trend may not be consistent yet, but investors have been watching retail sector earnings closely over the last week. Walmart and Home Depot, two bellwethers in the industry, reported their fiscal Q2 numbers this week.

Walmart beat estimates and posted comp sales growth of 2.6%, but its stock was smacked down 9% despite a top- and bottom-line beat. The company added 96 basis points (bps) of gross margin, which was boosted by $2.9 billion in tariff refunds.

However, the real question mark in the numbers came from comps, which decelerated significantly from 4.1% and 4.6% in fiscal Q1 2027 and Q4 2026. Management blamed 125 bps of this decline on new drug regulations affecting pharmacy sales, but the real culprit appears to be a step down in transaction size, not volume.

At Home Depot, comps grew 1.7%, which was the best number since Q3 2022. However, its stock rose only slightly after the earnings release and is now locked in a tight range between the 50-day and 200-day moving averages.