Two major US retailers released their fiscal second-quarter results on the same day, offering contrasting outlooks for the year ahead. Target posted a 5.3% rise in net sales and a 3.8% increase in comparable sales, prompting an upward revision to its full-year sales growth forecast at roughly 5%. In contrast, Lowe's saw comparable sales grow just 0.2%, pinned its full-year sales outlook to the lower end of its prior range, and guided to flat comparable sales for the year. On the same day, off-price retailer TJX delivered 4% comparable sales growth and raised its full-year profit guidance. Taken together, the numbers point to a pickup in everyday spending while big-ticket housing-related purchases remain soft.

Target shares slipped about 3% in pre-market trading, while Lowe's fell roughly 2%. Target shares are up more than 50% year-to-date, raising the bar for profit quality excluding tariff-related refunds.

Target: traffic rebounds, all six merchandise categories grow

For the quarter ended August 1, Target reported net sales of $26.5 billion, up 5.3% year over year, with comparable sales rising 3.8% versus market expectations of roughly 2.4% to 2.5%. Store comparable sales grew 2.7%, digital channel sales rose 8.7%, and same-day delivery surged more than 25%. Comparable traffic increased 3.6%. The company said all six core merchandise categories posted year-over-year growth, with hardlines (Fun 101) recording double-digit gains and food & beverage and beauty growing at high single-digit rates. Non-merchandise sales climbed more than 20%, driven by advertising, membership, and marketplace.

GAAP and adjusted earnings per share both came in at $4.11, versus $2.05 in the year-ago period. The quarter included a $994 million pre-tax benefit from IEEPA tariff refunds, or $1.65 per share. Excluding that refund, EPS grew 20% year over year.

Chief Executive Michael Fiddelke said the second quarter continued the improvement seen in the first quarter, noting the company has cut prices on more than 10,000 high-frequency items over the past year while continuing to invest in new products, convenience, and the shopping experience. He expressed optimism about early back-to-school trends.

For the full year, Target now expects net sales growth of approximately 5%, up from its prior target of about 4%. EPS guidance stands at $9.90 to $10.90, including the $1.65 per share second-quarter refund. Excluding the refund, the midpoint of guidance is $0.75 higher than the prior range of $7.50 to $8.50. Operating margin guidance is roughly 6%, with the refund contributing about 90 basis points.

Lowe's: Pro customers provide support, DIY remains under pressure

Lowe's reported total sales of $26 billion for the quarter, up from $24 billion a year earlier but slightly below the roughly $26.16 billion market consensus. Comparable sales rose just 0.2%. The company attributed growth to professional (Pro) customers, home services, and online, with online sales up 15.7%. Discretionary DIY spending remained pressured by macro headwinds. Diluted EPS was $4.27, flat year over year, while adjusted EPS of $4.40 exceeded expectations of roughly $4.22 and included $0.11 per share in tariff refunds. Gross margin declined from 33.81% to 33.04%, and operating margin fell from 14.48% to 13.67%.

Dollar sales growth notably outpaced comparable sales, largely due to acquisition consolidation. The company excluded $96 million in pre-tax charges related to the FBM and ADG acquisitions in its adjusted profit figures.

Chief Executive Marvin Ellison noted this was the fifth consecutive quarter of positive comparable sales growth, though discretionary remodeling spending remains under pressure. He said the near-term environment remains volatile and the company will continue to advance its Total Home strategy.

Full-year guidance was narrowed to the lower end of prior ranges: total sales of $92.0 billion (previously $92.0 to $94.0 billion), flat comparable sales (previously flat to up 2%), adjusted EPS of approximately $12.25 (previously $12.25 to $12.75), and operating margin of 11.2% (11.6% adjusted). The guidance includes the second-quarter refund but excludes any potential additional refunds in the second half. Capital expenditure remains capped at $2.5 billion.

Cross-validation from the same week: home improvement lags everyday spending

On August 18, Home Depot reported second-quarter sales of $47.86 billion, up 5.7% year over year, with comparable sales growth of 1.7% and US comparable sales up 1.3%. Adjusted EPS was $4.92. Traffic declined 1% while average ticket rose 2.8%, and online comparable sales grew 11%. The company maintained its full-year guidance for sales growth of roughly 2.5% to 4.5% and comparable sales of flat to up 2%. The overall home improvement chain continues to show "repairs and maintenance stronger than large-scale renovations."

TJX reported quarterly net sales of $15.2 billion, up 5% year over year, with consolidated comparable sales up 4%, ahead of company plans. Adjusted EPS of $1.22 beat the $1.19 consensus. The company raised its fiscal 2027 adjusted EPS guidance to $5.15 to $5.20, though its third-quarter adjusted EPS guidance of $1.30 to $1.32 came in below street expectations of roughly $1.34, sending shares down about 4% in pre-market trading. TJX also confirmed it received partial IEEPA tariff refunds.

Looking at the four companies together: demand for food, apparel, off-price, and everyday essentials is more stable, while large-scale renovation spending tied to housing turnover and mortgage rates remains weak. Lowe's shifting its full-year comparable sales outlook from "flat to up 2%" to "flat" contrasts with Home Depot's maintained "flat to up 2%" range, suggesting the home repair recovery is uneven.

Tariff refunds lift profits but do not change the demand divergence

Target, Lowe's, and TJX all included tariff refunds in their quarterly profits. Target's was the largest at $1.65 per share, while Lowe's recorded $0.11 per share. When evaluating operating trends, one-off refunds should be separated from comparable sales, traffic, and category performance. Target raised its profit midpoint even excluding the refund, and the simultaneous recovery in traffic and all-category growth points to improving momentum. Lowe's beat on adjusted EPS, but sales missed, gross margin declined, and full-year guidance was cut, indicating demand is weaker than the profit figures suggest.

Walmart reports earnings Thursday, which will provide additional read-through on lower-income consumers and grocery trends.

Market interpretation: This earnings batch is better read as "consumer stratification" rather than broad strength or weakness. Target's traffic and all-category growth suggest middle-income households' everyday spending is recovering after price cuts and assortment adjustments. Lowe's' DIY weakness and guidance cut indicate high interest rates, elevated home prices, and subdued housing turnover continue to suppress deferrable housing-related spending. Professional customers and repair-oriented demand provide a buffer, but not enough to push the home improvement full-year outlook back to the upper end. For rate-sensitive sectors, Lowe's' downward revision carries more information than Target's upward adjustment. For consumer stocks overall, Target and TJX show discretionary spending has not stalled, just that the housing chain is moving more slowly. The key variables ahead are whether mortgage rates can fall with long-end Treasury yields, and what Walmart signals about lower-income consumers.