MW Prices are probably going up at Walmart. Target and other retailers will detail the tariff impact this week

By Bill Peters

Meanwhile, terms like 'tariffs,' 'uncertainty' and 'recession' are coming up more on earnings calls

Following Walmart Inc.'s earnings last week - which one analyst said would be the most important quarterly results for shopper sentiment so far - executives said to prepare for price increases, potentially within the next few months.

This week, the lens on the consumer will narrow, as we get quarterly reports from retailers like home-improvement chain Home Depot Inc. on Tuesday, and Target Corp. on Wednesday.

Home Depot $(HD)$ arch-rival Lowe's Cos. Inc. $(LOW)$ also reports during the week. So do off-price chains TJX Companies Inc., BJ's Wholesale Club and Ross Stores Inc. Urban Outfitters Inc. $(URBN)$ also reports.

Those results will land as analysts look for more detail on how much consumers have balked as ever-shifting trade tensions and negotiations keep the economy in limbo. Mentions of tariffs on corporate earnings calls are at a decade high, according to a new FactSet analysis of S&P 500 companies over the last two months. Similarly, mentions of "uncertainty" are at their highest level since 2020, when the pandemic hit. Mentions of "recession" are at their highest level since the end of 2022.

Markets have rebounded from the blow they took after President Trump early in April said he would hike tariffs on imports from much of the rest of the world, but then temporarily paused the harshest escalations. Consumers, on the other hand, have offered mixed signals.

For instance, a University of Michigan gauge of U.S. consumer sentiment slipped in a preliminary May reading. That marked its fifth consecutive monthly decline, amid worries about steeper price increases.

Still, Walmart $(WMT)$ said that its results in April, the last month of its first quarter, were better than it expected. But management said the company could see "larger swings" in its financials up ahead, as the U.S. and China try to iron out their differences on trade.

Among other retailers, Western-wear chain Boot Barn Holdings Inc. $(BOOT.UK)$ said it saw strong sales trends over the past several weeks. Bit it said demand could wane and that its margins could suffer as it starts to sell tariffed products.

David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, said that the U.S. consumer was still holding up overall.

"The consumer remains strong and the resiliency of corporate America to navigate this volatile and unknown time continues to amaze me," he said over email.

Still, he said, along with the broader health of the consumer, spending on big-ticket items - examples of which might be things like appliances - could be an area of deeper focus for this week's retail results.

Shorter-term, there also will be questions about how much product retailers already have on hand that won't be affected by tariffs. As for competition on prices, UBS analysts recently said that prices for packaged goods, health products and office supplies sold at Target were around 11% higher than similar things at Walmart, 14% more than at Costco Wholesale Corp. $(COST)$ and 19% more than at Amazon.com Inc. $(AMZN)$. Walmart's size and leverage with suppliers is also an advantage.

"Walmart will have more room to absorb tariffs relative to other retailers like Target," Wagner said.

He later added: "While the focus will be on tariffs in the near-term, I'd expect Target to rely on heavy promotional activities to drive sales longer-term, which will likely be at the expense of margins."

Target relies more on discretionary items for sales, or those that aren't essential, like groceries. Cost-of-living increases have forced more consumers to focus on covering the basics.

The chain, in its most recent annual report, noted that a "significant portion" of its merchandise comes from outside the U.S., either directly or indirectly, with China serving as its biggest import source. Home Depot (HD), like other retailers, has tried to get more of its products from more places.

Eighteen S&P 500 companies, including one Dow 30 member, will report quarterly results this week, according to FactSet.

The calls to put on your calendar

Footwear demand: Lower demand, higher apprehension about the economy, tougher competition and consolidation have come to define the shoe industry over recent months. Results this week from VF Corp. $(VFC)$ - which makes Vans and Timberlands - and Deckers Outdoor Corp. $(DECK)$, the maker of Uggs, Tevas and Hokas, will try to assuage investors, as trade frictions remain top-of-mind and Nike Inc. $(NKE)$ retrenches to focus more on athletes.

The number to watch

Cloud, cybersecurity revenue: Cybersecurity firm Palo Alto Networks Inc. (PANW), Zoom Communications Inc. (ZM), Snowflake Inc. (SNOW) and Workday Inc. (WDAY) report during the week. Taken together, the results will offer a look at artificial-intelligence demand and IT spending.

Tax-preparation platform Intuit Inc. $(INTU)$ also reports during the week.

-Bill Peters

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May 18, 2025 10:00 ET (14:00 GMT)

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