Target and Walmart earnings preview: what will they tell us about the US economy?    

Target and Walmart earnings preview: what will they tell us about the US economy?

The upcoming earnings from Walmart and Target could provide one of the clearest snapshots yet of the health of the US consumer, with investors looking beyond the headline numbers for evidence of whether households are still spending confidently or beginning to feel the effects of higher prices and a more uncertain economic backdrop.

The two retailers offer particularly useful, but very different, perspectives. Walmart has increasingly benefited from consumers trading down and attracting higher-income households, while Target has a greater exposure to discretionary spending and has been working to revive sales after a difficult period.

Target reports its second-quarter results on Wednesday 19 August, followed by Walmart on Thursday 20 August.

The results come at an important point for the US economy. Recent data suggest consumer spending has remained relatively resilient, but concerns are increasing about the sustainability of that strength as households face elevated living costs and the benefits of earlier tax refunds fade. Goldman Sachs has warned that real consumer spending growth could slow towards 1%-1.5% in the second half of 2026, compared with 2.5% annual growth in June.

Those looking to trade around this week's results can do so through spread betting or CFD trading, while longer-term investors can access both shares through IG Invest or our share dealing service.

Walmart: the better test of underlying consumer demand?

Walmart is likely to provide the more positive reading on the US consumer.

The world's largest retailer reported revenue of $177.75 billion in its fiscal first quarter, up 7.3% year-on-year, while Walmart US comparable sales increased 4.3%, driven by growth in both transactions and average ticket, with strength in grocery and general merchandise. Global e-commerce sales jumped 26%, demonstrating that consumers continue to spend despite the wider economic uncertainty.

However, the composition of that growth is particularly important.

Walmart has increasingly attracted higher-income consumers, while also retaining its traditional lower- and middle-income customer base. This suggests that consumers are not necessarily stopping spending, but may be becoming more selective about where they spend their money.

Food and everyday essentials remain relatively defensive, whereas discretionary purchases are more sensitive to household confidence, employment and disposable income.

Investors will therefore be watching Walmart's comparable sales closely, alongside average transaction values, volumes and management commentary on consumer behaviour.

The company is guiding for second-quarter constant-currency net sales growth of 4%-5% and adjusted operating income growth of 7%-10%, with adjusted EPS of $0.72-$0.74. Its full-year fiscal 2027 guidance remains unchanged, calling for constant-currency net sales growth of 3.5%-4.5% and adjusted EPS of $2.75-$2.85.

A result comfortably above those expectations would reinforce the argument that the US consumer remains in relatively good shape.

Target: a more important test of discretionary spending

Target provides a contrasting picture.

The retailer has historically had greater exposure to discretionary categories such as home goods, apparel and electronics, making its results a useful indicator of whether consumers are willing to spend beyond basic necessities.

There are already signs of improvement. Target's first-quarter net sales increased 6.7% to $25.4 billion, while comparable sales rose 5.6%. Comparable traffic increased 4.4%, and comparable digital sales climbed 8.9%. Importantly, net sales increased across all six of its core merchandising categories.

This represents a significant improvement from the weakness Target experienced during 2025.

Management has also raised its outlook. Target now expects full-year 2026 net sales to increase by around 4%, compared with its previous expectation of approximately 2% growth, and expects full-year adjusted EPS to be near the top end of its previous $7.50-$8.50 range.

The second-quarter numbers will therefore determine whether the recovery is gaining traction or whether the first-quarter improvement was partly driven by easier comparisons and company-specific factors.

Tariffs and prices will be crucial

Another major theme will be the impact of tariffs.

Both retailers have significant exposure to imported goods, making them sensitive to higher input costs. The crucial question is how much of those costs are being absorbed by retailers and how much is being passed on to consumers.

For Target, this could be particularly important because its customer base is more exposed to discretionary purchases. If higher prices begin to discourage consumers from buying non-essential goods, comparable sales could weaken even if headline revenue remains supported.

Walmart, by contrast, has greater purchasing scale and a larger grocery operation, giving it more flexibility in managing prices. However, its enormous supply chain also means that tariffs and higher fuel costs can put significant pressure on margins.

Indeed, Walmart said in its first-quarter results that higher fuel costs in distribution and fulfilment reduced operating-income growth by around 250 basis points.

The trade-down effect

Perhaps the most interesting economic signal will be whether the so-called "trade-down" effect continues.

If middle- and higher-income consumers are increasingly shopping at Walmart because they perceive it as offering better value, that could suggest households remain financially healthy but are becoming more price-conscious.

That is a different economic environment from one in which consumers are simply cutting spending.

Walmart's first-quarter figures already showed strong growth in transactions and e-commerce, while Sam's Club US comparable sales excluding fuel increased 3.9%. Transactions excluding fuel at Sam's Club increased 6.2%, while average ticket fell 2.2%.

That combination — more transactions but lower average spending per transaction — could be an important indicator of consumers spreading their budgets more carefully.

Advertising offers another clue

Walmart's results will also increasingly be influenced by businesses that are less directly linked to traditional retail.

Global advertising revenue increased 37% in the first quarter, while membership and other income rose 27%. Walmart Connect is becoming an increasingly important contributor to profitability, potentially allowing the company to offset some of the margin pressure associated with retail.

That means investors need to distinguish between underlying retail demand and growth generated by higher-margin businesses such as advertising.

A strong Walmart earnings report does not necessarily mean the US consumer is booming if much of the profit growth is coming from these newer businesses.

Analyst ratings of Target and Walmart

According to LSEG Data & Analytics, analysts rate Target – its shares having risen by 54.49% year-to-date - as a ‘hold’ with a mean long-term price target at $144.51, around 4% below the current share price (as of 18 August 2026).

Analysts have a far more positive outlook on Walmart, though, with a year-to-date share price performance of nearly 3%. The stock is rated as a ‘buy’ and its mean long-term price target sits at $138.09, approximately 21% above current levels (as of 18 August 2026).

TipRanks has a ‘6 Neutral’ Smart Score for Target but a ‘buy’ rating.

For Walmart the Smart Score is ‘7 Neutral’ but with a ‘strong buy’ rating.

What the results could say about the US economy

Taken together, Target and Walmart should provide a useful two-speed picture of the US consumer.

If Walmart continues to report solid comparable sales while Target also delivers strong discretionary growth, it would suggest households remain relatively resilient and that fears of an imminent consumer slowdown may be premature.

If Walmart remains strong but Target struggles, the message would be more nuanced: consumers would still be spending, but increasingly prioritising value and essentials over discretionary purchases.

The most concerning scenario would be weakness at both retailers. A slowdown in Walmart's comparable sales alongside renewed pressure on Target's discretionary categories would suggest that higher prices, borrowing costs and economic uncertainty are finally beginning to constrain household spending.

Investors should also pay close attention to inventories, promotional activity, gross margins and management commentary on the second half of the year. These indicators could reveal whether retailers are having to discount more heavily to keep customers spending.

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Outlook

The upcoming results are therefore about more than earnings per share.

Walmart and Target sit at different ends of the US retail spectrum, making their results particularly useful when assessing the economy. Walmart can reveal whether consumers are prioritising value and essentials, while Target provides a clearer window into discretionary spending and consumer confidence.

So far, the evidence points to a US consumer that remains resilient but increasingly price-sensitive. Walmart's strong sales and e-commerce growth contrast with the need for Target to execute a significant turnaround, while rising costs and tariffs remain potential threats to margins.

The key question for the market is whether this resilience can continue into the second half of 2026.

If both retailers report healthy traffic and sales, investors may take comfort that consumer spending remains a reliable pillar of the US economy. But if growth is increasingly concentrated in essentials, lower-priced products and value-oriented retailers, the message could be that the consumer is still spending — just with less room to spare.

How to invest in Walmart and Target shares

1. Do your research on Walmart and Target ahead of their earnings releases on 19 and 20 August
2. Download IG Invest or open a share dealing account with us
3. Search for Walmart (WMT) or Target (TGT) in our platform or app
4. Choose the number of shares or value of money you'd like to invest
5. Place your trade