Target (TGT) missed on earnings. Lowe’s (LOW) provided mixed results. Home Depot (HD) fared better. Walmart (WMT) beat estimates but warned its customers were focusing more on lower prices. Results were all over the map for this week of retail earnings. But dig a little deeper, and there were some very clear themes — regardless of results — that showed us how the consumer is faring during this period of high inflation. They also provide a window into our holdings with exposure to the everyday consumer, namely Costco (COST), Amazon (AMZN) and Apple (AAPL). Here are some common threads before we get the bottom line on our Club holdings. Inventory glut Covid pandemic shortages eventually became post-pandemic oversupply, which is why the retail industry has been suffering from what Jim Cramer has called an inventory glut recession. During the pandemic, there was a lot of demand for retail goods. Giants like Walmart and Target overestimated the consumer demand and ended up ordering in excess. Fast forward to today, both retailers have been struggling to sell the surplus and are now sitting on stale inventory. This excess of goods has ultimately put pressure on their profits as they have been forced to mark down goods in order to clear out some of that inventory. In late July , prior to reporting its fiscal second quarter earnings this week, Walmart cut its quarterly profit expectations and full-year guidance. Similarly, Target issued two warnings — one in May and another in June — preparing investors that its then-upcoming quarterly results would take a hit. While Walmart reported 8.4% year-over-year growth in sales to $152.86 billion, customers focused on lower-margin product purchases — which in part, weighed on profitability. Though earnings-per-share did beat revised estimates. Walmart CEO Doug McMillon told CNBC on Tuesday, “People are really price-focused now, regardless of income level.” New customers and more frequent trips from households with annual incomes of $100,000 or more helped boost sales. Target met analyst revenue expectations of $26 billion but reported much lower-than-expected Q2 earnings, a hard miss on its bottom line. On Target’s post-earnings call Wednesday, Chief Growth Officer Christina Hennington said customers are feeling the bite of inflation, stretching their budgets by taking advantage of promotions and consolidating store trips. She said Target shoppers still have spending power, but “confidence in their personal finances continues to wane.” Both retailers were also compelled to cancel billions worth in orders and pricing down their inventory, so they’re better positioned for fresh inventory as the holidays roll around. Both of them also signaled that customers are mindful of inflation and are adjusting their spending habits accordingly. Consumers are cautious but are still spending This week of retail earnings revealed that consumers are redirecting their spending patterns, but overall demand is…
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