Walmart, Home Depot earnings: Checking in on the US consumer

Big-box retailers Home Depot (HD) and Walmart (WMT) are set to report their first-quarter earnings figures on Tuesday, May 14, and Thursday, May 16, respectively. On May 10, the University of Michigan shared that its preliminary consumer sentiment reading fell to 67.4, a six-month low.

Yahoo Finance Retail Reporter Brooke DiPalma explains whether factors like inflation prices and consumer slowdowns are anticipated to show up in both stores' earnings reports.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Luke Carberry Mogan.

Video transcript

I, well, consumer sentiment, it tumbled on Friday as higher prices continue to weigh on shoppers.

So far.

This earnings season, we have seen rising prices force consumers to pull back on spending for fast food.

And now with the big box retailers like Home Depot and Walmart reporting this week, will we see a continuation of that trend?

That's what everyone wants to know.

We want to bring in our very own Brooke Dipalma, the best person to ask here within this newsroom.

Brooke give us a sense of what those expectations are and whether or not we will likely or we are like to see any sort of material.

We, yeah, everyone's really wondering where exactly consumer spending power is right now.

And certainly what Wall Street expects is that Wal Mart has been able to hold on to that momentum that it's gained in the recent years.

Home Depot.

On the other hand, we saw such a hike during the pandemic with those diy projects and now Wall Street is expecting that to be a bit of a pullback this quarter.

But the professional side of things at Home Depot expected to do well and taking a closer.

Look at Wal Mart, Wall Street does expect a 3% sales growth here in the U with gains across all income cohorts.

And that's something that Wal Mart has been strong on in recent years as both low income and high income shoppers look to Walmart for that low price every day strategy.

And what we've seen is that Walmart has introduced things like new private label brands called Better Goods.

That's a higher quality, roughly $5 price point, new private label brands in order to entice and keep those high income shoppers that they've gained, especially those are going to Walmart for groceries.

And what we've also seen is the company do that $9 billion store make over really hoping to engage income cohorts and really get that experience that they're looking for while also shopping on a dime.

Now, Home Depot, a bit of a different story.

There are Wall Street does expect a 2% sales drop.

And that's really because we're seeing tough comparisons compared to what we saw during the pandemic when everyone was flocking to the home improvement retailer to make adjustments, make redo their house while they were at home.

Now, inflation higher interest rates as well as soft existing home sales.

Really weighing on that customer that we saw boom during the pandemic.

But one point to make here is that Home Depot is really relying on that pro side of things to boost its upcoming quarter Wall street really, depending on that.

We did see them acquire our distribution during this quarter.

And that's really this, they're really leaning on this pro like roofers, like contractors in order to offset that pull back that they're seeing in the everyday consumer and back up to some of the other names that space, obviously the rival being lows there.

But in terms of what we could learn here from Home Depot, maybe what that will tell us or give us a better sense of some of those results that we'll see later on this earning season.

Yeah, well, two others that I'm looking for is Target and Lowe's.

They're also expected to report later on.

I think when it comes to Lowe's Home Depot, Walsh, you really pointing out that tough January weather, which we heard also from fast food companies is really pulling back on, perhaps going out and spending so eager to hear that's out there, something else that lows will have an impact on and that as far as Wal Mart compared to Target, target is expected to come in with a slight boost, roughly 1% sales growth this quarter.

But Target just has not been able to maximize as much as Wal Mart has on where consumers are seeking value and really taking advantage of that low price strategy that seems to be working for Walmart right now.

So it be interesting to see if w was able to hold on and Target was able to gain back a bit.