Topline
Target posted another quarter of declining sales Wednesday, but not as steep as their first quarter sales drop, as the big box retailer struggles to recover after facing consumer backlash and tariff pressure—while Lowe’s beat expectations for earnings and sales as it reached a deal to acquire a construction materials supplier for professional builders.
Big box retailers including Lowe’s, Home Depot and Walmart release earnings this week, which could indicate the impact of tariffs on spending.
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Timeline
Before the earnings call, the retailer announced a deal to acquire Foundation Building Materials, a company that distributes drywall and other construction materials to professional builders—even though products for do-it-yourself projects make up 70% of Lowe’s sales, Reuters reported.
Net sales fell .9% for the quarter, Target leadership said on Wednesday—an improvement from the 2.8% drop in the first quarter.
Cornell, who will stay on as the company’s executive chair, said Target had to “navigate through a volatile and uncertain tariff environment,” later adding “as one of the largest importers in the country, the prospect of higher tariffs meant we were facing some major financial and operational hurdles as we entered the year.”
Answering questions from investors, Target leadership was optimistic about the company’s ability to “mitigate the impact of tariffs,” later saying that the company was “well positioned relative to other retailers given Target’s size and scale.”
Target executive vice president and CFO Jim Lee said the company saw “healthy growth in digital,” and said the company would cautiously maintain their guidance, although added “we’re still facing a highly volatile and uncertain environment and believe it’s prudent to maintain a cautious approach in the back half of the year.”
Home Depot reported net earnings at $4.6 billion—slightly below expectations of $4.71 billion, with second quarter revenue also slightly down from projections—the company reported $45.2 billion in net sales, down from an expected $45.3 billion, according to data reported by Reuters.
However, these lower sales were still higher than the company’s first quarter revenue of $39.8 billion.
The retailer’s president and CEO Ted Dinker said in a statement the results were still “in line with our expectations,” and the company reaffirmed its fiscal guidance, including a 2.8% growth in sales for the year.
CFO Richard McPhail warned that higher tariff rates for “some imported goods” could impact prices, but also noted that these adjustments “won’t be broad based,” in comments also confirmed by CNN.
McPhail said customers were avoiding larger home improvement projects in favor of smaller ones, which he said was due to “a result of general uncertainty and higher borrowing costs in the form of interest rates.”
Home Depot imports less than half of its inventory from outside the U.S., executive vice president for merchandising Billy Bastek said at the call on Tuesday.
Key Background
Home Depot said in May the retailer did not plan to raise prices in response to tariffs. “We don’t see broad-based price increases for our customers at all going forward,” Bastek said at the time. However, Bastek did note that some merchandise could leave shelves due to increasing tariffs. “There’s items that we have that could potentially be impacted from a tariff that, candidly, we won’t have going forward,” Bastek said, but did not elaborate on which items this referred to.
What To Watch For
Several major retailers are scheduled to report earnings this week, and their results could indicate how these businesses are dealing with higher tariff rates since President Trump’s “reciprocal” levies kicked in earlier this month. Lowe’s, one of Home Depot’s biggest competitors for home improvement and hardware, will host its earnings call on Wednesday morning, as will the department store chain T.J. Maxx. Walmart, one of the largest general retailers in the country, will hold its earnings call on Thursday.
Surprising Fact
Foot traffic at Home Depot stores fell in July, according to a report produced by Placer.ai. According to the analysts, foot traffic at brick and mortar stores fell 4.3% for the month, and was down at least 2.5% for the year. However, the company also said online sales have increased, with Bastek noting on Tuesday “sales leveraging our digital platforms” rose about 12% compared to the second quarter of 2024. In comparison, foot traffic at the non-home improvement retailers was more mixed. Foot traffic at Target was down 3.9% for the year, but up compared to June by 1.8%.
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