Walmart set a somber tone for the first week of retailer earnings, but that wasn't the whole story. From tariff refunds to price cuts, the quarter showcased a shifting landscape as the industry heads into its most critical period of the year.

The big news was Walmart's sales woes as the Bentonville, Ark.-based giant reported a same-store sales decline-the first since 2020. Target, meanwhile, showed some signs of life, reflecting its turnaround efforts. Reports also arrived from home-improvement merchants Home Depot and Lowe's as well as off-pricer TJ Maxx parent TJX and Ross Stores, which reported strong sales and earnings growth.

The docket is full for next week, too, with reports slated from Kohl's, Gap, and Best Buy, among others, so there will be more data points to come.

These earnings are important for investors who are particularly keen on any clues that would reveal prospects for the make-or-break back-to-school and holiday seasons.

Here are a few main takeaways from week one:

All Eyes on Bentonville

The company is a bellwether not only for the retail industry but also the economy as a whole as consumers grapple with high gasoline prices specifically, and inflation in general. Walmart's post-earnings tumble was a reflection of disappointing comparable sales-a measly 2.6%. The chain took a big hit from changes in pharmacy drug rules. Same-store sales would have risen 3.4% if not for the drug hit.

But there was plenty of positive news, including market share gains across categories and impressive growth in alternative revenue streams like advertising and membership. Particularly encouraging were e-commerce sales, up 24%. However, the focus on comps showed that investors are looking past strong margins this quarter; instead they are laser-focused on the second half. Can Walmart-or any retailer-cut prices fast enough to bring in new customers and retain loyal ones? And at what cost?

The Tariff Factor

Tariff refunds have made a muddle of margins.

Although this phenomenon should be largely contained to the second and third quarters, it has still made most investors sift through recent margin results, as Barron's previously noted was likely to happen.

While Walmart-which received $2.9 billion in its quarter-had been the only major company to quantify its tariff refunds, billions in benefits are now embedded in other retailers' outlook, from Target to Home Depot, which received $994 million and $730 million, respectively. Ross Stores also reported a tariff benefit of $253 million. These checks are likely hitting at an opportune time, given recent pressure on retailers, notably Walmart and Target, to lower prices. The coming quarters will show how many companies put the money to work.

It's Affordability, Stupid

The ongoing affordability crisis weighing on the housing market is still a problem for home-improvement retailers, recent legislation to address the problem aside.

Despite a nascent recovery in some parts of the country, the spring and summer selling seasons were underwhelming and mortgage rates remain a moving target. So, it isn't a shocker that Home Depot and Lowe's felt the pinch, with do-it-yourself particularly under pressure.

There were glimmers of hope: Home Depot, which reported a same-store sales increase of 1.7%, noted that its shoppers are still going ahead with smaller projects, even if major renovations are out of reach. And Lowe's anemic 0.2% same-store-sales growth was still better than some whisper numbers floating up from the Street.

Investors may assume that the companies are doing their best with the bad hand they've been dealt. But, truth be told, it's hard to see the two stocks breaking out of their range until the housing market thaws more thoroughly.

Red Flags for Mall Merchants

There may be some concern about companies like Gap, Abercrombie & Fitch, and other specialty apparel retailers whose reports are next up. That's because clothing was the weakest growth category for Target, with just 0.1% growth in the quarter-squeaking ahead of home furnishings. It also isn't a great sign that TJX's main division delivered only a 1% increase in same-store sales in the quarter.

No Proxies

Finally, apparel aside, it may be particularly hard this quarter to expect one retailer's results-maybe Walmart is the exception-to provide a clear line of sight for other merchants and their stock prices.

For example, Target shares are up some 65% since the start of 2026, compared with about 4% for Walmart and the State Street SPDR S&P Retail exchange-traded fund. It's all about the chain's comeback-not particularly a sign that the industry is vibrant. In other words, it isn't a proxy for big box stores.

Likewise, it's tough to extrapolate TJX's results to other off-price retailers. The slowdown in comparable sales at its division TJ Maxx was seen in no small part as potential customer attrition to Ross Stores.

Ross, at market's close Thursday, reported that same-store sales soared 10%. The retailer also reported net income of $851 million, including the tariff refund, from $508 million in the second quarter a year ago. Earnings per share: $2.66 on a diluted basis, compared with $1.56 a year earlier. (That includes a tariff refund boost of about 60 cents per share.)

Elsewhere Home Depot's relative comparable sales strength may have raised hopes unrealistically before Lowe's second-quarter report, which disappointed. Estée Lauder's 5% organic sales growth could be a good signal for beauty as a whole. But it undoubtedly also reflects the strength of wealthier consumers-as well as its own organizational changes and long-term turnaround efforts.

Second-Half Jitters

Looking ahead, consumers will likely keep focusing on value amid inflation's strain rather than closing their wallets altogether. If companies use tariff refunds to lower prices, bargain hunters will have plenty of options, and more market share may be up for grabs. The back-to-school season is already poised to set spending records; to win, retailers need to be the ones making those sales-maybe at the expense of their rivals.

Write to teresa.rivas@barrons.com

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