The winning and losing retailers heading into the holiday season

But other players aren’t feeling the heat. Here is a look at some of the issues discussed by retail executives in earnings calls and statements in the weeks before the holiday season.

The winners: Amazon, Target, Costco, discounters

Inflation pressures have further solidified the dominance of Walmart, Amazon and Costco over other retailers, still noticing declines in consumer spending.

A survey from the National True Cost of Living Coalition earlier this year found 65% of middle-class Americans say they are struggling financially. Retailers like Target have attributed this to slowing sales, but other players, like Walmart and Amazon, have seen this as a boon. A recent Morgan Stanley report showed Amazon, Walmart and Costco accounted for 46% of all retail growth in the third quarter, according to Women’s Wear Daily.

Walmart’s net sales in the U.S., for example, grew 5% over the past year from $109.4 billion to $114.9 billion, boosted by the continued growth of its advertising business and other investments in new services and technology. Higher-income customers are helping the retailer stay competitive: 75% of its market share gains last quarter came from households making more than $100,000 a year.

Walmart and Amazon offer both low-priced essentials and more expensive items. As a result, they have proven to be more palatable to both lower-income shoppers as well as higher earners hoping to spend less.

“We’ve just seen more concentration on the part of these large-scale retailers,” said Steve Dennis, president of SageBerry Consulting and former chief strategy officer for Neiman Marcus Group. “Now it’s exacerbated by the macroeconomic conditions because there’s very clearly been a shift to value, this trading down, nondiscretionary spending.”

Customers are looking for value, with retailers showing high demand for discounts and sales events. The spending hesitance has also helped the growth of value players like T.J. Maxx, Temu and Shein. T.J. Maxx parent company TJX reported better-than-expected earnings and revenue, with sales surpassing $14 billion, up 6% from a year before. Temu’s revenue rose 44% to 99.35 billion yuan this past quarter, according to Reuters. The Information reported Shein’s revenue, while not reported publicly, was up 23% in the first half of the year.

The losers: Best Buy, Target, Kohl’s, Macy’s

Retailers more focused on buyers’ wants rather than needs continue to struggle.

Best Buy CEO Corie Barry told investors the retailer saw softer-than-expected sales this past quarter due to a combination of macroeconomic uncertainty, customers waiting for deals and distractions due to the election, per CNBC. The company made $9.45 billion in revenue instead of the anticipated $9.63 billion.

Barry also said that while shoppers are responding more to sales events than last year, the company is seeing weaker sales in between those events.

Dennis said this is likely because cautious consumers tend to prioritize holiday spending, and promotional periods are typically around holidays. “When you’ve got limited budgets on the part of most consumers, the tendency is you’re going to focus on those kind of must-shop occasions,” he said.

Target also reported worse-than-expected results, with revenue coming in at $25.7 billion compared to analyst expectations of $25.9 billion. CEO Brian Cornell said customers’ budgets remain stretched, and they are shopping carefully. Additionally, port strikes, hurricanes and warmer weather have hurt Target’s profitability.

Several retailers, including Target, Kohl’s and Macy’s, said warmer weather in the fall, particularly in October, hurt cold-weather apparel sales. Net sales at Kohl’s fell 8.8% in the third quarter, while they were down 3.1% at Macy’s.

“Early November was stronger, and I think a lot of that was due to the fact that the weather was warmer this year than last year,” Matt Jacob, an equity analyst for data and analytics firm M Science, told Modern Retail.

Kohl’s CEO Tom Kingsbury told investors November sales are already up compared to the third quarter. “As it hurt October sales, it probably helped November sales a little bit,” Jacob said.

Financing constraints are also weighing down certain spending categories. Lowe’s and Home Depot both reported over the last few weeks that customers continue to hold back on big home improvement projects.

While also facing macroeconomic headwinds, Macy’s faces an additional problem. On Monday, in a preliminary earnings report, the company said that while preparing its latest financial statements, it found that an employee intentionally hid $132 to $154 million in delivery expenses from the fourth-quarter 2021 through Nov. 2, 2024. This is a small figure compared to the company’s $4.36 billion of delivery expenses during the same period but greater than the $105 million net income it made through all of 2023.

“Macy’s should have strong internal controls (safeguards) that could have picked up on this problem, regardless of whether it is material or not,” Amal Shehata, an accounting professor at the NYU Stern School of Business, said in an email.