This week, major retailers including Costco (COST, Financial), Target, Macy's, and Gap are set to release their earnings reports. Among them, Costco's stock has surged nearly 40% over the past year, reflecting high market expectations. However, this also means that Costco may face significant pressure in its earnings report due to signs of weakening consumer markets. Recent data indicates that consumers are becoming more cautious in their spending.
Walmart's recent quarterly earnings failed to satisfy investors, highlighting the pessimistic outlook for U.S. consumer spending. As a result, there is keen interest in how Costco, Target, and other retailers will perform under similar conditions. Costco's report, scheduled for Thursday, is particularly anticipated. Despite a challenging consumer confidence environment, Costco, like Walmart and Amazon, has maintained a solid performance. Although its sales last quarter did not meet analyst expectations, the sales trend this year remains robust.
Analysts have noted the increasing signs of consumer market weakness, with some data from the past two months showing a more cautious consumer spending attitude. In light of ongoing economic and consumer demand uncertainties, Wall Street has become more cautious. A report by FactSet last Friday revealed that analysts have significantly reduced their earnings per share (EPS) forecasts for S&P 500 companies for the first quarter of this year.
Walmart's fiscal fourth-quarter earnings report for 2025, released on February 20, showed strong revenue growth driven by consumers seeking discounts amid high U.S. inflation. However, the company's guidance for revenue and profit in the 2026 fiscal year fell short of expectations, leading to a pre-market stock price drop. This reflects not only Walmart's challenges but also the broader uncertainty in the U.S. economy.
Consumer confidence has declined, with inflation and tariffs adding to the uncertainty. In January, retail sales in the U.S. saw the largest drop in nearly two years, driven by post-holiday spending slumps and cold weather, while consumer confidence hit an eight-month low. Meanwhile, U.S. goods prices remain high, with tariffs introduced by the Trump administration potentially exacerbating price increases. Retailers must decide whether to absorb these costs or pass them on to consumers.
