Retail earnings are set to offer a check of consumer health this week as the second quarter earnings season winds down. On Tuesday, Home Depot's (HD) results showed that consumers continued to spend, albeit on smaller projects, as geopolitical concerns and inflation weigh on US households. Walmart (WMT), Target (TGT), and Lowe's (LOW) are among the other big box stores reporting this week.
Overall, earnings season showed remarkable strength. According to FactSet data, second quarter earnings for S&P 500 companies are on pace to rise 50% year over year, the highest growth rate since 2021. Artificial intelligence has been the growth engine of that broad-based earnings growth, Bank of America strategists noted.
Klarna (KLAR) stock plunged 19% in premarket trading on Tuesday after the Swedish buy now, pay later firm trimmed its outlook for gross merchandise volume, a measure of the total value of goods sold through the platform. Klarna now expects its 2026 gross merchandise value to come in between $149 billion and $151 billion, down from its previous forecast of $155 billion. That overshadowed Klarna’s unexpected profit during the quarter.
Earnings per share of one penny topped Wall Street forecasts for a $0.06 per share loss, according to S&P Global Market Intelligence consensus estimates. Revenue increased 27% year over year to $1.04 billion, also topping estimates of $996 million. Revenue grew by nearly 6% in the quarter to $47.9 billion, above the $47.3 billion analysts forecast, per Bloomberg estimates.
Adjusted earnings grew 0.2% to $4.79, more than the $4.73 predicted. "We saw broad based demand across the business as customers continued to engage in smaller projects," CFO Richard McPhail said in the release. McPhail and senior executive vice president Ann-Marie Campbell are temporarily leading the company while CEO Ted Decker takes medical leave.
Customers visited Home Depot less frequently during the quarter but spent more when they did. Same-store sales increased 1.7%, more than the roughly 1% expected, and US same-store sales jumped 1.3%, higher than the 0.9% expected.
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