Retail earnings in Q1 are a mixed bag

Discount giant Walmart headlined a mixed bag of earnings results reported by retailers this week, though the overall takeaway is consumers are still spending.

Why it matters: Distressed retailers face enough headwinds with interest rates climbing, so a pullback in consumption would only add to their woes.

Details: Walmart said its revenue in Q1 was up 7.6%, fueled by grocery and a 26% jump in e-commerce sales globally.

• As a result, it raised its full-year guidance, with CFO John Rainey pointing out that consumers are still buying, even as they wait for bargains and rein in discretionary spending.
• The discounter was joined by companies such as TJX, the parent of off-price banners T.J. Maxx and HomeGoods, which said its net sales rose 3% in Q1, though it missed expectations.

Zoom out: Buttressing Rainey's view on the consumer, the U.S. Census Bureau earlier this week announced advanced estimates for U.S. retail, including a 0.4% month-over-month increase in seasonally adjusted sales.

• Year over year, sales in April increased 1.6%, it added.

Yes, but: Home-related categories continue to struggle, with sales for home furnishings, electronics and appliances, and building materials or home improvement all shrinking since the beginning of the year, per Census.

• Home Depot, for example, said on Wednesday sales declined 4.2% in Q1, resulting in its biggest earnings miss in years.
• That follows a pandemic boom in home improvement sales as consumers hunkered down.

Meanwhile: Target said its sales held steady in Q1, growing 0.5%, though it noted consumer pullback in spending on discretionary and a focus on necessities.

Be smart: The pullback isn't a surprise, considering how spending on the home was augmented during the pandemic.

• Consumers are also shifting their dollars back toward experiences now.