As retailers adjust their strategies to weather global trade tensions and cautious consumer behavior, the broader U.S. economy could face deeper challenges if spending continues to soften. Photo by Shabaz Usmani, Unsplash.

News Release

UNITED STATES — Retailers are confronting an increasingly uncertain economic landscape as inflation, tariffs and persistent recession fears prompt American consumers to rein in spending.

Consumer spending, which accounts for roughly 70% of U.S. economic activity, is showing signs of strain. The University of Michigan’s consumer sentiment index fell for the fifth straight month in May, dropping 2.7% to 50.8, its second-lowest level in nearly 75 years. Economists had expected more resilience, but sentiment has plunged nearly 30% since January.

The impact of ongoing tariffs, stemming from trade policies initiated during former President Donald Trump’s administration, is being felt unevenly across the retail industry, with some chains faring better than others.

Walmart

The largest U.S. importer of container goods, Walmart, faced sharp criticism from Trump after the retail giant announced it had already raised prices due to tariffs and planned additional hikes in the summer, ahead of the back-to-school season. Trump publicly rebuked the company, saying it should absorb the added costs rather than passing them along to consumers.

Walmart may have more difficulty absorbing the baseline 10% increase in import taxes due to its low operating margins, which average at around 4% to 5%. These margins are similar to other grocery brands, but are lower than other retailers such as Lululemon, which operates at a nearly 29% margin.

Home Depot

Home Depot, in contrast, said it does not anticipate raising prices thanks to years of supply chain diversification. Still, some items may vanish from its shelves due to trade restrictions.

“There’s items that we have that could potentially be impacted from a tariff that, candidly, we won’t have going forward,” said Billy Bastek, executive vice president of merchandising, during a call with analysts.

Target

Target reported a steeper-than-expected drop in first-quarter sales and revised its full-year outlook downward. The retailer now expects a low-single-digit decline in annual sales, after previously projecting a 1% increase.

Chairman and CEO Brian Cornell cited weakening consumer confidence and tariff pressures as key challenges.

“We have many levers to use in mitigating the impact of tariffs, and price is the very last resort,” Cornell said.

TJ Maxx, Marshalls

TJX Cos., the parent company of T.J. Maxx and Marshalls, appears to be benefiting from the economic turbulence. The company reported stronger-than-expected quarterly earnings and reaffirmed its fiscal 2026 guidance, projecting same-store sales growth of 2% to 3%.

“I am convinced that our broad assortments of great brands and fashions, at compelling prices, will continue to be a tremendous draw for shoppers seeking value,” CEO Ernie Herrman said.

Lowe’s

Lowe’s posted a slight decline in first-quarter sales, falling to $20.9 billion from $21.4 billion a year earlier, but still exceeded Wall Street expectations. The company reaffirmed its 2025 revenue forecast, expecting between $83.5 billion and $84.5 billion in annual sales.

President and CEO Marvin Ellison noted that roughly 60% of the company’s goods are sourced domestically, with 20% still tied to China.

“Although we’re pleased with this reduced dependency, we’re not satisfied and we’re working to accelerate our diversification efforts,” Ellison said.

As retailers adjust their strategies to weather global trade tensions and cautious consumer behavior, the broader U.S. economy could face deeper challenges if spending continues to soften.