Walmart and Home Depot both beat estimates this week, yet their stocks moved in opposite directions, a split that lays bare the K-shaped consumer driving the retail sector. The S&P 500 hit a fresh all-time high this month, but July retail sales slipped 0.6 percent to $763.6 billion, the first month-over-month decline since October 2025, even as the year-over-year comparison still showed a 5 percent gain.
The tariff refund distortion
Walmart’s fiscal second quarter benefited from $2.9 billion in tariff refunds that added 750 basis points to operating income growth. Management said the windfall will be passed back to shoppers through price cuts and will not repeat in the third quarter. Strip that out and the quality of the beat looks considerably thinner.
Walmart's volume over value problem
U.S. comparable sales rose 2.6 percent, a sharp deceleration from 4.1 percent in the prior quarter and 4.6 percent in the fourth quarter of fiscal 2026. The company attributed 125 basis points of the slowdown to new pharmacy regulations, but the clearer signal came from Sam’s Club: transactions jumped 7 percent while the average ticket fell 2.5 percent. Shoppers are showing up more often and spending less each time, a volume-driven mix that rarely sustains comparable growth.
Home Depot's wealthy cohort carries the day
Home Depot posted 1.7 percent comparable growth, its best since the third quarter of 2022, built on a 2.8 percent rise in average ticket and a 1 percent drop in transaction count. Purchases over $1,000 grew 2.4 percent, and the average spend per trip climbed from $90.01 to $92.50. A smaller group of equity-rich homeowners is funding renovations while the broader housing market remains frozen by affordability.
Guidance gaps and oversold signals
Walmart guided third-quarter operating income growth to a 2 to 4 percent range, a band wide enough to lack conviction, and the stock shed 9 percent on the day, piercing its 50-day moving average and pushing the relative strength index to 30, the conventional oversold threshold. Home Depot merely reaffirmed its third-quarter outlook. One retailer is guiding to a range that implies deceleration; the other is letting the numbers speak. The market noticed the difference.