While the sector had its ups and downs during this earnings season, there were some clear winners.
On Wednesday, Aug. 22, Target Corporation (TGT) posted earnings that hit the bullseye, so to speak. The company posted a 6.4% increase in traffic growth and comparable sales growth of 6.5%. Target is only the latest retailer to beat expectations.
Companies like Walmart Inc (WMT) and Target, which are finding innovative ways to tackle Amazon.com Inc. (AMZN) , are making comebacks after analysts worried that Amazon might kill brick-and-mortar retail.
Unlike Target CEO Brian Cornell, who raved about the strength of the consumer in this economy, Giacomo Santangelo, a professor of economics at Fordham and Seton Hall universities, is cautious on consumer sentiment.
"Everything is good until the exact second it's not," he said. "It's an illusion more than a fact."
However, Luke Tilley, chief economist at Wilmington Trust feels bullish on the consumer. "We think the consumer has been very strong this year," he said.
Stronger wage growth, strong job growth and the tax cuts in the tax packets are all reasons that Tilley cited. "The jobs are very well disbursed," he said. This is "the strongest wage growth we've had in the recovery" from the recession.
The unemployment rate dropped to 3.9% in July and 157,000 jobs were added to the economy. Wage growth was up 2.7%.
"Yes, it's true that national unemployment is down, but that number may be measuring the wrong thing," said Santangelo.
Whether consumers are stronger or not, there's a lot to say about the current state of the economy. Most retailers discussed the economy in their investor calls this quarter. Here's what the biggest winners had to say.
Target Corp. (TGT)
On Target's investor call, Cornell focused briefly on the Chinese tariffs. Cornell expressed Target's concern about tariffs on Chinese imports and the possible effect on Americans, "in addition, a prolonged deterioration in global trade relationships could damage economic growth and vitality in the United States."
Cornell added, "However, our concern is centered on the impact of tariffs on consumers and the economy, not our ability to manage our business in the face of these challenges."
"In my career, I don't recall a stronger consumer environment than we have now," Cornell told TheStreet. He attributed the strength to GDP and the housing market.
TJ Maxx (TJX)
TJ Maxx released earnings on Tuesday, Aug. 23, posting an EPS of $1.17, better than FactSet expectations of $1.05.
CEO Ernie Herrman said the strong economy is making it easier for retailers. "When the economy is getting better or retail is ticking up a notch, what you get there is the wholesalers getting more optimistic."
On the Macy's call, the executive team sounded bullish on the consumer spending.
"Based on the first half performance, our strong execution and the anticipation of continued healthy consumer spending, we're raising both sales and earnings guidance for the year," said CEO Jeffrey Gennette.
He added, "we are also benefiting from strong consumer confidence and spending, including growth in international tourist spending."
Walmart's Dan Binder, VP of investor relations, spoke about consumers during Walmart's call. His comments referred to consumer strength during the massive chain's second quarter.
"Clearly, the consumer backdrop is favorable, we're getting a little bit of benefit from that," he said.
In response to an analyst's question, Binder said analysts "on this call are really close to what the consumer is doing and the macro backdrop and we would reiterate that a lot of those key metrics that you look at, we look at. Job growth is great. Wages are up."
"Consumer['s are] in great shape. In the surveys that we look at, they tell us that they are feeling good about their financial condition. We haven't seen any meaningful change in their spending patterns as gas prices have [increased]. I think there's a lot of offsets there, tax reform being one of the main ones. So, overall, we feel good about the consumer going into the back half of the year."
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