Walmart (WMT) and Home Depot (HD) Results Show US Consumers Cut Back but Still Find Room for Splurges

Walmart (WMT) and Home Depot (HD) Results Show US Consumers Cut Back but Still Find Room for Splurges

Fri, August 28, 2026 at 5:41 PM GMT+3 3 min read

Walmart Inc. (NASDAQ:WMT) disappointing sales and The Home Depot, Inc. (NYSE:HD) strength among budget-conscious do-it-yourselfers indicate middle-class consumers are growing more tight-fisted, Reuters reported, even as wealthier shoppers keep supporting luxury brands like Ralph Lauren.

Walmart's fiscal second-quarter comparable sales grew 3.4% excluding the impact of pharmacy-related items, while Walmart, TJ Maxx owner TJX, and Home Depot all warned shoppers remain "selective" as U.S. retail sales in July posted their first monthly decline in nine months. Basket sizes shrank at Walmart and Target as shoppers continued visiting stores but spent less per trip. IG Group analyst Angeline Ong said, "Even Walmart, which has been supported by more affluent households trading down, isn't able to keep average spending growth rising."

Bull Case

Walmart Inc. (NASDAQ:WMT)'s sales growth, while decelerating, is still positive and reflects genuine trade-down demand. Comparable sales grew 3.4% even as growth cooled. Ong's comment that more affluent households are trading down to Walmart points to Walmart gaining a customer segment it did not previously serve as heavily, a structural tailwind even during a broader spending slowdown.

The Home Depot, Inc. (NYSE:HD) is benefiting directly from consumers' shift toward smaller, more deliberate purchases rather than losing out to it. Home Depot's strength is among budget-conscious do-it-yourselfers. It suggests homeowners are substituting professional contractor work with DIY projects to save money, a behavior shift that funnels spending toward Home Depot's core business rather than away from it.

Consumers are not retreating from spending altogether, only becoming more selective about where it goes, which favors well-positioned retailers over the category as a whole. eToro's Lale Akoner said households are "becoming much more deliberate about where their money goes," not cutting spending broadly, meaning retailers that consistently deliver value, as Walmart and Home Depot have positioned themselves to do, are better placed to capture that more deliberate spending than competitors relying on broad discounting alone.

Bear Case

Shrinking basket sizes point to a demand problem that price cuts alone are not solving. Shoppers continued visiting Walmart and Target but spent less per trip, and McDonald's discounted menu items failed to draw customers this quarter even in an otherwise expensive menu, according to Reuters, evidence that promotional pricing is losing its power to offset consumers' underlying caution.

Walmart Inc. (NASDAQ:WMT)'s growth deceleration is happening despite, not because of, favorable positioning. Even with more affluent households trading down to Walmart, a dynamic that should be adding incremental sales, the company still could not sustain rising average spending growth. It shows the pressure on household budgets is broad enough to offset even Walmart's trade-down tailwind.

The Home Depot, Inc. (NYSE:HD)'s strength is linked to a specific, cautious consumer behavior, DIY substitution, that shows broader economic pullback rather than confidence. Consumers choosing to do home projects themselves instead of hiring professionals is typically a sign of tightened discretionary budgets. It means Home Depot's current strength may show the same underlying consumer caution pressuring Walmart, just channeled into a different purchase decision.

Conclusion

Both retailers are operating in the same cautious consumer environment, but the read on each differs. Walmart gains when wealthier households trade down to cut costs, while Home Depot wins when shoppers switch to do-it-yourself projects. However, slowing growth at both stores shows that broader budget pressures force Americans to spend far more selectively.

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Disclosure: None. This article is originally published at Insider Monkey.