Retail Learnings from Q2 2025
What retailers can do to compete with big box stores in today's tariff-impacted economy.
Salima Nadira
What better way to plan strategy, than to learn from what the biggest names in retail are doing today?
If you haven’t seen the retail earnings roundup for Walmart, Target, Home Depot and Lowe’s from last week, here’s a quick summary of what’s happening:
Shoppers are still spending, but differently; overall basket mix is shrinking in discretionary categories but holding firm in essentials.
Convenience, i.e. online shopping and same day delivery, can still encourage a shopper to swipe their card on bigger ticket items.
Tariffs are finally hitting line item pricing; consumers are taking on 36% in higher prices, while businesses absorb 64% of tariff-related costs.
Homeowners continue to spend on maintenance and DIY projects, but are stalling on bigger remodeling jobs. Meanwhile, professional contractors are still going strong.
By The Numbers
Let’s take a closer look at what each retailer is doing, and uncover some tactical approaches to consider for your own retail chain.
Walmart
Walmart is leaning hard on value. It pushed thousands of “Rollback” price cuts and faster deliveries, which drove bigger baskets and strong e-commerce growth. But the aggressive pricing squeezed profit margins, so even with higher sales, earnings growth was limited.
By the numbers:
Q2 U.S. comparable sales rose by 4.6%, led by groceries, health items, and fashion. U.S. e‑commerce jumped 26%.
Increased “Rollbacks” (price cuts) by 30% YoY for Q2 to offset tariff price increases.
Slashed timing on deliveries—about a third of orders arrived within 3 hours.
Facing tariff pressures—inventory being replenished at higher post‑tariff prices. Executives expect these costs to persist through 2025.
Profit diversification through advertising (46% increase globally) and membership income (up 15% YoY in Q2).
Target
Target is feeling pressure in discretionary categories like apparel and electronics. Shoppers are prioritizing essentials, leaving carts “fussier” and changing the mix of products in the basket.
By the numbers:
Comp store sales fell ~3.2%; digital sales grew ~4.3%, helped by same‑day services.
Discretionary categories (apparel, home goods, electronics) underwhelmed; shoppers prioritized essentials.
Prices are a last‑resort lever—Target is resisting broad price hikes despite tariff pressures.
Revenue diversification through non-merchandise sales (ads, marketplace, memberships), up 14.2%.
Overall Q2 outlook held steady (no raise or cut), amid leadership transition as CEO Brian Cornell plans to step down in early 2026.
Home Depot
Home Depot is seeing strength in smaller DIY projects but weakness in large remodels. Big-ticket spending is still muted, but it continues to emphasize stability in its core business.
By the numbers:
Reported Q2 net sales of ~$45.28 billion—slightly below expectations.
Comparable store sales rose 1.4%—third straight quarter of growth—driven by smaller DIY projects; large-scale remodels remain weak due to high interest rates.
Implementing modest price increases in some categories and scaling back promotions to offset tariffs; average ticket size rose ~1.4%, highest since 2022.
Foot traffic dropped ~2.2%, signaling softer demand for financed, big-ticket items.
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Lowe’s
Lowe’s is leaning into its professional contractor segment to drive growth. It delivered strong results this quarter and expanded further with a Pro-builder acquisition, helping it build momentum.
By the numbers:
Q2 revenue around ~$24 billion, with net income ~$2.4 billion—meeting analyst expectations.
Comparable sales grew ~1.4%, mirroring Home Depot; net sales forecasted to rise ~1.7% YoY.
Leaning on professionals/contractors—announced strategic acquisition of Foundation Building Materials.
Managing tariff pressures with ~60% of merchandise sourced in the U.S., reducing China exposure to ~20%.
Key Takeaways
While big box retailers with deep pockets may be able to sacrifice margin to steal customers away from other retailers, or offset margin hits with alternative sources of revenue, independents must find smarter ways to protect profitability.
The priority is now in recovering lost margins from unnecessary discounting and promotions, and driving incremental sales from customers without relying on discounts.
The need for in-depth customer segmentation, using methods like RFM analysis, is undeniable. Without it, there is no way to send personalized messages that make the most sense for the customer, and that incentivizes them to convert in the way that motivates them the most. Blanket, vendor-led discounts on products are no longer the way to go; there now has to be an understanding of which customer segment would be motivated by discounts.