Retail Powerhouses Clash: Walmart and Amazon Dominate, Target, Home Depot, and Lowe's Struggle

May 24, 2023 : The Q1 2023 earnings season has unfolded with a varied outcome for America’s retail powerhouses, leaving behind a mixture of results. Amazon and Walmart emerged as industry titans, while Target, Home Depot, and Lowe’s faced some obstacles. These developments occurred in an environment where the retail sector strives to find stability amidst evolving consumer behavior and a return to pre-pandemic trends.

As per the US Department of Commerce, retail sales in Q1 2023 witnessed a growth of 3.6%, and e-commerce sales increased by 8% compared to the same quarter in 2022. This represents a return to the pre-pandemic norms of 4% annual growth for retail and 14.9% for e-commerce. It marks a shift from the unusual period between March 2021 and December 2022, where brick-and-mortar retail surprisingly kept up with or surpassed e-commerce sales due to unique consumer behaviors driven by the pandemic.

The e-commerce behemoth, Amazon, showed no signs of slowing down despite intensifying competition. Its Q1 US retail revenue grew impressively by 11% compared to the same quarter in 2022. Citi Research estimates that Amazon’s Gross Merchandise Value likely experienced a 12% growth from the previous year, outperforming the industry average of 8% for e-commerce.

Walmart, following suit, delivered strong Q1 earnings. The company’s US same-store sales increased by 7.4% compared to the previous year, more than double the industry average. Even more remarkable, Walmart’s e-commerce sales surged by a staggering 27%, over three times the industry average.

However, while Amazon and Walmart celebrated their victories, others faced challenges. Target’s Q1 earnings revealed disappointing growth of 0.7% in comparable store sales and a decline of 3.4% in comparable digital sales. The company’s bleak outlook for 2023, projecting a low-single-digit decline to a low-single-digit increase, reflects US consumers’ struggles.

Home Depot also experienced disheartening Q1 earnings. The company reported its largest revenue miss in two decades, with same-store sales declining by 4.6% and digital sales declining by 2.9% compared to Q1 2022. Home Depot now expects sales and comparable sales to decline between 2% and 5% for the fiscal year.

Likewise, Lowe’s, despite surpassing revenue expectations, encountered a decline of 4.3% in comparable store sales. Although digital sales grew by 6% compared to the previous year, Lowe’s also revised its projections, anticipating a sales decline of 2% to 4% for this fiscal year.

All retailers are grappling with a noticeable shift in consumer spending patterns. As discretionary spending contracts, consumers are prioritizing essential needs over wants. They are opting for fewer and smaller purchases while emphasizing value. However, amidst the challenges, this change in consumer behavior presents an opportunity for retailers to reassess, innovate, and adapt to meet evolving demands. The forthcoming quarters will undoubtedly test these retail giants’ resilience, creativity, and agility as they continue to vie for the US consumer’s wallet.