What recent retail earnings revealed about the state of consumer health

New Economic Realities // May 25, 2026 What recent retail earnings revealed about the state of consumer health By Anna Hensel Ivy Liu Consumer sentiment hit new lows in May, according to the University of Michigan’s consumer sentiment index, but quarterly retail earnings show a resilient consumer that is still willing to spend.

Last week, retail giants including Home Depot, Walmart, Target, TJX and Urban Outfitters, Inc. reported their quarterly earnings. And there were a surprising number of bright spots considering the inflationary pressure both retailers and consumers have faced over the past year.

Target reported its first quarter of sales growth in more than a year, driven by the success of viral partnerships with brands like Roller Rabbit, Parke and Pokémon that brought more people into stores. The off-price sector also continues to soar, with TJX reporting net sales of $14.

3 billion in its fiscal first quarter, up 8% year over year on a constant currency basis. But this also isn’t an environment where retailers can rest on their laurels. Many retail executives remained cautious about their outlooks for the year, as they wait to see how increasing gas prices impact both their vendor partners and consumers.

While many retail executives spoke at length about how their consumers remain resilient (especially those targeting high-income customers), they said they also continue to make trade-offs as they seek out the best value. In turn, success in today’s retail environment requires getting ahead of any signs of consumer fatigue.

It also means making investments in both lower prices and high-quality experiences to convince customers they are getting the best deal. Here are the three biggest takeaways on the state of consumer health, according to last week’s earnings reports.

Consumers are starting to express some backlash to price increases Perhaps one of the most interesting pieces of news that came out of the earnings cycle last week was that E. l. f. Beauty is testing price increases on select items after seeing sales unit decline. Last year, E. l. f.

Beauty raised prices by $1 across all its SKUs in response to tariffs, as well as years of inflation. But earlier this year, E. l. f. tested a $4 price decrease on its Halo Glow skin tint. CEO Tarang Amin said during E. l.

f’s quarterly earnings call on Wednesday that “initial test results show a 38% lift on Amazon and a 36% lift across all retailers, including a triple-digit sales lift on TikTok Shop,” and said that the company is “exploring other pricing opportunities.”

“ As we look at the state of the consumer today, we have recently seen a more pronounced decline in units,” Amin said. “As a result, we are keenly focused on how to deliver a better value and improve unit velocity.” E. l. f.

Beauty continues to report strong growth — it reported net sales growth of 35% year over year during its most recent quarter — but Amin positioned these moves as E. l. f. taking signals from its community and acting quickly upon them.

Meanwhile, PepsiCo in February announced that it would be cutting prices by as much as 15% on its Frito-Lay snacks, including Lay’s, Doritos and Cheetos, ahead of the Super Bowl.

According to Bloomberg, Frito-Lay “had missed internal revenue targets for two years in a row by over a billion dollars,” and the price drop was one tactic to bring customers back into the fold. PepsiCo executives said during its first-quarter earnings call in April that it was starting to see sales of savory snacks accelerate.

Net revenue for PepsiCo increased 8. 5% year over year during the first quarter, though part of that was driven by buzzy brands PepsiCo acquired, like Poppi. ‘Value’ is a multi-dimensional puzzle Retail executives spoke at length during their respective earnings calls about how they are delivering value to their consumers.

But what that strategy looks like varies depending on where they sit in the retail landscape. At many retailers, focusing on value doesn’t mean focusing solely on price. At many retailers, focusing on value no longer means focusing solely on price.

As Jessica Ramirez, co-founder of The Consumer Collective, put it in an interview with Modern Retail, “the word value no longer means buying something cheaply, buying it on promotion — it really does mean, is this product [high] quality?” Target had a banner quarter, with net sales up 6. 7% year over year.

Sales increased in all six of Target’s merchandising categories. The company said it remains focused on investing in “style, design and culture” to drive sales across all its major categories, as well as in value — in other words, price.

In toys, for example, Chief Merchandising Officer Cara Sylvester said the company had seen “tremendous growth from new offerings priced at $20 or less, including many priced at $5 and $10.” But buzzy collaborations that spanned