As the U.S. enters the Thanksgiving holiday season, the final wave of corporate earnings reports has arrived, perfectly timed with the kickoff of White Friday sales. While major consumer companies like Costco Wholesale Corporation(COST.US), NIKE, Inc. Class B(NKE.US), and Lululemon Athletica Inc(LULU.US) are still on deck to report, most other consumer goods companies have already released their results. 

The picture is increasingly “K‑shaped”: discount chains and premium brands that have successfully repositioned are powering ahead, while many middle‑income‑focused bellwethers are stalling.

1. Retailers

Key Takeaways:

• Top Performers: Wal-Mart Stores, Inc.(WMT.US), TJX Companies, Inc.(TJX.US), and Ross Stores, Inc.(ROST.US) exceeded expectations this quarter. Walmart continues to lead the sector, leveraging its low-price strategy, diverse product offerings, and growing e-commerce penetration, which surged 22% in the third quarter. Same-store sales also beat estimates, driving revenue growth of 5.84% and a 35.09% jump in GAAP EPS.
• Discount retailers TJX and Ross Stores also delivered strong results, with revenue growth of 7.49% and 10.44%, respectively. Both companies maintained industry-leading inventory turnover rates, showcasing their operational efficiency.
• Underperformers: Target Corporation(TGT.US), Home Depot, Inc.(HD.US) missed expectations. Target, often seen as a bellwether for middle-class consumption, struggled with weak discretionary spending. Meanwhile, Home Depot faced headwinds from a sluggish housing market, which dampened demand for appliances and home improvement products.

2. Apparel / Sportswear

Key Takeaways:

• Bright Spots: Ralph Lauren Corporation Class A(RL.US) was the standout performer, with revenue up 16.49% and EPS soaring 43.72%. The company’s successful shift from traditional menswear to a more premium “old money” aesthetic for women has paid off, driving its stock price up over 60% year-to-date.
• Amer Sports, Inc.(AS.US), the parent company of Salomon, also posted impressive results, with revenue growth of 29.73% and EPS surging 127.27%. The global expansion of its Arc'teryx brand and a focus on direct-to-consumer sales have significantly boosted profitability.
• Under Pressure: Deckers Outdoor Corporation(DECK.US), once a leader in trail running footwear, faced intensified competition from brands like On, Salomon, and Altra. Despite its high margins, growth slowed significantly, with revenue up just 9.11%, falling short of market expectations. North American sales stagnated, reflecting challenges in the increasingly competitive trail running market.

3. Restaurants

Key Takeaways:

• Winners: Restaurant Brands International Inc(QSR.US), the parent company of Burger King, outperformed thanks to strong growth from its Popeyes brand, which benefited from store expansions. Revenue rose by 6.90%, while EPS grew 2by 1.52%.
• Struggles: Starbucks Corporation(SBUX.US) faced significant pressure, with EPS plunging 85.37%. Despite its heavy investment in China, the company has lost market share to Chinese Luckin Coffee. Additionally, drought conditions in key coffee-producing regions have driven up costs, further squeezing margins.
• Chipotle Mexican Grill, Inc.(CMG.US) also experienced slowing growth, warning that rising beef prices and tariffs could compress margins. The company refrained from fully passing on these costs to consumers, opting instead to absorb some of the impact.

4. Cosmetics / Beauty

Key Takeaways:

• Challenges: e.l.f. Beauty, Inc.(ELF.US) missed expectations as tariffs on Chinese imports heavily impacted its profitability. EPS dropped 84.85%, highlighting the vulnerability of mid-tier brands to geopolitical and economic pressures.
• Mixed Results: Estee Lauder Companies Inc. Class A(EL.US) posted a 130.23% increase in EPS, though much of this was due to a low base and aggressive cost-cutting. Underlying demand remains weak, and the company has yet to see a meaningful recovery.
• Outlook: Ulta Salon, Cosmetics & Fragrance, Inc.(ULTA.US), a key player in the industry, has yet to report. Analysts expect both foot traffic and average transaction values to remain under pressure.

The Harsh Reality of Consumer Divergence: The Disappearing Middle

Across the consumer sector, companies that outperformed shared two common traits: either they offered compelling price/value propositions (e.g., Walmart, TJ Maxx, Ross) or they benefited from high margins and strong brand equity (e.g., Ralph Lauren, Amer Sports, Popeyes). These players are steadily capturing market share from mid-tier brands.

Mid-market players, particularly those exposed to tariff-related cost pressures, are shrinking. Companies like Target, Home Depot, Starbucks, e.l.f., and Deckers have all reported slowing growth or declining profits, reflecting the challenges of serving a squeezed middle class.

The root cause lies in the erosion of middle-class purchasing power. Over the past five years, persistent inflation has weighed heavily on household budgets. According to The Wall Street Journal, prices for goods and services have risen 25% since 2020. While inflation has cooled from its 2022 peak, essentials like coffee and ground beef continue to climb.

Many middle-class families have depleted their pandemic-era savings, and wage growth has failed to keep pace with rising costs. Research from Harvard University suggests that the middle class increasingly feels its standard of living is deteriorating.

In November, Goldman Sachs issued a "red alert" on U.S. consumer health, warning that spending weakness has spread from low-income households to the middle class. Several corporate executives have described current consumer confidence as the worst in decades.

Options Opportunity: Lululemon Athletica Inc(LULU.US)

Ahead of White Friday, stocks like Gap, Inc. (The) Common Stock(GAP.US), American Eagle Outfitters, Inc.(AEO.US), Amer Sports, Inc.(AS.US), and Lululemon Athletica Inc(LULU.US) have seen recent gains. However, Lululemon remains under pressure, with North American revenue declining due to tariffs and rising competition. Its stock is down 60% from its all-time high, and negative sentiment appears to be fully priced in.

The company’s challenges are largely regional and temporary. Management has committed to accelerating product innovation and expanding internationally, with double-digit growth in Europe and China expected to offset North American weakness.

Valuation is near historical lows and significantly below industry peers. Even with conservative assumptions—flat margins, zero North American growth, and low single-digit revenue growth overall—the downside risk appears limited. The stock has formed a clear bottoming pattern, and implied volatility for options is at the 90th percentile of its one-year range.

Strategy: Selling put options could yield attractive premiums. If the stock stabilizes or rebounds, the premium becomes profit. If the stock declines further, investors can acquire shares at a lower effective cost, offering a favorable risk-reward profile.

Note: Options are high-risk derivatives. Investors should carefully assess their risk tolerance. All investments carry risks.