With quarterly earnings reports from Target (TGT  ), as well as Home Depot (HD  ), Walmart (WMT  ), Macy's (M  ), TJX Companies (TJX  ), this week will bring valuable insights on consumers' purchasing power and behavior. Target opened the retail earnings week by delivering an unexpected third quarter earnings beat despite declining sales. Its shares rose 15% upon the report during early trading.

Target Blew Past Both Top And Bottom-Line Expectations As It Delivered A Big Earnings Beat

For the fiscal third quarter that ended on October 28th, revenue amounted to $25.4 billion, topping LSEG's estimate of $25.24 billion. But sales fell YoY as they amounted to $26.52 billion in last year's comparable quarter with comparable sales dropping for the second consecutive quarter, nearly 5% YoY. Digital sales contracted 6% YoY. Net income rose 36% to $971 million but one should note that during last year's comparable quarter, Target was forced to take aggressive action to get rid of excess inventory.

Target blew past Wall Street estimates thanks to purchases of a new kitchenware brand, fall female fashion apparel and jewelry that improved the weakened discretionary category compared to the second quarter.

Target executives observed weaker discretionary spending with shoppers actively seeking for deals as it continues to face the same challenges that have been plaguing its business over the past year. When it comes to purchases, shoppers are still not going beyond necessities and when they do decide to make a purchase, they are patiently waiting for a deal to make it.

Target Does Not Expect The Holiday Quarter To Be The Best Time Of The Year

CFO Michael Fiddelke warned that although Target remains laser focused to push both traffic and sales into positive territory, this isn't expected to happen next year, even with the most wonderful quarter of the year ahead, one that Target expects to be roughly the same. Target expects holiday quarter comparable sales to decline in mid-single-digits with adjusted earnings per share between $1.90 and $2.60.

With better-than-expected results, Target showed its management handled inventory and expenses more efficiently, but it now needs to find a way to boost sales. Together with Walmart, results from Target will also serve as a forecasting tool for holiday sales. Reuters reported that Walmart did not hire any additional staff for the holiday season which is already a telltale sign that a softer holiday season is in the cards. Walmart is scheduled to report on Thursday before the market opens, after beating EPS and revenue estimates for four quarters in a row.

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