Mark your calendar for earnings reports. For Amazon it’s April 29. For Walmart it’s May 15.  

If you have any stake or interest in the fortunes of the American consumer, those dates will be ones to watch, because as the first quarter draws to a close, Amazon and Walmart are bracing for what could be a challenging earnings season.

Both companies, bellwethers of consumer spending, have expressed caution about their Q1 prospects due to persistent inflation, weak consumer demand and foreign exchange challenges. This cautious outlook reflects broader concerns about the health of the global economy and its impact on consumer behavior.

They are, of course, not alone in the attention those earnings will receive. Other companies will step up with their own take on consumer spending, but it is expected to be down, maybe even significantly.

According to The Wall Street Journal, “Citi’s analysis of its U.S. credit-card data shows that spending has fallen across most retail categories. In the retail quarter to date, spending plunged 12% and 22% on apparel and athletic footwear, respectively, compared with a year earlier. But even less-discretionary categories such as food retail, aftermarket auto parts and pet retail are seeing moderate declines.”

In recent months, consumers have been prioritizing essential purchases over discretionary items, a trend exacerbated by high inflation. Walmart CEO Doug McMillon noted this shift during a March 10 speech at the Economic Club of Chicago, stating, “There are lots of income levels in this country — if you’re at the lower end of that scale, you are feeling more frustration and pain because of higher food prices. They’ve persisted for years now, and you’re just tired of it.”

McMillon also highlighted that budget-conscious consumers are buying smaller pack sizes and being more selective with their purchases. But there are other issues. According to a March 7 article from Zachs, “Walmart is experiencing adverse currency movements and margin pressures from shifts in product mix. While raising its fiscal 2025 guidance, the company’s implied fourth-quarter view [Q1 by the calendar] for revenues and operating income reflects a slowdown from the reported third-quarter figures.”

Similarly, Amazon has faced challenges in maintaining its sales momentum. The company’s projected revenue for Q1 2025 was below expectations, ranging from $151 billion to $155.5 billion, reflecting concerns about inflation and consumer spending. 

Neil Saunders, managing director of retail at GlobalData, observed, “Uncertainty seems to be the buzzword of earnings calls. … Going into this year, a lot of retailers are very nervous about various aspects of policy, particularly tariffs. They fear both the cost implications for their businesses and the dampening impact higher prices would have on spending.”

Tariffs have been another significant factor affecting both retailers. Walmart, as the largest U.S. importer of containerized goods, is particularly vulnerable to tariffs on discretionary items like clothing and electronics, which are primarily sourced from countries such as China and India.

Brian Mulberry, a portfolio manager at Zacks Investment Management, noted that more than 70% of Walmart’s Great Value brand products come from China, making the company sensitive to tariff fluctuations.

Inflation continues to pressure consumer budgets, leading to a focus on value-driven purchases. Jeanel Alvarado, founder and CEO of RetailBoss, explained, “Consumers feel the pinch of inflation, shifting their focus to essentials like groceries and health products while cutting back on discretionary items like apparel and electronics.”

Despite these challenges, both companies have shown resilience. Amazon recently surpassed Walmart in quarterly revenue for the first time, with $187.8 billion in sales compared to Walmart’s $180.5 billion. However, Walmart’s annual sales still outpace Amazon’s, with projections indicating Walmart will generate approximately $708.7 billion in the upcoming fiscal year, while Amazon is expected to reach about $700.8 billion.

Walmart’s stock has faced volatility following its mixed Q4 earnings report, with shares dropping after the company provided softer-than-expected guidance for Q1 2025 and beyond. Despite this, Walmart’s business fundamentals remain strong, with eCommerce sales surging and the company attracting higher-income shoppers.

As Amazon and Walmart prepare to report their Q1 2025 earnings, the retail landscape is marked by caution. Consumer spending trends suggest a continued focus on essentials and value-driven purchases, influenced by inflation and tariff concerns.

While both companies face challenges, their adaptability and strategic shifts in response to consumer behavior will be crucial in navigating these headwinds. As Saunders noted, “There is genuine concern that demand could soften in a material way,” underscoring the need for retailers to remain agile in an uncertain economic environment.