What does it mean when the strongest retail earnings week of the year lands on the same week as the broadest import tariff since the 1970s?
Walmart posted 4.6% comp growth. TJX added 129 stores. Lowe's beat by a full point. Home Depot broke a three-quarter EPS losing streak. And on Monday, a 15% surcharge hit nearly everything crossing a U.S. port.
The gap between those two headlines is the thing worth paying attention to this week. The Q4 numbers reflect where retail was. The tariff math reflects where it's going. I've been tracking this collision for weeks, and the data is finally specific enough to show what it means for the tenant pipeline in 2026.
Present Situation vs Expectations
Michigan Sentiment
-11% YoY
Inflation Expectations
3.5%
+$100B in tax refunds
BofA estimates 2026 refunds ~25% higher than 2025. Largest impact on Gen Z, Millennials, and lower-income households — a Q1 spending catalyst that could extend this divergence.
Michigan Sentiment
56.6
Flat MoM, down 11% year-over-year
Redbook (YoY)
+7.2%
Strongest weekly print of the cycle
1-Yr Inflation Exp.
3.5%
Down from 4.0% — improving
The signal: Consumers say they're worried. Their wallets disagree. This gap historically closes by spending falling toward sentiment, not the other way around. The tax refund injection is the next test — if spending holds through Q2, the tariff price increases hit shelves in Q3-Q4 after the tailwind fades.
ECONOMIC PULSE (Week of Feb 25, 2026)
Redbook Index: +7.2% YoY (week ending Feb 14), up from 6.5%. Strongest weekly print of the cycle so far.
Conference Board: 91.2 (Feb), up 2.2 points, beat 87.2 estimate. Present Situation fell to 120.0. Expectations rose to 72.0. That's a 48-point gap.
Michigan Sentiment: 56.6 (Feb final), flat. Down 11% year-over-year. 1-year inflation expectations dropped to 3.5% from 4.0%.
CPI (January): +2.4% YoY. Core at +2.5%. Groceries +2.1%, food away from home +4.0%, shelter +3.0%.
PCE (December): +2.9% YoY, core at +3.0%. Both rose 0.4% month-over-month, double the prior pace. Wrong direction for rate cuts.
Jobless Claims: 206,000 (week ending Feb 14). Dropped 23,000 in a week, the largest decline since November.
BofA Card Spending: +2.6% YoY in January. Strongest pace in nearly two years. Income-based divergence widening.
Sources: FRED, Conference Board, UMich, BLS, BEA, BofA Institute
The Earnings Scoreboard
Start with Walmart. Total revenue hit $190.7 billion. U.S. comps went up 4.6% excluding fuel. eCommerce jumped 27%, now 23% of U.S. sales, a record. Store-fulfilled deliveries grew roughly 50%. Walmart Connect ad revenue rose 41%. Operating income went up 10.8%, outpacing revenue growth by more than 500 basis points.
Dominant numbers. But look at the forward guide. Net sales growth of 3.5% to 4.5%. Adjusted EPS of $2.75-$2.85, versus Wall Street's $2.96 consensus. CFO John David Rainey flagged "some pressure on the lowest income cohort." Walmart is winning Q4. They're less certain about Q3.
TJX: Q4 net sales hit $17.7 billion, up 9%. Full-year comps of +5% across every division. They added 129 net new stores, bringing the total to 5,214. HomeGoods comped +5%. They hiked the dividend 13% and authorized $3 billion in share repurchases. Off-price is running on all cylinders.
Their FY27 guide: +2% to +3% comps. That's a meaningful step down from the +5% they just posted.
Home Depot reported Q4 comps of +0.4% (distorted by lapping a 53rd week). Adjusted EPS of $2.72 beat the $2.54 consensus, breaking three straight misses. FY2026 guide: flat to +2% comps. Consumers remain "reluctant to make significant investments in their homes."
Lowe's came in at $20.6 billion in Q4 sales. Comps of +1.3%, beating expectations of +0.2%. Pro customers, online sales, and home services drove the outperformance. FY2026 guide: flat to +2% comps, but total sales growth of 7-9% including acquisitions.
The pattern across all four: Q4 was strong. Every forward guide was cautious.
4 for 4 on Q4 beats.
4 for 4 on cautious guides.
Q4 Delivered vs. Forward Guide
Comp / net sales growth rate (%)
Walmart guide is net sales; others are comp sales. HD Q4 comps distorted by 53rd week lap.
TJX Guide Gap
-2.5pp
Guided +2.5% vs +5.0% delivered
Walmart EPS Guide
-$0.16
$2.80 midpoint vs $2.96 consensus
Home Depot EPS Beat
+$0.18
Broke 3-quarter losing streak
The signal: Management teams are reading something in real-time that Q4 results can't capture. The Feb 24 tariff announcement landed the same week as earnings calls. These guides aren't sandbagging — they're the first tariff signal embedded in public earnings language.
What this means: Four of the biggest retailers in the country beat Q4 expectations and then guided conservatively for 2026. Current tenant health is solid. But management teams are pricing in uncertainty that hasn't hit the P&L yet. For lease renewals happening now, the Q4 numbers are encouraging. For new commitments, the guidance language matters more.
The 15% Question
On Monday, February 24, a 15% surcharge on nearly all imported goods took effect. The legal basis is Section 122 of the Trade Act of 1974, invoked after the Supreme Court struck down the earlier reciprocal tariffs on February 20. The surcharge has a 150-day statutory window.
Look at who gets hit hardest. Nike estimates a $1.5 billion annualized impact, roughly 120 basis points off gross margins. Vietnam produces about 50% of their footwear. Gap pegs their exposure at $250-300 million, with more than 100 basis points of margin compression. Vietnam and Indonesia account for 45%+ of their sourcing.
Port congestion and air freight cost spikes are already showing up from inventory pull-forward before the deadline. 77% of supply chain leaders have already shifted sourcing away from China, per ISM World. 93% now prioritize intra-Asia diversification. But a 15% surcharge across the board catches everyone, not just China-exposed retailers.
The CPI context makes this harder. January CPI came in at 2.4% year-over-year. Groceries at +2.1%. Shelter at +3.0%. The inflation picture was actually improving. Then the December PCE report showed core spending up 3.0% year-over-year, with the monthly pace doubling from 0.2% to 0.4%. The Fed's preferred measure was already moving the wrong way before the tariff took effect.
Here's the timing problem. Retailers will eat some of the cost initially to hold customers. That compresses margins in Q1-Q2 without showing up in consumer prices. Then the price increases hit shelves in Q3-Q4. The Q4 2025 earnings we just celebrated are the last quarter where this variable wasn't in the math.
What this means: Import-dependent tenants (apparel, footwear, electronics, furniture) face margin compression starting now. Watch for rent reopener conversations and location rationalization from these categories in Q2-Q3. Retailers with domestic or nearshore supply chains (groceries, dollar stores, home services) are relatively insulated and may accelerate expansion as competitors pull back. The gap between the two groups is about to get wider.
The Barbell Tightens
JLL published their Q4 2025 retail real estate report this week. One number jumped out: net absorption doubled.
Q4 net absorption hit 11.9 million square feet, exactly double Q3's 5.2 million. But new retail construction starts fell 44% year-over-year to 7.1 million square feet. More demand. Less new supply. The math goes one direction.
JLL Director of Retail Research James Cook called it "barbell retail." Value and necessity on one end. Luxury and experiential on the other. The middle is where the stress concentrates.
The Coresight tracker puts numbers on the bifurcation. U.S. store closures crossed 2,000 by mid-February. Macy's has 150 planned. Walgreens is closing up to 1,200 over three years. Carter's is closing roughly 100 in 2026. Saks Global just entered bankruptcy.
On the opening side: TJX added 129 stores. Dollar General plans 400+. Aldi plans 180+. Trader Joe's is opening 20 new locations, including first-ever entries into Louisiana, Kansas, and Washington state. IKEA announced 10 new U.S. stores for 2026. Barnes and Noble plans 60.
Coresight projects 7,900 closures versus 5,500 openings for full-year 2026. Net negative, but the opening pace is up about 4% from last year while the closing pace is down by a similar margin.
Look at who's opening and who's closing. Every name on the expansion list is value, grocery, off-price, or experiential. Every name on the closing list is mid-market, department store, or pharmacy. The same split shows up in the JLL data, in the earnings numbers, and in the format pipeline. It's consistent across every data source this week.
Closing / Contracting
~7,900
projected closures (2026)
Walgreens
Pharmacy — 3-year plan
1,200
Carter's
Children's apparel
~100
Saks Global
Luxury — bankruptcy
Ch. 11
Opening / Expanding
~5,500
projected openings (2026)
Dollar General
Value retail
400+
TJX (all banners)
Off-price
129
Barnes & Noble
Experiential retail
60
Also expanding: Trader Joe's (20 stores, 3 new states) • IKEA (10 U.S. stores)
Coresight Research: 7,900 closures vs 5,500 openings | Net -2,400 stores in 2026
Closures by mid-Feb
2,000+
Already tracking ahead of pace
Net Absorption (Q4)
11.9M SF
Doubled from 5.2M in Q3
Construction Starts
-44%
YoY to 7.1M SF — less new supply
The signal: Every closing name is mid-market, department, or pharmacy. Every opening name is value, grocery, or experiential. The 15% tariff accelerates this — import-dependent tenants face the most margin compression. For landlords: the replacement-tenant pipeline is value and grocery. Properties anchored there are tightening. Properties dependent on the left column are running out of backfill options.
What this means: The supply-demand imbalance in retail real estate is tightening. Absorption is up, new construction is down 44%, and the tenants absorbing space are in value and necessity formats. For properties with grocery or value anchors, tenant demand is strong and getting stronger. For properties dependent on mid-market department stores or pharmacy anchors, the replacement tenant pipeline is getting shorter. The 15% tariff surcharge will accelerate this divergence because import-dependent tenants (the ones closing) get hit hardest.
Looking Ahead
One number that hasn't gotten enough attention: Bank of America estimates 2026 tax refunds will be roughly $100 billion higher than 2025, about a 25% jump. The largest impact falls on Gen Z, Millennials, and lower-income households. That's a Q1 spending catalyst for value retail that could extend the strong Redbook readings into March.
The confidence-spending divergence from last week is still intact. Michigan sentiment at 56.6 is flat and down 11% year-over-year. But the Redbook at +7.2% and BofA card spending at +2.6% say consumers are still transacting. Same pattern, now with one more variable layered on top.
The Conference Board's February data (91.2) beat expectations, but the 48-point gap between Present Situation (120.0) and Expectations (72.0) tells you where the tension lives. People feel okay right now. They're bracing for something.
The question for Q2 is whether the tariff math catches up to spending before the tax refund tailwind runs out. The answer will show up in the Redbook readings over the next six weeks. And it will show up in the tenant pipeline: which retailers speed up their expansion plans, and which ones start calling their landlords about lease terms.