Volkswagen Taps Brakes on EVs in Second Pivot Since Diesel Crisis
To regain its green credentials after Dieselgate, as the affair came to be known, the German carmaker pivoted —aggressively—to electric vehicles. In March 2021, Volkswagen said it aimed to sell more EVs than Tesla Inc. globally by 2025. That, too, hasn't gone as planned. Early models flopped because of VW's buggy software and flagging consumer interest in battery-powered autos, particularly in Europe. The company was slow to roll out competitive EVs in China, where local manufacturers now dominate the market. And US buyers have never really gotten very excited about the company's electric offerings.
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Wall Street's reaction matched the tone of the results: Walmart slid about 4% on thinner-than-expected profits; Target sank around 7% after a disappointing CEO replacement pick; Lowe's climbed on a quarterly beat and its pro-builder acquisition; and Home Depot wobbled on a near-miss on earnings before shares ended the day modestly higher on what the Street saw as strong positioning. Taken together, the verdict was the corporate version of a sigh: a muddle-through, not a meltdown. Look at Walmart first . Its top line grew — revenue hit $177.4 billion, U.S. comparable sales rose 4.6%, and global e-commerce soared 25% — but its profits lagged. Adjusted EPS landed at $0.68, under expectations. Margin pressure came from Walmart's deliberate trade-off: The company rolled out around 7,400 'Rollbacks' to pull in value-hunters and paired them with faster fulfillment (a third of orders arrived in under three hours). That's a powerful combination for traffic, but it's an expensive one for margins. Walmart's success this quarter looks less like a boost in spending and more like strategic price programming paired with logistical muscle. Target tells the other side of that same story. Target's discretionary categories (apparel, home goods, electronics, etc.) were weaker, pulling the overall sales mix away from higher-margin non-essentials and deeper into the basics. Store comps fell 3.2%, though digital grew 4.3% thanks to same-day services. To offset those weaker store sales, Target took a multipronged approach, pivoting toward other revenue streams. Non-merchandise (ads, memberships, marketplace) revenue jumped 14.2%, cushioning against goods margin erosion from tariffs and markdowns. Shoppers may be tucking their wallets tighter — but if convenience is baked in, they'll still swipe their cards. Target's stable guidance despite weaker in-store comps suggests that it trusts the consumer hasn't disappeared; they're just shopping differently. Together, these narratives illustrate a consumer who hasn't given up — but one who has recalibrated. Groceries, OTC staples, and easily delivered essentials remain in demand. Spending on discretionary items — furniture, fashion, home decor, and more — is being deferred unless there's a compelling price cue or frictionless convenience. The signs are less belt-tightening than basket-rebalancing. Essentials and value are in; big splurges and nice-to-haves can wait. When policy hits the receipt Tariffs no longer live in policy punditry; they've moved squarely into earnings slides . Walmart flagged rising import costs projected into the back half of the year, even as it leans harder on Rollbacks to maintain traffic. Target leadership framed tariffs as a volatile, hard-to-plan headwind, stressing that the company is mitigating costs and will only hike prices 'as a last resort' despite mounting margin pinch. Home Depot, which earlier in the year vowed to hold prices steady, is now signaling some 'modest' price hikes. This week's quarterly reports come as July wholesale inflation posted its largest monthly gain in three years — producer prices surged 0.9%, with trade services inflation indicating steeper supply-side pressure. Right now, retailers are stuck playing volleyball with their margins: If they spike prices too quickly, consumers pull back. If they hold the ball too long, their earnings could erode. Tariffs now function as a margin tax, not a policy debate — and the question for each retailer becomes where to concede and where to compete. But the squeeze is broader than just CEOs admitting fault lines. Tariff exposure varies by product category — hard goods such as appliances, electronics, and tools lean heavily on import chains, while groceries and consumables remain more insulated. A Barron's article after President Donald Trump's 'Liberation Day' announcement said some retailers — including Walmart and Home Depot — could be more tariff-proof because of their pricing power and essential product lines. And the economics of how costs get passed along — or not — are evolving. Harvard Business School research shows that early in the year, retailers absorbed much of the impact by shrinking margins, front-loading inventories, or redirecting supply rails; price hikes have only been modest so far. Earlier this year, Morgan Stanley estimated that softline retailers (fashion, home textiles) could see EPS hit by up to 35% as they shoulder tariffs, even with just a 1% price increase and a 3% drop in volume. Goldman Sachs' latest analysis has estimated that U.S. businesses have absorbed about 64% of tariff-related costs so far, meaning consumers have taken on the remaining 36% in higher prices. Extrapolating forward, Goldman projects continued inflation pressure: 0.2 percentage point already added to core PCE by mid‑2025, with a further 0.16% in July and potentially 0.5% more over the rest of the year, underscoring how tariffs are translating into persistent inflation — even without sudden retail shockwaves. Housing chills, aisles adapt If the consumer economy is muddling through, the housing market is wandering through a funhouse mirror. With 30-year mortgage rates still in the mid-6s , home affordability is at its lowest in decades, and turnover has slowed to a crawl. Builders keep breaking ground, but completions lag, and sentiment among homebuilders has sunk to levels usually reserved for recessions. That disconnect is bleeding straight into retail aisles: Households aren't cracking, but they're deferring the big stuff. Welcome to the Twilight Zone . Home Depot missed on both sales and earnings: $45.28 billion in revenue versus $45.36 billion expected, and $4.68 EPS versus $4.71 anticipated. Management held its full-year guidance, but the message wasn't confidence — it was steadiness amid deteriorating conditions. Store visits fell 2.2% YoY in the second quarter after a 3.9% drop in the first quarter, per and inside comparable sales, average ticket ticked up a little over 1% while transactions edged down a bit, a sign that big projects remain deferred even as maintenance spending continues. Big-ticket remodels — kitchens, baths, and basements — don't happen when rates are high and home sales frozen. For the weekend warrior, the paint project still goes ahead; the dream addition doesn't. Two aisles over, Lowe's took a different tack. It beat expectations on comps and earnings. Comparable sales rose 1.1%, and management raised its full-year outlook. Then Lowe's dropped a not-so-subtle strategic bombshell: an $8.8 billion acquisition of Foundation Building Materials . The math shows that contractor activity is still running, and Lowe's is leaning into that demand stream. Where retail homeowners pause big projects, pros keep working. Institutional demand from contractors is less rate-sensitive than for a family in Pittsburgh deciding whether to refinance before redoing their kitchen. The housing market's bigger picture explains part of the market's uneven footing. Households are deferring big commitments, while business-driven spending trudges on. Zoom out, and the data agrees. July retail sales were up half a percent; producer prices rose sharply. Cash registers are still ringing, even if the margins are tighter. It's not a boom or a bust. It's late-cycle pragmatism, where 'muddle-through' looks like the baseline until housing thaws, tariffs ease, or the Federal Reserve cuts interest rates. Swipe now, stumble later? If consumer resilience has kept receipts steady, the credit side of the ledger tells a shakier story. Household debt crossed $18 trillion this summer, credit card balances hit record highs, and delinquency rates are drifting back to pre-pandemic levels. Retailers may be pulling levers to keep traffic flowing, but they're doing it in an environment where shoppers are leaning harder on credit just to sustain 'normal' spending. That dependence creates fragility — the next rate shock or labor market wobble won't just dent sentiment, it could puncture the ability to swipe. Put everything all together, and the picture looks like an economy that hasn't cracked but hasn't found balance either. Retail is still ringing up sales, housing is still breaking ground, and jobs are still paying wages — but each line comes with a footnote. What Walmart, Target, Lowe's, and Home Depot showed this week is that the U.S.' consumer engine is still running, just with less of a cushion, more friction, and a lot more dependence on tactical pricing and policy outcomes. For now, the tightrope holds. The question is how long it takes before gravity starts to matter. There's also a subtler role retailers are playing: shadow inflation managers. Tariffs, freight, and wages are raising input costs, but companies aren't just passing them straight through. Instead, they're absorbing some pain in margins, hiding some in packaging and assortments, and offsetting the rest with loyalty perks and lightning-fast fulfillment. The Fed may set the target rate, but Walmart's rollbacks and Target's membership perks are the real-world tools that decide how much households may actually feel inflation week to week. That's why these four earnings matter well beyond their aisles. They offer a map of how the private sector is engineering stability when the macro picture is stuck in the gray. Call it cycle hedging: each retailer has carved out a buffer — Walmart trades margin for loyalty, Target backfills with ads and memberships, Lowe's courts the pro channel, and Home Depot waits out the rate freeze — designed not to accelerate growth but to cushion the landing. They're not chasing a boom; they're buying insurance against a bust. For consumers, the pattern is just as plain. They're not slamming their wallets shut, but they're choosing carefully: ordering curbside instead of browsing aisles, replacing the washer before remodeling the kitchen, keeping projects small until housing thaws. In that sense, retail isn't just reflecting the economy, it's refereeing it — deciding which costs get passed on, which get hidden, and which get smoothed into 'everyday low' and 'same-day delivery.' And this week's quarterly guidance from these four retail titans offers a weather report for the economy: not stormy, but overcast, with possible breaks ahead. That's the kicker: this isn't a story of retail as a lagging indicator, but retail as the economy's frontline manager. The receipts aren't just reporting demand — they're shaping it. The skies may be gray, but as long as value and speed stay in stock, the U.S. economy can keep muddling through with the cart half full.
