As consumers prepare to drop the hammer on what could be a record-breaking holiday season ahead, retail earnings from Walmart and Target tell different stories with two things in common: leadership changes are in progress, and families still want toys.
Despite significant economic concerns, tariffs, widespread job losses, and a looming sense of uncertainty this year, a record 186.9 million people plan to shop from Thanksgiving Day through Cyber Monday this year, according to this month’s consumer survey released by the National Retail Federation (NRF) and Prosper Insights & Analytics. Of those surveyed, 32% plan to purchase toys this season.
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At Walmart, toys are driving sales and benefitting from price elasticity as families traditionally hold off on cutting back on kid-related purchases unless absolutely necessary during times of economic uncertainty. While not entirely “recession-proof” as some have stated over the years, toys and games show resilience as families look to provide magical holiday experiences for the little ones on their shopping lists.
On an earnings call last week, Walmart Executive Vice President & Chief Financial Officer John David Rainey noted that toys, alongside the electronics and seasonal categories, have “seen some of the higher AURs [average unit retail] … that being in the high single digits,” while unit sales have remained relatively flat as the company balances needs and wants across grocery and general merchandise in a tariff-skewed retail environment. “I think [in those categories], you’ve seen higher price increases overall, where other parts of the basket, we’ve not had the same pressure from tariffs, and we’ve been able to mix out the baskets in a way that has minimized the impact on the consumer,” Rainey said.
Walmart’s third-quarter revenue (fiscal year 2026) was strong, up 5.8% to $179.5 billion. The company’s e-commerce business grew by 27%, while comparable sales in Walmart U.S. spiked 4.5% compared to Q3 last year. The positive results led the retailer to raise its outlook for growth in net sales to 4.8% to 5.1% and adjusted operating income to 4.8% to 5.5%, both in constant currency. Outgoing President and CEO Doug McMillon offered comments on the company’s performance following the announcement of a leadership transition, under which John Furner, currently President & CEO of the company’s U.S. business, will take the helm.
“The team delivered another strong quarter across the business. E-commerce was a bright spot again this quarter,” McMillon said. “We’re gaining market share, improving delivery speed, and managing inventory well. We’re well-positioned for a strong finish to the year and beyond that, thanks to our associates. It’s been an honor to serve them as CEO, and I’m as excited about the future of this company as I’ve ever been. John Furner is a fantastic leader with a proven track record. I couldn’t be happier for him and for Walmart.”
According to Rainey, Walmart Marketplace has some standout categories, including toys, that are seeing more than 40% year-over-year growth. “It really shows that customers are coming to us with this broader assortment, and it’s allowing us to cater to a broader set of customers than we have historically,” he said.
On the membership side of the business, Chris Nicholas, President and CEO of Sam’s Club, noted similar success in e-commerce while stating that the division is “going on offense on things like price and experience” while leaning into great products alongside “sharp” pricing.
“We’ve got some great general merchandise items coming through Pokémon, LEGO Game Boy, [Fisher-Price] Disney Princess Parade, and the Mahjong set,” he said. “I don’t know if you all know, but Mahjong is the new pickleball.”
Missing the Bullseye
In Minneapolis, Target’s Q3 earnings were the flipside of a coin representing the Nation’s largest big-boxes in a duality of strikingly similar, yet very different stories.
Q3 sales slipped 1.5% to $25.3 billion as incoming CEO Michael Fiddelke digs in to correct years of decline following management missteps and controversy under outgoing CEO Brian Cornell. Just a decade ago, Target’s Cornell and Walmart’s McMillon assumed their posts within months of one another at a time when Target was buzzworthy and Walmart, while much larger, was fairly average in the minds of consumers. Now, Walmart commands the buzz and growth while Target attempts to restore its luster.
“Thanks to the incredible work and dedication of the Target team, our third quarter performance was in line with our expectations, despite multiple challenges continuing to face our business,” Fiddelke said in an earnings release. “As we head into the all-important holiday season, our team is well-prepared and ready to serve our guests with the great products, value, and inspiration they expect from Target. At the same time, we continue to focus on the important work to deliver on our three key priorities: solidifying our merchandising authority, elevating the shopping experience, and further harnessing the power of technology to move at a greater pace and consistency, all in support of a return to sustainable growth.”
A notable win for Target in Q3 came from execution on its “Fun 101” reinvention of the Hardlines business. “Across categories, one theme is clear: our guests continue to respond to newness and style-forward assortments,” said Rick Gomez, Chief Commercial Officer at Target. “Fun 101 delivered another quarter of growth, led by a nearly 10% comp in toys … we’ve invested in unique-to-Target assortments that are clearly resonating.”
Fiddelke said that the company is working to create “a consistently elevated experience” in its stores, and that Fun 101 represents bringing “real focus strategy” to categories that Target has, in the past, done “uniquely well.”
“How do we bring style and culture and design leadership to those categories? And so we’ve made more change in those categories, and we see response,” Fiddelke said on the Q3 earnings call. “It’s good to see categories like toys running an almost 10% increase in Q3. It’s good to see the places where we’ve applied focus moving in the right direction.”
In the Target toy department, where corporate turnover has been heavy in the past two years, Gomez says the team has zeroed in on hot trends and exclusive products, starting with trading cards, a category that’s on track to do more than $1.1 billion in sales for the retailer this year.
“As I’ve shared before, trading cards have been a huge trend that we have been leaning into, and this holiday season, we will be offering new product drops nearly every week, including Pokémon, Magic: The Gathering, NFL, MLB, and WNBA cards,” Gomez said. “We’ve also expanded our assortment of affordable and on-trend toys, including thousands under $20, with many starting at just $5. As the number one market share player for LEGO, we are partnering with this iconic brand to offer exclusive-to-Target sets starting at just $10. And for Barbie fans of all ages, we’re offering two exclusive Barbie collaborations with Joanna Gaines, a collectible doll, and her perfectly designed townhouse to live in.”
With the holiday homestretch fast approaching, the U.S. toy industry is seeking some big hits to maintain positive sales momentum in a challenging year that has seen sales rise and margins decline.
And to reach consumers? Walmart enlisted renaissance man Walton Goggins as The Grinch, while Target called “Weirdly Hot Santa” back into action in a bid to lure shoppers into stores this season.
We’ll be watching this play out with great interest.
