Recently, a number of large U.S. retailers, including Home Depot, Walmart, Target and Lloyd's, are about to report second-quarter earnings. These earnings figures are getting a lot of attention on Wall Street, especially against the backdrop of recessionary fears sparked by July's weak jobs report.

According to GlobalData's analysis, at least 10 North American consumer discretionary companies that have reported earnings had lower revenue growth than in the previous quarter. In addition, third-party data suggests that consumer spending trends have been erratic this summer, with spending on credit and financial cards continuing to decline, indicating that consumer confidence may be weakening.

In response to inflation, the Federal Reserve has raised interest rates, which has had a significant impact on demand for interest rate-sensitive goods such as automobiles, appliances and furniture. Home Depot and Lloyd's have felt this pressure recently, with sluggish sales growth. Analysts expect that many retailers may lower their earnings forecasts for fiscal 2024 to reflect market expectations of slower spending.

GlobalData's Saunders noted that while the market may have digested expectations of slower consumption, polarization in the retail sector will become more pronounced. Companies that are able to effectively control costs and improve margins will be market winners, while those with slower growth will face greater challenges. Investors will favor companies that have clear plans for dealing with the situation, while those that are overly optimistic about the future may be at a disadvantage.