The trend: Consumer spending held steady in Q3, but that resilience masked widening divides.

• Higher-income shoppers continued to spend—often freely—while lower- and middle-income households pulled back, reshaping the retail landscape heading into the holiday season.
• The split reflects a growing reality: High earners’ wages are outpacing inflation, giving them more room to spend, while the earnings of low- and middle-income consumers haven’t kept pace, tightening budgets and making these households more selective about where and when they spend.
• This divergence buoyed retailers with strong value propositions or affluent customer bases and weighed on brands tied to discretionary or big-ticket purchases.

Zooming in: Bank of America card data shows that even as household spending rose for a fourth straight month in September, most of the momentum came from middle- and higher-income consumers. That split showed up clearly in retailers’ Q3 results.

• Williams-Sonoma, for instance, raised its margin outlook after affluent households kept investing in premium furnishings, lifting its Q3 comps by 4%. But even its performance underscored the K-shaped economy: Comps for the higher-end Williams-Sonoma brand rose 7.3%, while its more mid-market Pottery Barn banner grew just 1.3%.
• At the other end of the spectrum, value-focused off-price retailers TJX, Ross, and Burlington all reported strong sales growth as deal-seeking accelerated across income tiers. Their treasure-hunt model and abundant discounts on name brands continued to draw both budget-constrained consumers and higher-income shoppers looking to stretch their dollars ahead of the holidays.
• Mass merchants also strengthened their hold on the consumer wallet. Fast deliveries, low prices, and broad assortments helped Walmart and Amazon gain share. Target, more dependent on discretionary categories, faced another quarter of subdued demand as consumers remained “choiceful,” shifting more spending toward essentials.

Our take: Taken together, Q3 earnings reflect a retail environment defined by divergence: affluent consumers buoying premium and digital-first brands, lower-income shoppers tightening budgets, and an increasingly universal hunt for value. That mix sets the stage for a holiday season where off-price and mass merchants are positioned to outperform, even as overall consumer momentum remains steady but subdued.

Go further: Read our Retail & Ecommerce Earnings Q3 2025 report.