Walmart (WMT) released its third-quarter earnings Thursday morning, posting a revenue of $160.8 billion, up 5.2% year-over-year and higher than estimates of $159.13 billion. Macy's (M) saw a small boost after posting its third-quarter earnings, showing an earnings beat on the top and bottom lines. The retailer also revealed that sales fell by 7% year-over-year citing inventory backlog issues. Both retailers, among others, are gearing up for the holiday season as research from Klarna shows consumers are changing their spending habits and strategies for purchasing goods.

TD Cowen Research Analyst Oliver Chen joins Yahoo Finance to discuss these companies' performances and how they might adjust for an evolving consumer.

Chen also explains which retailers will have the best value from a stock perspective: "What we continue to see, Akiko, is this bifurcation theory, so owning very premium great luxury... the LVMH portfolio (MC.PA) — which includes Dior, Vuitton, and Sephora — and then also a customer that is obsessed with value, and wants opening price points and is responding to promotions. So great ideas there include Walmart and Costco (COST) because at Costco you get the treasure hunt and you get extreme value, Walmart you get everyday low value, plus you're getting a tech play..."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

AKIKIO FUJITA: Oliver, we heard from Doug McMillon today talk about a period of deflation that the company is going to have to manage through, essentially, unit prices will be a little lower. How do you look at that right now? Are we talking a few months? Is this a bigger concern for other retailers too? What are you seeing in terms of pricing power and where consumers are willing to go?

OLIVER CHEN: Yeah, we just left the call with Walmart as well as Macy's and what's happening is the price raises are softening so disinflation. That has a negative impact on comp store sales because you're not getting the benefit of pricing, but that does have very positive impacts on the ability for the consumer to use those dollars to buy more stuff such as clothes, apparel, home, hardlines.

So overall, it's a positive for freeing up dollars for the consumer to discretionary products, but it's a negative for overall total comp store sales. So looking forward conceptually, retail needs to focus on selling more number of items or units, it needs to focus on traffic and getting people to walk into store or online and conversion rates. That will be a major focus.

But having disinflation, it really isn't a bad thing so pluses and minuses in terms of thinking about how to model that and what it means for the stocks.

RACHELLE AKUFFO: And I want to take a look at Macy's here, obviously, the stock being rewarded here this morning. What did you like out of that earnings report?

OLIVER CHEN: Yeah, Rachelle, you brought up great points. The inventory is in good shape. It's running very close to the sales so well positioned and freshness here, also, a better than feared in terms of the comp being less negative than we expected or other people expected. We like Macy's. We have an outperform rating on Macy's.

Our top idea is to include Walmart, Costco Louis Vuitton, LVMH. But at Macy's, we're excited about getting the right stuff at the right place at the right time, so inventory management as well as pricing analytics. We also think there's an opportunity to improve the clothing. It really needs to be more relevant to Gen Z and younger customers, and they're working hard on that and private label.

As we look ahead to holiday and Black Friday, and I hope everyone's out there shopping and investing in their wardrobes and buying for themselves and others, what will be big is gifting and beauty and Macy's is well prepared for that too. They've been cautiously optimistic and the word is cautious on their guidance. So this company has been executing relative to this cautious reasonable guidance they've been offering.

But trends are still negative. We really want to see growth. We really want to see margins on both sides.