The stark division in retail between those who try to lower prices to customers amid increasing inflation and those who are able pass the cost on to consumers this holiday season was revealed by a roundup of major retail earnings.

Large-box chain stores TargetAnd Walmart were punished by investorsAlthough third-quarter earnings results exceeded analyst expectations, the company still delivered disappointing results. Each company has adopted a strategy which largely involves absorbing the increasing costs of shipping, labor, and materials instead of raising sticker prices. Both firms cited the necessity to maintain a high reputation for value.

“That is our goal.” Walmart CEO Doug McMillon said in an interviewCNBC “Squawk on the Street.”“We help people save money and live better lives. These are the words that were spoken out of [Walmart founder]Sam Walton’s mouth. He loved fighting inflation. So do we.”

Walmart stock shares dropped 2.6% Tuesday after the announcement of its results. Target stock shares fell 4.7% on Wednesday. reported. Walmart stock has been slightly lower year-to-date, but Target is still gaining about 43%.

It’s different if your business is selling lots of clothing. Department store operator shares Macy’sAnd Kohl’sTJ Maxx Owner TJXRetailer of lingerie Victoria’s SecretThe stock market rallied after the companies proclaimed their pricing power to Wall Street, and reported lower inventories.

Macy’s stock rose 21% Thursday and reached a record $37.95, a new three-year high. Kohl’s shares were up more than 10% and Victoria’s Secret shares went up nearly 15%. TJX reached an all-time high 52 weeks ago of $76.94, Wednesday.

Simeon Siegel, analyst at BMO Capital Markets said that everyone became concerned about inflation and supply chain. But that is not the same as having tight inventories and higher prices.

Siegel explained, “Each one of these stock poppings represents the recalibration back to concerns about inflation into excitement surrounding low discounting.”

Retailers are facing rising costs for everything, from fuel and labor. Inflation hit a three-decade high in October. The consumer price index — which includes a mix of products ranging from gasoline and health care to groceries and rents — rose 6.2% year over year, the most since December 1990.

Some categories have seen a bigger uptick than others, though. Food prices, for example, grew by 0.9% in October — with meat, poultry, fish and eggs collectively increasing 1.7%. The price of apparel remained unchanged.

Macy’s, a retailer primarily focused on apparel, stated that it had been conducting tests for the past three month to find out which products consumers are more price sensitive to and where they are willing to spend a little more.

Jeff Gennette is Macy’s chief executive. He stated in an interview that “We have seen these inflationary cycles before” and added, “We have a lot experience with them.” And with fashion, you sometimes can pass it on and get a higher price and ticket.

Gennette stated that Macy’s has a price ceiling for commodities such as basic T-shirts and denim jeans. He said that in some instances, the retailer holds the retail. “In these cases we take the higher cost and take a smaller margin.”

Gennette added that Macy’s is also equipped with lean inventories. It won’t need to sell surplus goods it doesn’t want. Macy’s three-month inventory ended October 30th was more than 19% higher than year-ago levels. However, they were lower by over 15% on an annual basis.

Investors were concerned earlier in the week by Walmart and Target’s bloated inventory levels. In part, these companies were being proactive to make sure shelves were well-stocked for the holidays — and that could pay off if shoppers rush into stores in the coming weeks eager to spend. Walmart stated that its inventory is up 11.5% in advance of the holiday season. Target saw its inventories rise nearly 20% (or $2 billion) year-over-year.

“Retailers don’t want to scare off a consumer,” said Naveen Jaggi, president of commercial real estate firm JLL’s retail advisory services. They are willing to control their costs, and to pay the sales price because it doesn’t take away the incentive to buy a product.

If people aren’t there, or if they come to Target and Walmart looking, then the overstocked inventory might be reduced.

Gennette stated that Macy’s uses markdowns at the local level, rather than at the regional level. According to Gennette, the exact same shirt at one Macy’s Los Angeles location might be cheaper than the shirt five miles away.

Michelle Gass, Kohl’s CEO, stated that customers are gradually gravitating towards higher-end products as Kohl’s merchandise range changes. She mentioned NikeAnd PVHTommy Hilfiger, a Kohl’s-owned brand, is one example of a premium brand that can fetch higher prices at Kohl’s.

“We still have those great promotions, but less of them, so that it’s simpler — especially for our new customers,” Gass said in an interview. We have sophisticated tools for elasticity now.”

Kohl’s is also tightening its inventory grip, down 25% on an annual basis for Macy’s at the close of the third quarter.

Stephanie Wissink, an analyst at Jefferies said Kohl’s profit margins have improved due to the current inventory situation and the pent up demand environment. This allows Kohl to sell more products at full price.

Victoria’s Secret also has been increasing sales of bras and other underwear by selling them at higher prices, which helps to boost its overall revenue. The third quarter revenue rose by 7% to $1.4billion, compared with $1.35billion a year ago. Inventory was up 4% in the third quarter compared to 2018 and down 16% from 2019.

Ernie Herrman, CEO of TJX, told analysts during Wednesday’s earnings call that there has been no resistance from customers to the price hike.

His statement was, “We assumed there would be just a few things here and there with which we’d run into problems. However, that is not true.”

TJX saw its comparable store sales rise 14% over the previous year. However, TJX’s net sales rose 24% to $12.5 million for the period ended October 30. The inventories of TJX were slightly higher at $6.6 million, as compared to $6.3 billion just two years ago.

—CNBC’s Melissa RepkoContributed to the report.