Walmart Earnings: US Comparable Sales Hit Six-Year Low; Digital Scale Offers Cushion

Key Morningstar Metrics for Walmart

• : $81.00
• : ★

• Morningstar Economic Moat Rating

  : Wide

• Morningstar Uncertainty Rating

  : Medium

What We Thought of Walmart’s Earnings

Walmart’s WMT fiscal 2027 second quarter included US comparable sales growth of 2.6% on traffic growth of 1.5% and ticket growth of 1.1%. Adjusted operating income grew 10% when excluding a 7% boost from tariff refunds. Shares sank 9% on Aug. 20 after the results.

Why it matters: While Walmart US’ comparable sales decelerated (hitting their lowest level since 2020), we believe the firm’s expanding digital ecosystem, marketplace density, and commitment to low prices allow it to defend traffic, share of wallet, and profitability against competition.

• We don’t believe the sales slowdown is entirely demand-driven. Although pharmacy pricing legislation (implemented in January) acted as a 125-basis-point headwind in the quarter, core categories’ comparable sales held around 3%-4%.
• We forecast Walmart US comparable sales to average 4.2% annually over the next decade. This trajectory is underpinned by its unmatched scale and low-price leadership, offering a vast product assortment that caters to financially stretched consumers across income cohorts.

The bottom line: We retain our $81 per share fair value estimate on wide-moat Walmart. We believe shares are overvalued even after the selloff.

• In our view, the market assumes high-margin advertising and memberships will permanently lift operating margins well above 6% historical peaks. We view this as unrealistic, as persistent mix headwinds from low-margin grocery and fierce industry competition stand to cap gains.

Key stats: Global advertising revenue grew 38%, and membership income rose 17%. We see these high-margin revenue streams as providing dry powder to profitably defend traffic and maintain price gaps relative to conventional grocers.

• We forecast high-margin alternative revenue streams to reach nearly 41% of operating profit by fiscal 2036, up from over 25% in fiscal 2026. This mix shift offsets a declining profit contribution from core US merchandise, which we project will fall to just under 50% from roughly 62%.