Walmart Earnings: Low Prices and Strong Digital Presence Drive Market Share Gains

Key Morningstar Metrics for Walmart

• Fair Value Estimate: $50.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Walmart’s Earnings

Walmart WMT delivered strong fiscal 2025 first-quarter results, as its low prices and digital investments continued to attract consumers. Total revenue expanded by 6%, with growth dispersed across the domestic and international businesses. Top-line growth and resilient margins prompted a 20% increase in adjusted earnings per share to $0.60, easily surpassing our $0.52 forecast. We plan to raise our $50 fair value estimate by a mid-single-digit percentage (in line with the stock price reaction after the May 16 release), as we think the retailer is well-positioned to continue taking market share across various income cohorts. Still, we view the shares as overvalued.

Walmart US enjoyed a 3.8% increase in comparable sales during the quarter, ahead of our 3.5% estimate, driven entirely by traffic growth. The firm impressively lapped a difficult 7% comp increase from the prior year as strength in grocery (up by mid-single digits) and health and wellness (up high-single digits) helped offset weakness in general merchandise sales. We expect higher-margin general merchandise sales to remain pressured in the coming quarters but forecast market share gains in the firm’s nondiscretionary categories. Walmart US still eked out a 10-basis-point improvement in segment operating margin to 4.9%, despite an unfavorable category mix amid strong inventory management and fewer markdowns. We surmise that growth in alternative high-margin profit channels, such as advertising (up 24% companywide), also contributed to margin expansion.

We remain impressed by the improvement at Sam’s Club, which yielded a 4.4% comp gain in the first quarter on top of 7.0% last year. The warehouse club saw a 13% uptick in membership income, and we were encouraged by continued growth in Sam’s Club Plus membership penetration, which management said reached a new high of 54% (exceeding Costco Wholesale’s COST executive membership penetration in the mid-40s).