Walmart's Push Into High-Margin Ventures: A Blueprint for Growth?
Walmart Inc. WMT is reshaping its growth strategy by doubling down on high-margin revenue streams — namely, advertising, memberships and marketplace expansion. This strategic shift is boosting profitability and reinforcing the company's leadership in the global retail landscape.
In the first quarter of fiscal 2026, Walmart saw meaningful gains from its evolving business mix. Higher-margin categories like advertising and memberships were major contributors to profitability. The company's advertising revenues rallied 50% year over year, fueled in part by its December 2024 acquisition of VIZIO. This move brought VIZIO's SmartCast Operating System under the Walmart umbrella, enhancing Walmart Connect's ability to deliver personalized, scalable advertising solutions. Walmart Connect posted 31% growth in the United States, while Sam's Club advertising grew 21%. Internationally, ad revenues rose 20%, led by strong performance from Flipkart.
Membership income also played a vital role. Overall membership fees rose nearly 15% year over year in the fiscal first quarter. Sam's Club U.S. saw solid gains in member growth, renewal rates and an increase in Plus memberships, driving a 9.6% rise in membership income. Walmart+ delivered double-digit income growth, while Sam's Club China membership income soared over 40%, driven by rising member adoption. Walmart is also scaling its third major growth pillar: marketplace and store-fulfilled delivery. This integrated ecosystem enhances operational efficiency and supports omnichannel retail engagement.
By expanding these high-margin verticals, Walmart is positioning itself for sustainable earnings growth and improved shareholder value in a rapidly evolving retail environment.
How WMT's Competitors Are Building New Profit Engines
Some of WMT's competitors in the retail space are The Kroger Co. KR and Target TGT.
The Kroger Co.'s alternative profit businesses, including retail media and health & wellness, continue to contribute to profitability. These businesses generated $1.35 billion in operating profit in fiscal 2024, supported by a 17% increase in retail media revenues. Kroger Precision Marketing ('KPM') is expanding rapidly, with increasing commitments from agencies, reinforcing its position as a high-margin growth driver. As digital engagement grows, Kroger remains focused on leveraging data-driven insights to enhance advertising effectiveness and drive sustained profitability in this segment.
Target is accelerating its shift toward high-margin, non-merchandise revenue streams by scaling digital advertising and marketplace services. Roundel, Target's retail ad business, continues to benefit by driving higher engagement, performance and campaign success. Meanwhile, Target Plus — the company's third-party digital marketplace — also delivered double-digit growth in the first quarter of fiscal 2025.
WMT's Price Performance, Valuation and Estimates
Shares of Walmart have gained 7.9% year to date compared with the industry 's growth of 8.1%.
From a valuation standpoint, WMT trades at a forward price-to-earnings ratio of 36.09X, above the industry's average of 33.08X.
The Zacks Consensus Estimate for WMT's fiscal 2026 earnings implies year-over-year growth of 3.2%, whereas its fiscal 2027 earnings estimate suggests a year-over-year uptick of 11.6%.
Image Source: Zacks Investment Research
WMT stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
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The Kroger Co. (KR): Free Stock Analysis Report
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