Can Walmart (WMT) Keep Growing Despite Tariff Threats?
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Just when everyone thought brick-and-mortar retail was dead, Walmart (WMT) proved them wrong again. The retail giant’s latest quarterly results sent its stock soaring, with revenue climbing 5.48% year-over-year. This performance caught the attention of investors and analysts alike, with our TrackStar data showing Walmart dominating retail sector searches – garnering 2,788 hits, more than Target (TGT) or Costco (COST) combined. But dark clouds are gathering on the horizon. Donald Trump’s recent presidential win brings with it the specter of renewed tariffs on Chinese imports – a critical source of Walmart’s inventory. The question isn’t just whether Walmart can maintain its growth trajectory but whether it can do so while navigating potentially significant cost increases. Walmart’s Business Walmart is the world’s largest retailer, with over 10,500 stores across 19 countries, serving an astounding 255 million customers weekly. The company has masterfully evolved from its humble Arkansas beginnings into a retail technology powerhouse, blending its vast physical footprint with sophisticated digital capabilities that rival Amazon’s. Walmart segments its business into the following areas:
The latest quarter showcases Walmart’s ability to execute in challenging conditions. U.S. comparable store sales grew 5.3%, driven by increased foot traffic and larger basket sizes. The company’s digital transformation continues to accelerate, with global eCommerce sales surging 27%. |
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Walmart’s strategic investments in automation and supply chain optimization are paying off, with improved inventory management and faster delivery times. The marketplace business is expanding rapidly, adding new sellers and categories to compete more effectively with online rivals. Financials
Source: Stock Analysis If money talks, then Walmart’s financials speak volumes. The company’s trailing twelve-month revenue of $673.8 billion represents more than just a 5.48% year-over-year increase – it’s a testament to Walmart’s ability to grow even as competitors struggle with changing consumer behaviors. Operating margins tell an even more impressive story. Despite inflationary pressures, the operating margin expanded to 4.27% TTM from 4.17% in FY2024. This expansion reflects both Walmart’s pricing power and its ability to leverage technology for cost savings. The company’s free cash flow remains a standout metric at $17 billion TTM. This robust cash generation not only funds Walmart’s digital transformation but also supports a growing dividend, which increased 9.09% to $0.83 per share. Valuation
Source: Seeking Alpha Walmart’s premium valuation reflects its market leadership position, though some might argue it’s stretched. Trading at a P/E Non-GAAP TTM of 35.3x, Walmart commands a significant premium to Target at 16.2 and Dollar General (DG) at 12.0x. However, focusing solely on earnings multiples misses the bigger picture. Walmart’s Price/Sales ratio of 1.0x sits well below Costco’s 1.6x, suggesting potential upside if the company continues executing its digital transformation strategy successfully. Growth
Source: Seeking Alpha The numbers paint a picture of consistent, quality growth that’s increasingly rare in retail. Revenue growth of 5.43% year-over-year might not sound spectacular, but it’s impressive at Walmart’s scale. More telling is the company’s 9.54% EBITDA growth, showing Walmart isn’t just growing – it’s growing profitably. The three-year revenue CAGR of 5.51% demonstrates Walmart’s resilience through challenging times. While this trails Costco’s 9.10%, it handily beats Target’s 2.26% and comes with improving margins. Profitability
Source: Seeking Alpha In the retail world, margins tell the story of operational excellence, and Walmart’s narrative is compelling. Its gross margin of 24.63% far exceeds Costco’s 12.61%, though it falls short of Target’s 28.42%. The EBITDA margin of 6.13% reflects strong operational efficiency at scale. Return on equity of 18.53% might lag behind Costco’s 30.27% and Target’s 33.97%, but context matters. Walmart generates these returns on a significantly larger asset base, making the achievement more impressive than raw numbers suggest.
Our Opinion 8/10 Walmart isn’t just surviving in retail – it’s thriving. The company’s proven ability to adapt, its massive scale, and its successful digital transformation warrant our strong 8/10 rating. Yes, potential tariffs on Chinese imports pose a real threat. However, Walmart’s global sourcing capabilities, supplier relationships, and ongoing investments in automation provide multiple levers to pull in response. The company’s history of successfully navigating similar challenges suggests it will weather this storm, too. For investors, Walmart offers that rare combination of defensive characteristics and genuine growth potential. While tariffs might create near-term turbulence, the company’s long-term trajectory remains compelling. |
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