Will Walmart's Membership Growth Power Its Profit Cycle in Q2?

For Walmart Inc. WMT, the challenge in the second quarter of fiscal 2026 is not only to improve sales but also to accelerate profit in an environment clouded by tariffs. Well, membership income may provide the answer to this.

In the first quarter, Walmart’s membership fee income rose 14.8%, driven by double-digit growth in Walmart+ subscriptions, strong renewals at Sam’s Club and rapid international expansion, especially in Sam’s Club China, where membership income grew more than 40%. This recurring, high-margin revenue source is becoming a key part of profit, providing stability that traditional retail sales often lack.

The appeal of membership extends beyond fees to the way consumers shop. Walmart+ subscribers are engaging more with delivery and digital shopping, while Sam’s Club Plus members are renewing at higher rates and adopting digital tools like Scan & Go. These patterns strengthen customer loyalty, improve efficiency and ultimately support profitability.

This shift toward fee-based and service-driven profits is especially important as tariff pressures mount. Cost increases from imports, particularly in categories like electronics and toys, cannot be fully absorbed in a business already marked by tight margins. By leaning on membership income, Walmart has more flexibility to navigate pricing challenges without compromising its value proposition.

As Walmart unveils second-quarter results on Aug. 21, the focus will be on whether membership growth can meaningfully drive the next leg of profitability.

How Costco and BJ’s Compare to Walmart on Membership Growth

Costco Wholesale Corporation COST reported a 10.4% year-over-year increase in membership fee income in the third quarter of fiscal 2025, totaling $1,240 million. While a membership fee hike added 4.6% to results, Costco’s growth was primarily fueled by a larger member base and strong executive membership adoption. Costco achieved an impressive 92.7% renewal rate in the United States and Canada and a global renewal rate of 90.2%.

BJ's Wholesale Club Holdings, Inc. BJ reported an 8.1% year-over-year jump in membership fee income to $120.4 million in the first quarter of fiscal 2025. BJ’s Wholesale Club attributes this growth to strong member acquisition and retention, supported by a recent fee hike implemented in January 2025. Higher-tier membership penetration surpassed 40% for the first time, showing BJ’s Wholesale Club is effectively upgrading member value while keeping its tenured renewal rate high at 90%.

What Latest Metrics Say About WMT Ahead of Q2 Earnings

The Zacks Consensus Estimate for Walmart’s second-quarter sales and earnings per share implies year-over-year growth of 3.7% and 9%, respectively. 
 

Walmart has been a standout performer, with shares rallying 35.6% in the past year, almost in tandem with the industry’s growth of 35.5%. 
 

From a valuation standpoint, Walmart's forward 12-month price-to-earnings ratio stands at 36.12, higher than the industry’s 33.13. WMT carries a Value Score of D.
 

Walmart currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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