Can Walmart's High-Margin Verticals Sustain Its Retail Edge?

Walmart Inc. WMT is redefining its growth strategy by focusing on high-margin revenue streams — specifically advertising, memberships and marketplace expansion. This strategic pivot is strengthening the company’s profitability and reinforcing its dominant position in the global retail industry.

In the first quarter of fiscal 2026, Walmart reported significant progress driven by a more profitable business mix. The company’s advertising revenues surged 50% year over year, thanks in part to its December 2024 acquisition of VIZIO. By integrating VIZIO’s SmartCast Operating System, Walmart Connect gained advanced capabilities to deliver personalized, scalable advertising solutions. Walmart Connect's U.S. operations grew 31%, while Sam’s Club advertising climbed 21%. On the international front, ad revenues jumped 20%, led by a robust performance from Flipkart.

Membership income was another key growth engine. Total membership revenues increased roughly 15% year over year. Sam’s Club U.S. recorded strong growth in new members, higher renewal rates and an uptick in Plus memberships, resulting in a 9.6% rise in membership income. Walmart+ posted double-digit growth, while Sam’s Club China saw membership income rally over 40% amid growing adoption.

Walmart is also expanding its third high-margin vertical: marketplace and store-fulfilled delivery. This integrated, omnichannel ecosystem enhances operational efficiency while elevating customer experience.

By accelerating growth in advertising, memberships and marketplace services, Walmart is positioning itself for long-term earnings growth and stronger shareholder value in today’s fast-evolving retail landscape.

How Walmart’s Competitors Are Tapping High-Margin Profit Streams

As Walmart intensifies its focus on high-margin businesses, rivals like The Kroger Co. KR and Target TGT are also investing in alternative revenue streams to boost profitability.

Kroger is strengthening its profitability through high-margin alternative profit businesses, particularly retail media and health & wellness services. In fiscal 2024, these segments delivered $1.35 billion in operating profit, fueled by a robust 17% year-over-year increase in retail media revenues. Kroger Precision Marketing continues to gain traction, with rising commitments from advertising agencies underscoring its growing influence as a key profit driver.

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 & Estimates

Shares of Walmart have rallied 42.6% in one year compared with the industry’s growth of 40.8%.

From a valuation standpoint, WMT trades at a forward price-to-earnings ratio of 36.43X, above the industry’s average of 33.12X.

The Zacks Consensus Estimate for WMT’s fiscal 2026 earnings implies year-over-year growth of 3.6%, whereas its fiscal 2027 earnings estimate suggests a year-over-year uptick of 11.7%.

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.

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

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