The world’s largest retailer still has a bright future.
Walmart (WMT 0.88%), the world’s largest retailer, isn’t usually considered a high-growth stock. But over the past five years, its stock has more than doubled as the S&P 500 rose about 80%. It achieved those market-beating gains even as the pandemic, inflation, geopolitical conflicts, tariffs, and other macro headwinds rattled the global economy.
But can it stay ahead of the market over the next five years? Let’s review its core strengths, upcoming catalysts, and valuations to see how much higher its stock could go.
Image source: Walmart.
What happened to Walmart over the past five years?
Walmart operates more than 10,750 stores and warehouse clubs across 19 countries. It generates most of its revenue from its namesake U.S. stores, while its Sam’s Club stores compete against Costco in the warehouse club market. It also operates a broad range of e-commerce websites and smaller regional banners.
Walmart’s scale and diversification helped it keep pace with Amazon (AMZN -1.16%) as other brick-and-mortar retailers crumbled. It expanded its e-commerce marketplace, renovated its stores, matched Amazon’s prices, upgraded its shipping and curbside pickup options, and leveraged its massive network of brick-and-mortar stores to fulfill its online orders. It also rolled out more private-label brands to lock in its shoppers and boost its gross margins.
From fiscal 2021 to fiscal 2025 (which ended this January), Walmart’s total revenue grew at a compound annual growth rate (CAGR) of 5%. Its comparable sales in the U.S. grew at a healthy rate, even as many of its retail peers struggled with macro and competitive challenges.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
FY 2024 |
FY 2025 |
|---|---|---|---|---|---|
|
Walmart U.S. Comps Growth |
8.6% |
6.4% |
6.6% |
5.6% |
4.5% |
|
Sam’s Club U.S. Comps Growth |
11.8% |
9.8% |
10.5% |
4.8% |
5.9% |
|
Walmart International Sales Growth |
1% |
(16.8%) |
0% |
10.6% |
6.3% |
|
Net Sales Growth |
6.7% |
2.4% |
6.7% |
6% |
5.1% |
|
EPS Growth |
(8.5%) |
2.5% |
(12.3%) |
34.4% |
26% |
Data source: Walmart. Comps growth excludes fuel sales.
During the pandemic, Walmart’s sales surged as more shoppers stocked up on essential goods. Its e-commerce investments also paid off as more of those customers shopped online. When inflation surged from 2021 to 2023, it drew more cost-conscious shoppers to its stores. Its international growth stalled out in fiscal 2022 after it divested some of its weaker overseas stores, but the segment stabilized in fiscal 2023 and grew over the following two years.
In fiscal 2021, Walmart’s reported earnings per share (EPS) declined as its pandemic-related expenses surged, it divested some of its international businesses, and it generated a higher mix of its revenue from its lower-margin e-commerce marketplace.
In fiscal 2023, its EPS dropped again as inflation, markdowns for flushing out excess inventories, currency headwinds, and a one-time litigation charge from an opioid settlement compressed its margins. However, Walmart’s profits surged again in fiscal 2024 and fiscal 2025 as those headwinds dissipated.
What will happen to Walmart over the next five years?
For fiscal 2026, Walmart expects its total net sales to rise 3.75% to 4.75% as its adjusted EPS increases 0.4% to 4.4%. It expects its top-line growth to be driven by its rising e-commerce sales, its streamlined pricing and inventory management strategies, and the expansion of its integrated advertising business, which will be strengthened by its recent takeover of Vizio.
On the bottom line, it expects higher tariffs — especially on Chinese goods — to squeeze its margins. It might offset some of that pressure by negotiating new deals with its Chinese suppliers, storing more of their products in its domestic warehouses, or passing those costs onto its consumers, but those strategies aren’t long-term solutions. However, the cost savings from its AI and automation efforts (especially in its warehouses) might cushion that blow.
From fiscal 2025 to fiscal 2028, analysts expect Walmart’s net sales and reported EPS to grow at a CAGR of 5% and 10%, respectively. That growth should be driven by its tech-forward “Store of the Future” upgrades, the expansion of its advertising arm, the automation of its warehouses, and AI-driven upgrades for its e-commerce marketplaces.
We should take those estimates with a grain of salt, but they seem like a realistic continuation of Walmart’s current growth strategies. But a lot of optimism is already baked into its stock at 35 times next year’s earnings, and that higher valuation might set it up for a steep drop on any negative news.
Assuming Walmart matches Wall Street’s estimates, grows its EPS at a CAGR of 10% over the following three years, and trades at a more reasonable 30 times earnings, its stock price could rise another 33% to about $121 by 2030. That would be a solid five-year gain, but Walmart’s premium multiple might prevent it from replicating its previous gains or consistently staying ahead of the S&P 500, which has generated an average annual return of more than 10% since its inception in 1957.
