We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Walmart's E-commerce Improves 26%: Is Margin Expansion Next?
Read MoreHide Full Article
Key Takeaways
WMT's global e-commerce sales rose 26%, with growth across U.S., International and Sam's Club.
Walmart U.S. adjusted operating income rose 5.7% to $6 billion as e-commerce economics improved.
WMT store-fulfilled delivery grew 45%, and 36% arrived in under three hours.
Walmart Inc. (WMT - Free Report) continues to demonstrate how its omnichannel model is evolving beyond traditional retail, with e-commerce becoming an increasingly important driver of growth and profitability. The company’s first-quarter fiscal 2027 results underscored strong digital momentum, supported by faster fulfillment capabilities, marketplace expansion and growing contributions from higher-margin revenue streams.
Global e-commerce sales increased 26% in the quarter, led by store-fulfilled pickup and delivery as well as marketplace growth. The strength was evident across segments, with Walmart U.S. e-commerce sales rising 26%, Walmart International e-commerce sales advancing 27%, and Sam’s Club U.S. e-commerce sales growing 23%.
As digital sales scale, the focus is shifting from growth alone to the profitability of that growth. Walmart U.S. adjusted operating income rose 5.7% to $6 billion, while the adjusted operating income rate improved 6 basis points to 5.1%. The gain was aided by improved e-commerce economics, Walmart+ membership growth and other income benefits.
The company’s extensive store network remains a key advantage. Store-fulfilled delivery in Walmart U.S. grew about 45% in the quarter, and more than 36% of store-fulfilled deliveries were completed in less than three hours. Globally, Walmart delivered more than 3.5 billion units on the same day or the next day.
Even so, margin expansion remains a work in progress. Consolidated gross profit rate increased 6 basis points to 24.3%, but operating expenses continued to face pressure from higher fuel costs, depreciation and healthcare expenses. While near-term expenses remained elevated, the quarter suggested that Walmart’s growing e-commerce scale is increasingly being supported by better fulfillment economics and a richer mix of higher-margin digital revenues.
E-commerce Gains Put TGT and COST Margins in Focus
Target Corporation (TGT - Free Report) is also benefiting from growing digital demand. In its first quarter, TGT reported comparable digital sales growth of 8.9%, driven by more than 27% growth in same-day delivery through Target Circle 360. Gross margin expanded to 29% from 28.2%, while adjusted operating margin improved to 4.5% from 3.7%.
Costco Wholesale Corporation (COST - Free Report) continues to post robust online-related growth. Digitally enabled comparable sales increased 21.1% in May and 21.6% for the first 39 weeks of the fiscal year. Total comparable sales rose 12.5% in May, while net sales increased 14.5% to $24.01 billion. COST’s strong digitally enabled sales growth highlights the growing importance of e-commerce and convenience-led shopping across the retail landscape.
View the Zacks #1 Rank List
Image: Bigstock
Walmart's E-commerce Improves 26%: Is Margin Expansion Next?
Key Takeaways
Walmart Inc. (WMT - Free Report) continues to demonstrate how its omnichannel model is evolving beyond traditional retail, with e-commerce becoming an increasingly important driver of growth and profitability. The company’s first-quarter fiscal 2027 results underscored strong digital momentum, supported by faster fulfillment capabilities, marketplace expansion and growing contributions from higher-margin revenue streams.
Global e-commerce sales increased 26% in the quarter, led by store-fulfilled pickup and delivery as well as marketplace growth. The strength was evident across segments, with Walmart U.S. e-commerce sales rising 26%, Walmart International e-commerce sales advancing 27%, and Sam’s Club U.S. e-commerce sales growing 23%.
As digital sales scale, the focus is shifting from growth alone to the profitability of that growth. Walmart U.S. adjusted operating income rose 5.7% to $6 billion, while the adjusted operating income rate improved 6 basis points to 5.1%. The gain was aided by improved e-commerce economics, Walmart+ membership growth and other income benefits.
The company’s extensive store network remains a key advantage. Store-fulfilled delivery in Walmart U.S. grew about 45% in the quarter, and more than 36% of store-fulfilled deliveries were completed in less than three hours. Globally, Walmart delivered more than 3.5 billion units on the same day or the next day.
Even so, margin expansion remains a work in progress. Consolidated gross profit rate increased 6 basis points to 24.3%, but operating expenses continued to face pressure from higher fuel costs, depreciation and healthcare expenses. While near-term expenses remained elevated, the quarter suggested that Walmart’s growing e-commerce scale is increasingly being supported by better fulfillment economics and a richer mix of higher-margin digital revenues.
E-commerce Gains Put TGT and COST Margins in Focus
Target Corporation (TGT - Free Report) is also benefiting from growing digital demand. In its first quarter, TGT reported comparable digital sales growth of 8.9%, driven by more than 27% growth in same-day delivery through Target Circle 360. Gross margin expanded to 29% from 28.2%, while adjusted operating margin improved to 4.5% from 3.7%.
Costco Wholesale Corporation (COST - Free Report) continues to post robust online-related growth. Digitally enabled comparable sales increased 21.1% in May and 21.6% for the first 39 weeks of the fiscal year. Total comparable sales rose 12.5% in May, while net sales increased 14.5% to $24.01 billion. COST’s strong digitally enabled sales growth highlights the growing importance of e-commerce and convenience-led shopping across the retail landscape.
WMT Stock Price Performance, Valuation & Estimates
Shares of Walmart have risen 22% over the past year compared with the industry’s growth of 20.3%.
WMT Price Performance Versus Industry
Image Source: Zacks Investment Research
From a valuation standpoint, WMT trades at a forward price-to-earnings ratio of 39.36, higher than the industry’s average of 35.83.
WMT Valuation Compared to Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for WMT’s current and next fiscal year earnings per share implies year-over-year growth of 9.5% and 13.3%, respectively.
Walmart currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.