Walmart's upside is still very significant, says former Walmart U.S. CEO Bill Simon

Core Viewpoint - Walmart is currently favored among retail analysts and investors, but its premium valuation raises questions about future growth potential [1][2]. Walmart's Valuation and Performance - Walmart is perceived as becoming too expensive compared to its peers and its historical valuation, with a price-to-earnings (P/E) ratio of 42, significantly higher than Alphabet's 30 [4][5]. - Despite the high valuation, analysts believe there is still upside potential for Walmart, particularly as it integrates more AI functions into its operations [3][7]. - Walmart is considered cheaper than Costco, indicating that there may still be room for growth despite its current valuation [7]. CEO Transition and Market Share - The upcoming CEO transition at Walmart is viewed as a potential headwind, although the new CEO, John Ferner, is seen as capable [2][6]. - Walmart's market share is low, with no category exceeding 3%, suggesting that even small gains could significantly impact profitability [6]. Comparison with Target and Costco - Target is also undergoing a CEO transformation, but its valuation parameters differ from Walmart's, with analysts expecting improvements in margins [5][7]. - Costco, while historically strong, faces challenges related to changing demographics and the convenience factor compared to Walmart [9][10]. Tariff Impact on Retailers - Tariffs are expected to continue impacting the retail sector into 2026, but the overall effect is anticipated to be neutral compared to 2025 [12][13]. - Footwear retailers are particularly affected by tariffs, but some companies like Dixs are managing to absorb these costs effectively [13].