Core Insights - Walmart Inc. and Costco Wholesale Corporation are two leading players in the global retail sector, each with distinct business models and strategies [1][2][3] Walmart Overview - Walmart operates over 10,750 stores globally, including supercenters and discount stores, and is expanding its e-commerce and digital advertising platforms [2] - The company has a market capitalization of $884.2 billion and is focusing on enhancing its omnichannel retail capabilities through its extensive store network [3][4] - Walmart's global e-commerce sales increased by 27% in Q3 of fiscal 2026, with U.S. e-commerce up 28% and international sales up 26% [5] - The shift towards higher-margin revenue streams, including advertising and membership income, now accounts for approximately one-third of Walmart's consolidated adjusted operating income [6] - Investments in technology and automation are central to Walmart's strategy, improving fulfillment efficiency and maintaining price leadership [7] - International operations are contributing to growth, particularly in Mexico, China, and India, although the company faces challenges such as intense competition and cost pressures [8] Costco Overview - Costco operates on a membership-based model, generating stable high-margin revenues from membership fees and maintaining competitive pricing through bulk purchasing [9][10] - The company reported over 20% growth in digitally enabled comparable sales in Q1 of fiscal 2026, driven by increased website traffic and app engagement [11] - Operational efficiency is a key advantage, with productivity gains from technology improving checkout speed and inventory management [12] - Despite its durable business model, Costco faces challenges from thin merchandise margins and fluctuating demand for discretionary items [13] Financial Performance and Estimates - The Zacks Consensus Estimate for Walmart's current fiscal-year sales suggests a year-over-year increase of 4.6%, with EPS expected to rise by 4.8% [14] - For Costco, the current fiscal-year sales and EPS estimates imply year-over-year growth of 7.5% and 11.7%, respectively [17] - Over the past year, Walmart's shares have increased by 19.7%, while Costco's shares have declined by 10.8% [20] Valuation Comparison - Walmart trades at a forward price-to-earnings multiple of 38.19, while Costco has a forward P/E of 41.38, indicating a relative valuation discount for Costco compared to its historical average [23] Investment Outlook - Walmart is positioned as a stronger option for investors seeking momentum and earnings diversification, while Costco remains a solid long-term investment focused on stability and consistency [24]

Core Thesis - Walmart Inc. is undergoing a significant transformation from a traditional retailer to a digitally enabled platform, with current valuation multiples reflecting high investor expectations for profit growth and margin expansion [2][5] Valuation Metrics - As of November 26th, Walmart's share price was $109.10, with trailing and forward P/E ratios of 37.41 and 35.21 respectively [1] - The company's P/E ratio is currently 36–37× and EV/EBIT is approximately 27×, which are 35–40% above decade-long averages [2] Strategic Initiatives - Walmart's strategy includes an omnichannel approach utilizing over 4,700 stores as mini-fulfillment centers, enabling same-day delivery and grocery pickup [3] - Higher-margin profit streams such as Walmart Connect advertising, marketplace seller fees, and Walmart+ memberships are expected to contribute over 20% of operating income in the near future [3] - The company aims to reduce costs by 20% through aggressive automation in fulfillment and distribution centers [3] E-commerce Growth - Walmart is the second-largest e-commerce player in the U.S., leveraging its grocery dominance and store-enabled last-mile delivery to enhance customer engagement and digital revenue [4] - International e-commerce expansion, particularly through platforms like Flipkart, is projected to double digital revenue by 2028 [3] Market Expectations - The stock has significant upside potential if execution of strategic initiatives is successful; however, the market is currently pricing in flawless performance [5] - Any delays in automation, marketplace growth, or digital adoption could lead to a notable re-rating of the stock [5]

Core Insights - Walmart's eCommerce performance is strong, with a 21% increase in U.S. sales and achieving profitability in U.S. eCommerce for the first time, which helps mitigate cost pressures from tariffs and supply chain issues [1][12][10] Financial Performance - First-quarter revenue growth was 2.5%, slower than projected, with U.S. comparable store sales growing by 4.5% driven by increased transactions and average ticket size [2][4] - The company anticipates sales growth of 3.5% to 4.5% in the current quarter, maintaining full fiscal year sales guidance at 4% [5] eCommerce and Membership Growth - eCommerce sales increased by 21%, with significant growth in store-fulfilled pickup and delivery, and Walmart Connect advertising growing by 31% [7][10] - Membership-related income rose by 3.8%, with Walmart+ fees experiencing double-digit growth [7][12] Tariff Impact and Cost Management - Tariffs are creating unprecedented cost pressures that Walmart cannot fully absorb due to narrow retail margins, particularly on products sourced from China [2][9] - The company is managing costs by absorbing some tariff impacts within categories and diversifying profit streams through eCommerce and advertising [10][9] Operational Insights - Delivery speed is a key driver of business, with a 91% increase in deliveries under three hours compared to the previous year [8] - Over 50% of Sam's Club members now transact digitally, indicating a shift towards omnichannel commerce [11] Market Outlook - The operating environment is fluid, making near-term earnings forecasts difficult due to the dynamic nature of tariffs and cost pressures [14][2] - The company remains cautiously optimistic, leveraging its scale and supplier base to navigate macroeconomic challenges [4][3]

Economic Outlook - The U.S. economy is showing signs of potential recession, with the Atlanta Federal Reserve predicting a 2.1% decline in Q1 GDP after earlier forecasts of over 2% growth [1] Walmart - Walmart is positioned as a top defensive stock, having gained 2% during the Covid recession while the S&P 500 lost 25%, and rose 12% during the Great Recession of 2008-2009 [2][3] - The company benefits from its size and scale, providing significant buying power that allows it to be a price leader during economic downturns [4] - Walmart's extensive reach means 90% of the U.S. population lives within 10 miles of a store, which supports its Walmart+ membership growth, particularly among wealthier consumers [5] - Upper-income households, defined as those earning $100,000 or more, have been a key growth driver for Walmart, potentially increasing their patronage during a recession [6] - Walmart is also expanding its advertising and online marketplace businesses, enhancing fulfillment capabilities for third-party merchants [7] Philip Morris International - Philip Morris International's traditional cigarette business remains strong, with modest volume growth and strong pricing power, particularly in international markets [8] - The company's smokeless products, such as Zyn and IQOS, are significant growth drivers, with Zyn projected to see volume growth of 34% to 41% this year [9] - IQOS has also experienced solid growth, with plans for broader rollout in the U.S. pending FDA approval [10] - Zyn and IQOS offer better unit economics compared to traditional cigarettes, with Zyn's contribution level being six times greater and IQOS's twice as good [11] - The addictive nature of Philip Morris' products makes them resilient during economic downturns, and the company offers a 3.5% dividend yield, making it an attractive growth stock in a defensive industry [12]