Walmart is the largest brick-and-mortar retailer on the planet, and that reputation often masks how the business is changing.
The investment thesis for Walmart (WMT) is no longer just discount retail at scale.
It is a defensive cash machine layered with a fast-growing ad platform, global footprint, and selective bets on adjacent services. That mix is what makes WMT a credible long-term hold today.
Walmart's Core Retail Engine: Scale and Pricing Power
The base of any Walmart thesis starts with the supercenter and grocery business. Roughly 60% of US revenue comes from groceries, which drives weekly trips and stable foot traffic.
That volume gives Walmart unmatched supplier leverage. Pricing power is real and shows up as durable gross margin even when consumers trade down.
E-commerce is now a serious second engine. US online sales have crossed roughly 18% of the mix, helped by curbside pickup, delivery, and a growing third-party marketplace.
For investors comparing defensive retail names, Walmart's core is not exciting, but it is the revenue base that pays for everything else in the thesis.
Walmart Health Clinics: A Quiet Bet on Primary Care
Walmart's healthcare ambitions looked promising on paper. The plan was to use store traffic to anchor low-cost primary care clinics across underserved US markets.
That bet did not work as planned. According to Walmart's official announcement, the company shut all 51 Walmart Health centers and its virtual care service in 2024, citing reimbursement and cost pressures.
For long-term holders, the closure is a useful data point, not a thesis-breaker. Management cut a high-profile initiative quickly when the math did not work.
Pharmacies and vision centers stay open, preserving the in-store health touchpoints that drive repeat visits. Healthcare is now a smaller, more disciplined piece of the story.
Walmart Connect: Building a Multi-Billion Ad Business
Walmart Connect is the most important non-retail line item in the WMT thesis. It is the company's retail media network, monetizing search, display, and in-store screens against first-party shopper data.
The growth profile is unusually strong for a business this large. According to Walmart's Q4 FY25 earnings release, global advertising grew 29% year over year, with Walmart Connect up 24% in the US.
Two things make this segment matter for the equity story. First, ad revenue carries far higher operating margins than groceries. Second, the Vizio acquisition adds connected TV inventory that Amazon's ad business has profited from for years.
Investors weighing Amazon (AMZN) versus WMT on the ad angle should view Walmart Connect as a credible second-place player rather than a niche experiment.
International and Sam's Club: Underappreciated Growth Drivers
International gets less coverage than it deserves. Walmart owns roughly 77% of Flipkart in India and operates large grocery banners in Mexico (Walmex) and China.
Flipkart and India optionality
Flipkart is the most interesting piece. India is one of the fastest-growing e-commerce markets globally, and a future IPO could surface meaningful value that is currently buried inside the consolidated WMT line.
Sam's Club membership flywheel
Sam's Club operates the same membership model that powers Costco (COST). Renewal rates above 90% and steady fee hikes give Sam's a dependable, high-quality earnings stream that often gets overlooked next to the supercenter business.
Want to size a defensive retail position with optionality baked in? Open WMT in your Gotrade watchlist and review your defensive sleeve before earnings season.
Valuation: WMT P/E vs Costco and Target
Valuation is where the WMT thesis gets uncomfortable for some investors. Walmart trades at a forward P/E in the mid-30s, well above its long-term average and richer than Target (TGT).
Costco still trades at an even higher multiple, which gives WMT some relative cover. The market is paying up for ad-driven margin expansion, not just grocery scale.
The risk is straightforward. If Walmart Connect growth slows into the teens or international stumbles, the multiple compresses fast.
The reward case is that ad and membership income keep mixing the company toward higher-margin revenue, which can support the current valuation for years rather than quarters.
Conclusion
Walmart is no longer a pure discount retailer, and the thesis should reflect that. The grocery and supercenter base provides recession-resistant cash flow, while Walmart Connect, Sam's Club, and Flipkart provide the optionality that justifies a premium multiple.
The 2024 health clinic shutdown is a reminder that not every adjacency works, and that is fine. Discipline on failed bets is part of why WMT remains a credible long-term hold.
For US retail investors, the practical move is to size WMT as a defensive-plus-optionality position rather than a pure income play. Check your portfolio for retail exposure and decide whether your defensive sleeve already reflects this shift in the business mix.
FAQ
Is Walmart still primarily a discount retailer?
Yes by revenue, but advertising, membership, and international are now the segments driving margin expansion and multiple support.
What happened to Walmart Health?
Walmart closed all 51 health clinics and its virtual care service in 2024, citing reimbursement and cost pressures, while keeping pharmacies and vision centers open.
How big is Walmart Connect compared to Amazon ads?
Walmart Connect is a fraction of Amazon's ad business, but it is one of the fastest-growing retail media networks and a key margin lever for WMT.
Why is WMT trading at a higher P/E than Target?
The market is paying up for Walmart's higher-margin advertising and membership growth, plus its larger international footprint and grocery scale.
Is WMT a good long-term hold for a defensive portfolio?
For most US retail investors, WMT works as a defensive-plus-optionality core position, with grocery providing the floor and ads plus international providing the upside.
