Scale, online push and loyalty fees: how Walmart in the U.S. won the year of the tariffs

FILE - A Walmart logo is displayed outside of a Walmart store (AP Photo/Steven Senne, File)

As Americans tightened their belts last year, and tariffs challenged retail profit margins, Walmart reaped the rewards of some proactive business strategies.

Well-timed investments in technology and loyalty programs, combined with massive scale, allowed the U.S. retail giant to keep offering low prices on groceries and other everyday items while U.S. consumers were feeling the pinch from higher prices, and maintain its price gap against competitors even when tariffs forced some hikes over the last year.

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Top-line sales at Walmart grew 4.7 per cent in the fiscal year ending Jan. 31, while Target’s fell 1.7 per cent, Kroger stayed about flat, and Albertsons grew sales about 3.5 per cent.

“When the economy is hurting or people feel like their wallet is stretched, they go to Walmart,” said Morningstar analyst Brett Husslein.

Investors have noticed. Shares in America’s retailer of record, which reports quarterly earnings on Thursday, are up about 50 per cent since U.S. President Donald Trump imposed suffocating tariffs in April 2025 — gains that far eclipse competitors.

Great expectations

Industry analysts polled by LSEG expect another strong quarter, with Walmart’s net sales expected to increase 5.5 per cent year-on-year to US$174.95 billion. But they also acknowledge that challenges lie ahead.

Ongoing pain among working-class shoppers could pressure sales, especially in the wake of Trump administration rollbacks on SNAP federal grocery aid for low-income families. And with Walmart stock trading at 43 times forward earnings - way above rivals - expectations are high. Even a small hiccup in sales could send shares down.

Target declined to comment ahead of its earnings call on Wednesday, while Kroger and Albertsons did not respond to requests for comment.

Despite the tariff turmoil, Walmart was able to keep its operating margin nearly flat at 4.2 per cent last year versus the prior year.

That stems in part from scale. A typical Walmart store can carry more than 100,000 products, per industry estimates, giving it size and breadth to extract friendly terms from suppliers and keep prices low.

It’s also a result of newer, high-margin revenue streams that subsidize lower-margin areas. Walmart’s fast-growing advertising business, along with revenue from membership fees, combined for an estimated 27 per cent of operating profits last fiscal year, up from nine per cent in 2021, according to Morningstar data.

Walmart’s e-commerce business has also exploded.

It laid the groundwork before the COVID pandemic, said RBC analyst Steven Shemesh, when hand-wringing about the death of brick-and-mortar retail spurred it to build out its e-commerce and curbside pickup businesses, gaining on Amazon AMZN.O.

“Never waste a good crisis,” said TD Cowen analyst Oliver Chen.

Online sales grew 24 per cent last fiscal year, from about US$121 billion to $150.4 billion. It represented 21.3 per cent of total net sales, up from 17.9 per cent a year ago.

Amazon grew its e-commerce business just nine per cent over the same period, though given Amazon’s scale, that represented US$22 billion in total dollars, to about US$269 billion, according to its most recent annual report.

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“Amazon’s online store continues to see strong growth, particularly in grocery and everyday essentials,” an Amazon spokesperson said.

Investments in automated delivery have put Walmart ahead of Amazon for grocery sales, though, with its 4,600 U.S. stores serving as distribution centers that give it an edge in speed.

That’s key for companies like Once Upon a Farm, which sells organic children’s food that must be kept cold.

Co-founded by actress Jennifer Garner, the company sells at both Amazon and Walmart - but the latter is more efficient, said CEO John Foraker. “(Amazon’s) cold chain distribution network is not anywhere near Walmart’s.”

The Amazon spokesperson said its perishables business is growing quickly, with fresh groceries now making up nine of the top 10 most-ordered items where they’re available.

The company has also started offering one-hour and three-hour shipping in some markets.

Walmart “faces a capital-intensive e-commerce arms race,” said Morningstar’s Husslein, “leaving no margin for error.”

(Reporting by Nicholas P. Brown in New York and Juveria Tabassum in Bengaluru, Editing by Lisa Jucca and Nick Zieminski)