Retail giant Walmart Inc. (NASDAQ:WMT) is one of Jim Cramer’s favorite stocks primarily due to the firm’s ability to lower prices and compete at scale. With the current inflationary wave gripping the United States, Cramer discussed the role that the firm could play in keeping prices down and create long term value:
“That’s why I mean I still think that Walmart is trying to keep prices down. They really are. They’re trying to make it so that this is a Sam Walton moment, where you know there was one place that was good to you.”
For Walmart Inc., successfully keeping prices low to generate long term tailwinds might just be the trick for otherwise lackluster performance. In fact, even though he has been optimistic about the firm, Cramer has nevertheless also advised caution. For instance, in his August 24th appearance, the CNBC TV host remarked that “you have to let go of your Walmart unless you think you have a plan. Or have we suddenly decided it’s okay to pay 36 times earnings for somebody who misses?”
The miss that Cramer was discussing was Walmart Inc.’s second quarter earnings, which saw the firm miss comparable sales growth estimates. While the retail giant posted 2.6% in U.S. comparable sales growth, analysts had penciled in 3.5% to 3.8%. Similarly, Walmart Inc. also guided third quarter earnings per share to sit between $0.62 and $0.64 while analysts had penciled in $0.68.
Like Cramer’s remarks, Walmart Inc.’s management also insisted during the earnings call that the lower prices carry long term benefits. During the call, CFO John Rainey remarked:
“There is a bit of a cumulative benefit that comes when you lower prices. You do not necessarily expect to have that offsetting benefit to the lower prices in the immediate period.”
These benefits appeared to be present in Walmart Inc.’s full year operating income growth guide, which the firm raised to range between 7%to 8.5% from an earlier 6% to 8%.
Apart from reaping the benefits of long term customer loyalty through setting low prices in a tough period, Walmart Inc.’s is also benefiting in the short term from high margin eCommerce and marketplace growth. During Q2, the firm’s U.S. eCommerce sales surged by 24% while Marketplace net sales grew by more than 50%. Similarly, Walmart Inc.’s advertising revenue grew by 38% annually.
Yet, hidden in the details are the costs of funding eCommerce and Marketplace growth. In 2026’s first half, Walmart Inc.’s capital expenditure jumped by 24.6% while the firm also lifted full-year capex target to 4% of revenue from an earlier 3.5%. Simply put, the narrative for the retailer is driven by its ability to grow comparable sales through setting low prices while contending with capital intensive alternate revenue stream growth.
Looking at hedge fund sentiment, 111 had disclosed a stake in Walmart Inc. during Q2 which marked a jump over the 99 in Q1, according to Insider Monkey’s data. The stock trades at a forward P/E ratio of 36.90, which is lower than peer firm Costco’s 40. Short interest as a percentage of float is below 2% for both.
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