After Earnings Miss, Walmart Is Still a Top Consumer Staples Play

Key Points

• Walmart's latest results sent shares down on Aug. 21, but the firm's earnings "miss" requires a nuanced analysis.
• Key growth drivers such as eCommerce and advertising showed considerable strength. 
• Amazon's competition is growing, but retail experts remain skeptical that the company's latest moves will gain huge traction.

American-made goliath Walmart NYSE: WMT has indisputably become the world’s most valuable stock in the consumer staples sector. As of the August 21 close, Walmart shares have delivered a total return of approximately 141% over the last five years, achieving a market capitalization of nearly $782 billion.

However, Amazon.com NASDAQ: AMZN is ramping up its competition against Walmart, putting the continuation of the company’s dominance in question. Walmart also just missed on earnings. Below, we’ll dive into Walmart's latest financial results released on August 21 and analyze the competition between these two firms. Ultimately, is Walmart still one of the best plays in consumer staples?

Why Walmart’s EPS “Miss” Is Overblown

In its fiscal 2026 Q2, Walmart delivered revenues of around $177 billion, equating to a growth rate of 4.8%. Due to Walmart’s international footprint, this figure was negatively impacted by $1.5 billion in currency headwinds. Walmart puts its constant currency growth rate at 5.6%. Overall, these figures beat Wall Street estimates.

However, the company missed adjusted earnings per share (EPS), which came in at 68 cents. This was approximately 6 cents lower than expected. Shares fell by 4.5% after the earnings release.

However, this EPS miss was almost fully accounted for by a $450 million increase in the company’s expected costs for general liability and workers' compensation claims. Although the number of claims is falling, the cost to resolve each one is increasing. As a result, the company is now setting aside more money to pay these claims going forward. Although this is certainly not a positive, it is not likely to be a recurring issue. This makes the company’s earnings “miss” not overly concerning. Walmart boosted its guidance on multiple fronts as a positive sign for investors.

The firm now expects constant currency net sales growth of between 3.75% and 4.75% for the full fiscal year, up substantially from a range of 3% to 4% previously. Walmart also increased the midpoint of its full fiscal year adjusted EPS guidance to $2.57, up from $2.55 before.

The company's boost in full-year EPS guidance signals that it expected the accrual charge at some point during fiscal 2026. Raising this guidance despite the Q2 miss suggests that the company’s expectations are rising even in the face of headwinds.

Underlying Metrics and Growth Drivers Deliver

One of Walmart’s most important underlying metrics is U.S. comparable sales growth. This figure came in at 4.6%, a solid acceleration from 4.2% a year ago. Additionally, the firm’s U.S. eCommerce sales increased by 26%, a solid acceleration from 22% a quarter ago. Walmart’s global advertising business grew impressively by 46%, a moderate deceleration from 50% last quarter. Lastly, the company’s membership fees growth held steady at 15%.

These fees refer to subscriptions to Walmart’s Walmart+ service, which includes perks like same-day delivery and fuel discounts. Walmart+ is Walmart’s answer to Amazon Prime. The firm’s advertising and membership businesses are particularly important as investors consider this stock's future. 

They are higher-margin revenue sources, allowing Walmart to increase the profitability of the overall business as they become larger components.

Still, Amazon is certainly fierce competition for Walmart. In Q1, Amazon said it achieved more than $100 billion in U.S. grocery sales in the prior year. That figure notably excludes its Whole Foods and Amazon Fresh businesses.

The firm is ramping up its efforts even more, recently adding a same-day delivery service for perishable groceries. Still, industry experts note that there is a significant “trust chasm” when it comes to consumers buying fresh groceries from Amazon.

Overall, investors will have to wait and see if this offering truly catches on. In the meantime, Walmart continues to take market share.

Walmart Strong Q2 Keeps Bullish Outlook Alive

Walmart’s forward price-to-earnings (P/E) ratio has ballooned to around 37x. However, the strong growth of its emerging higher-margin revenue drivers plays a huge role in this.

Overall, with the company’s ability to keep finding new ways to grow, the stock continues to look like one of the best plays in consumer staples. However, the progress of Amazon’s new offering does need to be closely monitored. Signs that it is putting significant dents in Walmart’s market share would be worrisome.