Walmart's Profit Growth Surge Stalls Despite Price Cuts

Walmart's (WMT) stock has been struggling to reach its 52-week high, trading about 22% below it. Despite this, the retailer is continuing to cut shelf prices, which has led to significant profit growth. In fact, almost half of Walmart's profit growth can be attributed to areas such as membership, advertising, and marketplace.

In fiscal Q2 2027, Walmart U.S. comped 2.6%, while enterprise operating income grew 10% excluding tariff refunds. The company attributes this growth to the money it spent on price cuts, which will have a lasting impact over weeks and months. However, management has guided fiscal Q3 2027 operating income growth down to 2-4% in constant currency as the full weight of those cuts lands.

Walmart's focus on improving its profit mix is an interesting development for investors. The company's shift towards membership fees, advertising, and marketplace sales suggests that it is adapting to changing consumer habits. While this may not be enough to lift Walmart's stock to its 52-week high, it could indicate a more sustainable growth trajectory.