TD Cowen analyst Oliver Chen has selected Walmart as his leading investment idea for 2026, citing what he sees as an improving competitive position and a progressively digital profit profile that should enable the retailer to take sustained share.
Chen said his outlook brightened after discussions with Walmart executives, including Steph Wissink, Head of Investor Relations; Michael Marks, Senior Director of Investor Relations; and Chris Nicholas, President and CEO of Walmart International. Those conversations reinforced three main themes that Chen used to frame Walmart as his 2026 Best Idea.
Three pillars supporting the call
- Strengthening price leadership - Chen observed that Walmart appears to be tightening its position as a price leader, and management pointed to potential tariff refunds that could be deployed into price investments. The company indicated visibility to roughly $3 billion of potential tariff refunds and said these funds would be phased into price investments over time, with a focus on high-velocity consumables rather than being recognized all at once.
- Grocery market dynamics - Management signaled a structurally tougher outlook for traditional grocery. Chen noted that this environment gives Walmart, alongside peers such as Amazon and Costco, an opportunity to gain market share as competition on price intensifies.
- Digital profit engine - The retailer’s profit mix is shifting materially, with Chen noting that about one-third of EBIT now originates from alternative revenue streams. He emphasized that delivery, advertising, membership, and marketplace operations are increasingly driving profit, creating a more resilient earnings profile versus pure retail volatility.
Chen outlined that Walmart’s evolving profit composition helps insulate operating results from broad macro swings. He referenced the company’s internal algorithm that targets operating income growth of roughly 2 to 2.5 times the rate of sales growth, and the longer-term aspiration for consistent double-digit percentage EBIT growth.
Consumer trends and pricing flexibility
In his write-up, Chen relayed management’s read on consumer demand: aggregate demand remains stable, although lower-income shoppers continue to experience pressure. Walmart reported increased volatility at the low end in the first quarter, with fuel cited as the primary pressure point. Against that backdrop, the potential $3 billion in tariff refunds gives the retailer incremental flexibility to narrow prices or widen gaps versus competitors by investing selectively in consumables.
Delivery and monetization
Faster delivery, Chen said, is translating into higher shopping frequency, new customer acquisition, and improved conversion into membership. That enlarged, more engaged customer base supports higher-margin monetization across advertising, marketplace commissions, and membership fees, reinforcing the digital profit engine described above.
Analyst and rating context
Following the conversations and Chen’s analysis, several firms reaffirmed constructive ratings on Walmart. DA Davidson, Bernstein, SocGen, and RBC Capital maintained Buy or Outperform assessments. DA Davidson specifically noted that Walmart’s use of agentic search is helping attract younger customers.
Bottom line - TD Cowen’s thesis centers on a triad of factors: improving price leadership supported by potential tariff refunds, an environment in grocery that could permit share gains, and a profit mix shifting toward digital, higher-margin activities. Chen sees these elements combining to support sustained operating income growth well ahead of sales expansion.