⚠ The Profitable Half Stopped GrowingHigh threat

Walmart (WMT) — threat to the moat

General merchandise has not grown in three years, and it is the half of a discount store that carries the margin.

Walmart U.S. sells its merchandise in three buckets, and one of them has not moved in three years.

Walmart U.S. general merchandise net sales ($bn)$114.0bnFY2024$113.9bnFY2025$115.1bnFY2026A 0.9% increase over two years, inside a segment that grew 9.3%.
The half of a discount store that has always carried the margin has not grown in three years, while grocery and pharmacy — the two thinnest categories — carry everything.

General merchandise — entertainment, hardlines, fashion, home — was $113,985 million in fiscal 2024, $113,921 million in fiscal 2025 and $115,060 million in fiscal 20261. That is a 0.9% increase over two years inside a segment that grew 9.3%. Over the same period grocery went from $264,210 million to $285,482 million and health and wellness from $54,898 million to $69,547 million — a 26.7% increase2.

The significance is margin. General merchandise is where a discount store makes its money: the television carries a multiple of the gross margin on a gallon of milk, and the whole supercenter model is built on using cheap food to sell profitable everything-else. Grocery is the thinnest large category in retailing and pharmacy is thinner still, and now sits under a maximum fair price regulation that removed about 125 basis points from Walmart U.S. comparable sales in the June 2026 quarter3.

So Walmart is growing, and growing in the two places that pay least, while the place that pays most is static. Walmart U.S. reported a 5.2% operating margin in fiscal 20264; that average is being held up by advertising and membership rather than by merchandise.

The causes are not mysterious and not easily fixed. General merchandise is the category where Amazon is strongest, where Temu and Shein sell factory-direct at no margin, where the marketplace substitutes a commission for a gross margin, and where an online order — a list rather than a wander — never generates an impulse purchase.

What would falsify the concern is straightforward: general merchandise net sales growing faster than grocery for a full year. It has not happened since fiscal 2023. If it has still not happened in fiscal 2029, Walmart is a grocery and pharmacy business with an advertising network attached, and should be valued as one.

The number that tests this threat
Reported
General merchandise net sales
$115,060M, against $113,985M two years earlier

A 0.9% increase over two years inside a segment that grew 9.3%, while grocery and health and wellness carried the growth at far lower margins. Watch for general merchandise growing faster than grocery for a full year; it has not happened since fiscal 2023.

Source: Walmart Form 10-K, fiscal year ended January 31, 2026 ↗
References
  1. ReportedGeneral merchandise — entertainment, hardlines, fashion, home — was $113,985 million in fiscal 2024, $113,921 million in fiscal 2025 and $115,060 million in fiscal 2026.
    Walmart Form 10-K, fiscal year ended January 31, 2026 - consolidated financial statements and notes (total revenues $713,163M, net sales $706,413M, membership and other income $6,750M, cost of sales $535,395M, operating expenses $147,943M, operating income $29,825M, net income attributable to Walmart $21,893M, diluted EPS $2.73; balance sheet including inventories $58,851M, accounts payable $63,061M, property and equipment net $136,083M, accumulated depreciation $134,587M, depreciation and amortisation $14,203M; segment note; disaggregation of revenue by merchandise category and by market, and eCommerce net sales by segment) — FY2026 (ended January 31, 2026) · publ. March 13, 2026 · source ↗
  2. Moat Explorer calcOver the same period grocery went from $264,210 million to $285,482 million and health and wellness from $54,898 million to $69,547 million — a 26.7% increase.
    Moat Explorer calculation from figures in Walmart's own filings: global eCommerce of about $150.4 billion (Walmart U.S. $99.6B + International $35.8B + Sam's Club $15.0B) against $120.9 billion, a $29.5 billion increase against a $31,875M rise in net sales ($706,413M against $674,538M), about 92%; Walmart U.S. selling floor of 698.7 million square feet (633,724 + 36,609 + 28,375 thousand) and net sales per store of $104.7 million ($482,975M over 4,611 stores); operating margin 4.18% ($29,825M/$713,163M) against 4.31% ($27,012M/$648,125M); net margin 3.07%; gross profit rate 24.2% ($171,018M/$706,413M); grocery 59.1% of Walmart U.S. net sales ($285,482M/$482,975M) against 59.8% ($264,210M/$441,817M) and grocery growth of 3.4%; general merchandise to grocery ratio 0.40 against 0.43; health and wellness +26.7% ($54,898M to $69,547M); payables less inventories $4,210M ($63,061M less $58,851M); rent 0.34% of revenue ($2,434M/$713,163M); capital expenditure 64% of operating cash flow ($26,642M/$41,565M); a 1% overrun on $147,943M of expense is $1,479M; eCommerce penetration 27.5% international ($35.8B/$130,423M) and 20.6% at Walmart U.S. ($99.6B/$482,975M); shareholder returns $15,587M ($7,507M dividends plus $8,080M repurchases) against $14,923M of free cash flow; Q2 FY2027 net income attributable down 9.4% ($6,366M against $7,026M); Walmart U.S. comparable sales of about 3.9% excluding the 125 basis point pharmacy headwind — FY2024-Q2 FY2027 · publ. September 2026 · source ↗
  3. ReportedGrocery is the thinnest large category in retailing and pharmacy is thinner still, and now sits under a maximum fair price regulation that removed about 125 basis points from Walmart U.S. comparable sales in the June 2026 quarter.
    Walmart second-quarter fiscal 2027 earnings presentation (Form 8-K exhibit 99.2) - Walmart U.S. comp sales +2.6% with transactions excluding fuel +1.5% and average ticket excluding fuel +1.1% against total like-for-like inflation of 1.4%, and an approximately 125 basis point pharmacy headwind from maximum fair price regulation; eCommerce +24% including approximately 43% growth in store-fulfilled delivery, total advertising +38% including Walmart Connect +43%, and Marketplace sales +52%; expedited deliveries under three hours approximately 37% of store-fulfilled orders; share gains across categories and income tiers led by upper-income households — Q2 FY2027 · publ. August 20, 2026 · source ↗
  4. ReportedWalmart U.S. reported a 5.2% operating margin in fiscal 2026; that average is being held up by advertising and membership rather than by merchandise.
    Walmart Form 10-K, fiscal year ended January 31, 2026 - consolidated financial statements and notes (total revenues $713,163M, net sales $706,413M, membership and other income $6,750M, cost of sales $535,395M, operating expenses $147,943M, operating income $29,825M, net income attributable to Walmart $21,893M, diluted EPS $2.73; balance sheet including inventories $58,851M, accounts payable $63,061M, property and equipment net $136,083M, accumulated depreciation $134,587M, depreciation and amortisation $14,203M; segment note; disaggregation of revenue by merchandise category and by market, and eCommerce net sales by segment) — FY2026 (ended January 31, 2026) · publ. March 13, 2026 · source ↗
Sources
Generated September 22, 2026