In the outlier year that was 2020, Walmart (NYSE:WMT) demonstrated its strength as the largest retailer in the world, filling customer orders for essentials in stores and online.

Walt Disney (NYSE:DIS), on the other hand, had one of its toughest years ever as a company, and it is still climbing back from deep sales declines in several of its business segments.

But when evaluating both companies' future potential, it's not so simple. Let's get into the details.

Walmart associate with a wagon.

Image source: Walmart.

Different pandemic experiences

Walmart is the largest retailer in the world, with $560 billion in fiscal 2021 revenue, well ahead of second-place Amazon's $386 billion (about 24% of which was non-retail related revenue).

As an essentials retailer with a strong online presence, Walmart benefited from increased spending on basics under lockdowns, and its comps were higher than average. 

Walmart Metrics (YOY) 2021 2020 2019 2018
U.S. comps growth 8.6% 2.8% 3.6% 2.1%
U.S. e-commerce growth 79% 37% 40% 44%

Data source: Walmart quarterly reports. Fiscal years end Jan. 31, 2021. YOY=year over year. 

Prior to 2018, Walmart's e-commerce program did not contribute much of the total, and it invested in omnichannel capabilities to increase digital sales. That investment clearly paid off over the past 12 months.

Disney's sales suffered during the pandemic with closed parks and experiences, but that business segment is slowly improving.

Disney Metrics (YOY) Q2 2020 Q3 2020 Q4 2020 Q1 2021
Parks and experiences sales growth (10%) (85%) (61%) (53%)
Total sales growth 21% (42%) (23%) (22%)

Data source: Disney quarterly reports. The fiscal year 2020 ended on Oct. 3, 2020. Fiscal year 2021 Q1 ended on Jan. 2, 2021. YOY=year over year.

The entertainment giant launched Disney+, its premium streaming site, in November 2019, and that took off during the pandemic as more feature film-watching went online. The service has been a big success for Disney and has accumulated more than 100 million paid subscribers as of March 9. When you add in subscribers to Disney's other paid streaming services, Hulu and ESPN+, it has more than 150 million in total. Elsewhere, direct-to-consumer sales increased 73% in the 2021 first quarter (ended Jan. 2), which greatly helped minimize the overall sales decline for the company.

A fireworks display at Walt Disney World's Magic Kingdom.

Image source: Walt Disney.

Moving forward 

Walmart has nearly 5,000 U.S. stores and more than 11,000 locations worldwide. That's hard to beat, but it's also hard to generate high growth in such a saturated market. And because fiscal 2021 was so strong, the company is expecting slight year-over-year decreases in its fiscal 2022 metrics. That's not bad news in the long-term as Walmart maintained its dominant player status, but it could be a short-term headwind for the stock.

CEO Doug McMillon still sees tremendous opportunity ahead for Walmart. "We can make it true that in 2021 this company was just getting started," he said in the fourth-quarter conference call. McMillon sees new ways to expand and be a leader in retail change, focused on supply chain and technology advancements.

Disney is focusing on its direct-to-consumer business, launching Disney+ in more locations and rolling out an international general content streaming service under the Star brand, which is already operating in several locations. It has already released several films straight to streaming, including new films that were released to theaters and Disney+ at the same time. It expects to produce more than 100 content titles from its premiere list of entertainment brands like Star Wars, Pixar, Fox, and Marvel on an annual basis and distribute them through its various channels, which also include traditional TV and cable networks.

As more locations open up their economies and the pandemic gets back under control, the company should see a resurgence in park attendance, which has typically been its largest revenue-generating segment.

The verdict

In terms of stock performance, Walmart and Disney are competitive. But Disney stock is trading at a much higher valuation than Walmart currently, suggesting traders expect high-growth performance over the coming year.

Company 5-year stock gain Year-to-date stock gain/loss Forward P/E
Walmart 101.8% (3.3%) 26
Disney 88.1% 2.4% 96

Source: Author's calculations.

Another point in Walmart's favor is that it pays a dividend that yields 1.55% while Disney's dividend is still suspended.

I recommend both Walmart and Disney, and I see them as adding different kinds of value to a diversified portfolio. But if I had to choose one, I would choose Disney, since its future growth potential is stronger.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.