Innovations such as department store retailing in small towns and IT-driven supply chains made Walmart (WMT 0.46%) the largest retailer in the world in the late 20th century. However, the rise of Amazon (AMZN -2.56%) and challenges with international expansion soured investors on the company over time.

In the past few years, moves into online retailing, omnichannel, and other areas have helped Walmart avert decline. Still, the question for investors hinges on whether such moves are enough to make a position in Walmart stock worthwhile.

Walmart evolves with its industry

Although few believe Walmart will go the way of Sears Holdings anytime soon, the company has long struggled to thrive amid a changing retail landscape. Due to its challenges, Walmart has sought to copy the successes of its competitors.

To that end, it has experienced some success with e-commerce. Thanks to its massive footprint, approximately 90% of Americans live within 10 miles of a Walmart. This has helped revive its fortunes as an omnichannel retailer. Its approach combines in-store and online shopping, giving it a potential competitive advantage over Amazon's online footprint.

Furthermore, Amazon likely inspired its pivot into advertising via its website and the Walmart+ concept. Walmart+ gives customers benefits such as free shipping, fuel discounts, and even a free subscription to Paramount Global's Paramount+. The total package closely matches Amazon Prime's benefits. Still, since Walmart+ seems to match rather than outperform the competition, it is not clear this move will be a game-changer.

Walmart's financials

Moreover, despite its moves to embrace updated retailing concepts, the financials appear uninspiring. In the first two quarters of 2023, which ended July 31, Walmart brought in $294 billion in revenue, 5% more than in the same period in fiscal 2022. But while ad revenue increased by 30%, it declined to offer a specific figure.

Additionally, rising costs and expenses along with lower gains from equity investments reduced profit growth. Consequently, its consolidated net income for the first half of fiscal 2023 came in at $7.25 billion, an increase of 1% compared with the year-ago period. Also, thanks to high inventory, increased accrued liabilities, and rising spending on property and equipment, free cash flow in the first six months was $1.7 billion. This was well under the $7.4 billion in free cash flow for the same period one year ago.

For the fiscal year, Walmart projects 4.5% sales growth and a drop between 9% and 11% for adjusted EPS. Such forecasts indicate its struggles will not end anytime soon.

Given these results, it is not surprising that Walmart continues to underperform the S&P 500. And while its P/E ratio of 27 may come in lower than Costco's earnings multiple of 43, its multiple is well above Target's at 19 times earnings.

The higher valuation may have also made Walmart less competitive on the dividend front. Like Target, it is a Dividend Aristocrat. Still, its 1.7% dividend yield does not match Target's 2.6% cash return. Also, Walmart's 2% dividend increase for 2022 dramatically lags Target's 20% payout hike. Such dynamics may prompt most investors to choose Target over Walmart.

Should I consider Walmart?

While Walmart is not going away, investors would probably see higher returns in an S&P 500 fund than in Walmart stock. The company has made moves to stay competitive, but it has done little to stand out.

Moreover, the earnings multiple and dividend growth would likely prompt investors to favor Target in the retail space. Such dynamics give investors little incentive to buy Walmart.