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<h2>Key Points</h2><ul><li>Walmart's operating income is growing significantly faster than revenue as new, high-margin profit engines scale.</li><li>BJ's Wholesale is seeing impressive momentum in digital sales and membership fee income, but its merchandise gross margin is facing pressure.</li><li>Valuation ultimately makes one of these stocks a more resilient long-term investment than the other today.</li><li>10 stocks we like better than Walmart ›</li></ul>If you compare the latest quarterly results from Walmart (NASDAQ: WMT) and BJ's Wholesale Club (NYSE: BJ), one contrast is impossible to ignore. In its fiscal fourth quarter, Walmart's operating income jumped 10.8% year over year, easily outpacing its 5.6% revenue growth. BJ's, meanwhile, saw its total revenue increase by the exact same 5.6% in its most recent quarter, but its operating income actually slipped 0.2% year over year.But BJ's does have an edge on its much larger competitor in one crucial area: valuation.Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an &#34;Indispensable Monopoly&#34; providing the critical technology Nvidia and Intel both need. Continue »So, which stock is the better buy today: the better operator with a demanding valuation, or the cheaper warehouse club?<img alt="BJ's logo next to Walmarts." src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg1OTgyNC9iai12cy13bXQucG5nJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-dXJsPWh0dHBzOi8vZy5mb29sY2RuLmNvbS9lZGl0b3JpYWwvaW1hZ2VzLzg1OTgyNC9iai12cy13bXQucG5nJnc9NzAw"/>
Image source: The Motley Fool.
<h2>Walmart: a shifting profit profile</h2>Beneath Walmart's 5.6% top-line growth in fiscal Q4 were several underlying drivers pointing to a fundamentally improving business.The defining metric was the company's surging global e-commerce sales, which rose 24% year over year and now account for a record 23% of total net sales. Backing up this digital strength, U.S. comparable sales (excluding fuel) rose 4.6%, driven by a 2.6% increase in transactions. This proves Walmart is still driving real traffic, not just leaning on higher prices.Even more importantly, the company's highest-margin revenue streams are growing the fastest. Walmart's global advertising business surged 37% year over year in the quarter, with its U.S. ad segment, Walmart Connect, rising 41%. Further, global membership fee revenue increased 15.1%.All of these underlying factors help explain why the company commands such a high valuation. Its business is transforming.And then there is Sam's Club.Walmart's warehouse club segment posted 4% comparable sales growth excluding fuel and 23% e-commerce growth in the quarter. And management noted that Sam's Club membership reached record highs. In other words, Walmart investors get the core business plus a warehouse concept that is currently showing excellent digital and membership momentum in its own right.Naturally, this combination commands a premium. With shares trading at roughly 44 times the midpoint of management's fiscal 2027 adjusted earnings-per-share guidance of $2.75 to $2.85, Walmart stock is priced for perfection. That is a lofty multiple for any retailer, implying the company must maintain strong momentum in both its core business and its higher-margin initiatives in order to justify the stock's valuation.<h2>BJ's: slower growth for a cheaper valuation</h2>BJ's recent fiscal fourth quarter was solid on some fronts.The warehouse club operator's comparable club sales excluding gasoline rose 2.6% year over year, membership fee income jumped 10.9% to $129.8 million, and digitally enabled comparable sales soared 31%.Additionally, management highlighted that the company maintained a 90% tenured member renewal rate and achieved its 16th consecutive quarter of traffic growth.There is also a much easier valuation argument for BJ's. With shares trading at just 21.5 times the midpoint of management's fiscal 2026 adjusted EPS guidance of $4.40 to $4.60, the valuation is far easier to understand. This lower multiple leaves significantly more room for error than Walmart's premium price tag.But despite its stock trading at a fraction of Walmart's valuation, I don't think it is the better buy.Why not?While BJ's boasts good digital momentum and reliable membership income, it lacks Walmart's high-margin levers. In fact, BJ's merchandise gross margin rate declined by about 50 basis points in the quarter due to merchandise mix -- specifically a shift toward lower-margin consumer electronics -- which contributed to the slight dip in operating income. Management noted that selling, general, and administrative expenses also rose, largely driven by labor and occupancy costs tied to new club openings.BJ's isn't a bad business; it is just a model highly dependent on straightforward geographic expansion and steady execution at existing stores. Walmart simply has more ways to win.<h2>The verdict</h2>Ultimately, I view Walmart as the better buy today.Walmart possesses more ways to compound its earnings. Its scale advantages are significant, its digital momentum is fundamentally shifting the margin profile, and Sam's Club gives the company strategic exposure to a nationally scaled warehouse model. Ultimately, the rapid growth of high-margin streams like advertising and membership fees makes Walmart's overall profit profile far more durable.This doesn't mean investors can ignore valuation risk. Walmart's current price demands near-flawless execution and leaves very little wiggle room. However, between the two, Walmart looks like the more resilient long-term bet.<h2>Should you buy stock in Walmart right now?</h2>
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Walmart's operating income is growing faster than its revenue, driven by strong e-commerce sales and high-margin revenue streams. In contrast, BJ's Wholesale is experiencing pressure on its merchandise gross margin despite growth in digital sales and membership fees. Walmart's stock is valued at a premium, trading at 44 times its fiscal 2027 earnings guidance, while BJ's trades at 21.5 times its fiscal 2026 guidance. Ultimately, Walmart is viewed as the better long-term investment due to its diverse profit sources and digital momentum, despite the valuation risks involved.

- Walmart's operating income outpaced its revenue growth significantly, driven by strong e-commerce and high-margin initiatives.  
- In contrast, BJ's Wholesale Club experienced stagnant operating income despite solid revenue growth, facing pressure on merchandise margins.  
- Ultimately, Walmart's diversified profit sources and strategic advantages position it as a more resilient long-term investment compared to BJ's cheaper valuation.

Walmart vs BJ's Wholesale: Which Retailer Is a Better Buy?