Walmart, retailers tout AI, digital transformation efforts to argue they’re more than their stores

Retailers have seen mixed second quarter results, but are convincingly making the case that AI-driven transformation makes them more than just their brick-and-mortar stores.

Here's an update on tech initiatives worth watching in retail.

Walmart

Walmart's third quarter outlook wasn't well received even though the company's second quarter was better than expected. The company reported earnings of 80 cents a share on revenue of $187.9 billion, up 5.9% from a year ago. Adjusted second quarter earnings were 81 cents a share.

The company said its third quarter net sales will be up 3% to 3.75%, which was below the 5.95% estimate. Adjusted earnings for the third quarter are expected to be 62 cents a share to 64 cents a share compared to estimates of 68 cents a share. The fiscal 2027 outlook from Walmart also missed.

Walmart CEO John Furner said the quarter was good and highlighted the company's strategy to transform into a business that scales beyond its core stores. Walmart is about an advertising business, e-commerce and an online marketplace.

Furner noted the following:

• Membership fee revenue was up 17% in the third quarter.
• E-commerce revenue was up 23% globally, up 30% for Walmart International, up 26% at Sam's Club and up 24% for Walmart US.
• Marketplace revenue was up 52% in the second quarter.
• Advertising was up 38%.
• E-commerce represents more than 23% of sales at Walmart.

Furner said:

"We also expanded the reach of platform businesses like Walmart+ and Marketplace to markets outside the United States, demonstrating how we're leveraging these for growth. And as we build and scale these capabilities across markets and begin to operate globally on the platforms we've built during the last few years of transformation, we're seeing the same dynamic. These businesses work together, deepen our relationship with customers and members, and create additional opportunities for growth and stronger economics."

Supply chain was also a key topic. "We've invested in automation, technology, fulfillment capacity and our physical network, and these investments are showing up in customer experience. They're allowing us to move inventory more efficiently, deliver faster, help with in-stock levels, and support the growth of both our first party and marketplace businesses," said Furner. "They also strengthen the economics of our omnichannel model. And as we improve density and utilization across our network, speed and profitability reinforce one another."

Walmart called out Sparky improvements as usage is up 70% from a year ago.

• Walmart's Sparky AI agent increases order value
• Walmart's agentic commerce vision: Practical, personalized, immersive and less scrolling

CFO John David Rainey said Walmart's multi-year investment in digital capabilities including AI are paying off. "The key benefit of digital growth is being able to grow at a very low marginal cost," said Rainey. "We think we have a tremendous opportunity to continue to change and see our margins drift up over time."

Target

Michael Fiddelke, Target CEO, said on the company's second quarter earnings call that the retailer is targeting agentic commerce, named a new Chief AI Officer and has plans to bridge technology and guest experience.

Fiddelke said:

"We're continuing to modernize our tech foundation while investing in new industry-leading capabilities that allow us to personalize experiences across Stores and Digital channels, strengthen one of the nation's premier retail media businesses, help our merchants identify and respond to emerging trends faster than ever before and connect with both new and existing guests in increasingly relevant ways. Earlier this year, we became one of only a small number of retailers to partner initially with OpenAI, Google Gemini, and other leading platforms to shape the future of agentic commerce.

And while still small in total today, as more consumers begin to explore the benefits of agentic shopping, Target's digital traffic sourced from external AI platforms is growing more than 3.5x the industry as compared to a year ago."

• Target cuts deal with OpenAI as it plans customer experience overhaul

Lisa Roath, chief operating officer at Target, said the company is creating a digital twin of its business to ensure customers get the right inventory at the right time.

"We're investing in tools like Proxima, a digital twin of our middle-mile inventory positioning system, which allows our team to test and iterate on inventory flow plans before going live," said Roath. "Proxima helps us more efficiently evaluate inventory processes between our buildings and stores, giving our teams a way to quickly understand potential downstream impacts, learn faster, and make inventory decisions with greater confidence. We also saw meaningful gains in delivery speed."

Home Depot

Home Depot's second quarter results included a bevy of items focused on customer experience. Sales in the second quarter were $47.9 billion, up 5.7% from a year ago. CFO Richard McPhail said the company's customers continue to engage in home improvement projects, but are refraining from big projects.

What Home Depot can control is its experience. Here's a look at the takeaways:

• Magic Apron is evolving. Associates are using the Magic Apron app to navigate stores, find products and answer questions quickly.
• Home Depot is stepping up Express Delivery efforts.
• Digital sales in the second quarter were up 11% from a year ago.

Home Depot Senior Executive Vice President Ann-Marie Campbell said:

"Our teams are focused on ensuring on-shelf availability remains at record levels on introducing new and innovative products and deploying technology across the stores to enhance the customer experience. This, coupled with all of our investments in our associate experience through technology-enabled tools, makes it easier than ever for associates to serve customers. And we have seen greater associate engagement, better customer satisfaction scores and stronger sales."

• How Home Depot Blends Art and Science of Customer Experience

Lowes

CEO Marvin Ellison said the company is leaning into digital for experience and driving sales.

"We delivered online sales growth of 15.7% this quarter, reflecting the continued benefits of our investments in the digital experience. These investments include tailored experiences on Lowes.com and our mobile app as well as expanded visualization capabilities and the ongoing growth of our online marketplace. The improved user experience along with the compelling value offered by our loyalty programs are driving increased conversion and enabling to dynamic customer preferences."

Indeed, Mylow, Lowe's AI agent, has supported 25 million questions from customers and associates. "The conversion rate for online customers who use Mylow is triple that of customers who do not use the tool, reinforcing that a well-designed agentic AI experience can be a clear driver in the purchasing decision," said Ellison.

Joseph McFarland, Lowe's Executive Vice President of Stores, noted supply chain efforts. "We will continue our focus on productivity as we continue to rollout and adoption of Freight Flow 3.0 and Full Shelf Replenishment,” he said. “Both these projects are aimed at improving in-stocks and inventory accuracy by identifying and prioritizing the highest stocking needs and simplifying the product flow process from truck to shelf. Not only do these efforts drive labor productivity and customer service, but they also ensure that customers can find the products they need, where and when they need them."

• Lowe’s Eyes AI Agents as Home Improvement Companion for Customers
• Lowe’s Is Betting on AI To Drive Customer Experience, Optimize Multiple Processes

Estee Lauder

Stephane de la Faverie, Estee Lauder CEO and President, said the company is using AI to drive productivity and migrating to Shopify.

"For One ELC operating ecosystem, we are advancing with speed across our 3 biggest initiatives. We launched M·A·C U.S. brand.com on Shopify last week, the first of many deployments online and in-store across brands around the world in fiscal '27 as we modernize capabilities in our direct-to-consumer business to drive growth. For enterprise business services, we are on track to have transitioned about 80% of the expected roles by September, while also standardizing select processes and standing up key AI-enabled technologies to facilitate service delivery and productivity."

The CEO also noted that Estee Lauder started up 1,500 campaigns using AI for real-time personalization.

More retail:

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