The news: Walmart spent $14.2 billion on capital projects in the six months ended July 31, up 24% from a year earlier, according to its quarterly filing. This is the year the company said that spending would peak.
The largest share went to supply chain, customer-facing projects and technology: $7.7 billion in the US, up 15%.
The spending outran the cash coming in. Free cash flow fell $1.4 billion to $5.5 billion for the half, even though operating cash flow rose $1.4 billion to $19.7 billion. The filing attributes the whole decline to capex.
In six months, Walmart spent more on supply chain and technology than the $5.5 billion Costco spent on everything last fiscal year. And its total capex has more than doubled as a share of sales since fiscal 2021.
What changed: On the February earnings call, CFO John David Rainey put fiscal 2027 capex at about 3.5% of sales, and said Walmart was “hitting the peak of annual spending levels on supply chain automation and store remodels.”
On the second-quarter call, he moved the number up: “We now expect slightly higher CapEx for the year at approximately 4% of annual net sales.”
At 4%, fiscal 2027 would be the sixth straight year Walmart’s capex grows as a share of its revenue. The company spent 2% of revenue on capital projects in fiscal 2019, and 3.7% in fiscal 2026, per a Conveyor analysis of its SEC filings. The first half ran at 3.9%.
By the numbers:
Where the first-half money went, from the filing’s allocation table:
Supply chain, customer-facing initiatives, technology and other: $7.7 billion, up 15%
Store and club remodels: $3.6 billion, up 24%
New stores and clubs, including expansions: $1.1 billion, up 88%
Walmart International: $1.8 billion, up 48%
The supply chain and technology line is still the largest item. But, it is now the slowest-growing one. Remodels, new stores and international spending all grew faster, and Sam’s Club capex nearly doubled to $664 million, the fastest increase of any segment.
Depreciation is also climbing. It rose 13% to $7.7 billion for the half, and Rainey called it one of the bigger drivers of expense growth, “related to the CapEx that we’ve had, that’s really been around supply chain automation and addressing speed.”
Walmart still returned $9 billion to shareholders in the half: $3.9 billion in dividends and $5.1 billion in buybacks. That is more than the $5.5 billion of free cash flow it generated. Debt covered the difference: the company raised $4.2 billion in new long-term debt, repaid $2.3 billion, and added $3.9 billion in short-term borrowing.
The competition: Target is the one large peer moving in the same direction. Its capex is up about 30% so far this year. Most of that is going towards remodels and new stores, not automation.
The rest of the big-box field is holding back.
Costco kept capex near 2% of revenue in its latest fiscal year, roughly where it has run for a decade.
Home Depot’s first-half capex was flat, and management describes its eight-year, $1.2 billion supply-chain network build as nearly complete.
Kroger closed three Ocado-automated fulfillment centers, taking $2.6 billion in charges, and now describes its own plan as capital-light.
The counter: Return on investment rose to 15.4% from 15.1% over the trailing 12 months, even with the heavier spending, and operating cash flow grew $1.4 billion.
US e-commerce ran at double-digit incremental margins for the first half, meaning every new dollar of online sales brought in more than 10 cents of operating profit. Rainey credited the automated buildings that now serve 3,100 US stores and handle more than half of e-commerce volume. Those buildings feed the store network that ships 80% of Walmart’s US online orders.
Walmart’s free cash flow is weighted to the back half of the year: $8 billion of last year’s $14.9 billion came in after July. So, a weak first half does not on its own break the full-year forecast.
My view: I don’t think this spending has a peak. A project has an end date, and this looks more like a permanent cost of running the network. Capex as a share of sales has risen every year since fiscal 2021, and the forecast moved from 3.5% to 4% of sales in six months.
Depreciation grew 13% in the half, so even if new spending flattened tomorrow, the cost of what’s already built keeps rising for years.
So I’d read Walmart’s capex like its labor line: a recurring cost of competing on speed. The number to watch is whether profit keeps growing faster than the bill. This half it did: operating income rose 17% while depreciation rose 13%.
What’s next: Rainey said the company still expects “double-digit growth in free cash flow this year,” even with the higher capex guide. Through the first half it is down 20%.
Third quarter results follow in November.
