Bernstein’s latest review of the retail landscape spotlights five companies it views as having meaningful investment characteristics today, each with a distinct combination of growth drivers, margin dynamics and valuation implications. Below is a walkthrough of the firm’s assessments and the specific metrics and developments Bernstein cites.
Walmart
Bernstein highlights that investors appear to be expecting substantial margin improvement at Walmart, with the buy-side collectively pricing in roughly a 7% U.S. operating margin by fiscal 2030 and beyond. That assumption underpins elevated valuation multiples, the firm says, and implies an expectation of sustained e-commerce-related profitability gains.
While Bernstein acknowledges there is near-term upside as momentum builds, the analysts caution that once gains tied to e-commerce execution moderate, the share price could correct. The firm estimates an equilibrium valuation around $150 if Walmart can grow earnings per share to $5 in five years - a pace equivalent to about a 15% compound annual growth rate - and then settle into high single-digit growth thereafter.
Several sell-side firms have moved to higher price targets on Walmart in recent weeks, with RBC Capital, BTIG and Oppenheimer among those citing expectations for a strong holiday season and ongoing momentum.
Costco
For Costco, Bernstein’s long-term discounted cash flow work points to a long-duration growth story. The firm sees a multi-year runway, driven by international expansion that should lift sales, membership-fee income and margins, since overseas operations typically deliver higher margin profiles.
Even after Costco’s stock has recovered from a recent trough, Bernstein’s modeling still indicates roughly 25% upside potential under its long-horizon assumptions. The firm also notes recent company disclosures showing January net sales rose 9.3% to $21.33 billion. Separately, Costco extended its partnership with Instacart to enable same-day delivery in France and Spain, a development Bernstein includes in its growth and convenience thesis.
Dollarama
Bernstein values Dollarama largely on the optionality embedded in its international expansion plans, with Mexico and Australia identified as the primary markets of interest. The firm treats Dollarama’s Canadian operations and its majority stake in Dollarcity (in Latin America) as high-quality businesses deserving valuation premiums relative to peers.
In its framework, Bernstein applies multiples of about 35x on forward EPS for the Canadian business and roughly 26x on forward EPS for the CARS segment, effectively treating the international growth options as incremental upside without an immediate standalone valuation. While execution in Mexico and Australia is proceeding in line with management plans, Bernstein notes these initiatives will take multiple years before they can be independently valued.
Operationally, Dollarama posted third-quarter 2025 revenue of CAD 1.9 billion and EPS of CAD 1.17, beating analyst expectations. Credit agency Moody’s also revised Dollarama’s outlook to positive from stable, a development Bernstein records as supportive of the company’s credit and execution narrative.
Dollar General
Bernstein’s read on Dollar General is that the market has largely priced in the company’s gross-margin recovery story. Positive commentary from management on reductions in shrink and damages has lifted investor expectations, and sell-side analysts have moved estimates higher, though Bernstein notes that those expectations still sit below the company’s own long-term guidance.
Bernstein expects a potential further leg up in the shares heading into the fourth quarter, driven by near-term momentum and the possibility of upward revisions to gross-margin recovery forecasts. At the same time, the firm expresses reservations about the sustainability of long-term earnings growth given intensifying e-commerce competition from larger players such as Walmart and others.
Recent strategic and operational updates include an upgrade to Overweight by JPMorgan, Dollar General’s expansion of same-day delivery to more than 17,000 stores, and the appointment of David Rowland as the company’s new board chairman.
Five Below
Bernstein frames Five Below’s valuation primarily around its store-growth potential rather than solely on near-term comparable-store sales (comps). The market, the firm says, appears to be pricing in an acceleration of annual store openings to above 200 locations a year by around 2029 or 2030.
In the nearer term, Bernstein expects comp growth to normalize to positive low-single-digit levels after what it models as strong low-teens comp growth in fiscal 2025. With an assumed cadence of roughly 170 new stores annually in the interim, that combination equates to high single-digit net sales growth. Bernstein highlights the asymmetric outcomes: upside if Five Below can ramp store growth faster than modeled, and downside risk if comps turn negative in fiscal 2026 or if store expansion slows materially.
Broker activity has reflected renewed optimism; BofA Securities upgraded Five Below to Buy from Underperform, citing confidence in the retailer’s new leadership team, and other analysts, including Guggenheim, referenced an exceptionally strong holiday performance when raising their targets.
Overall takeaways
- Bernstein presents a mix of near-term momentum stories and longer-duration growth cases across these five retailers, with valuation outcomes tightly linked to execution timelines and margin trajectories.
- The firms highlighted span sectors most sensitive to consumer spending patterns, supply-chain execution and the competitive dynamics of e-commerce versus brick-and-mortar footprints.
- Several of the companies have recent operational developments and third-party endorsements that Bernstein incorporates into its view, but the firm also flags that meaningful upside often depends on multi-year execution.