Rothschild & Co analysts say the growing prominence of so-called agentic commerce - digital tools and automated systems that manage purchasing and replenishment for consumers - may redistribute competitive advantages across grocery and discount retail, benefiting some chains while pressuring others. The firm emphasized that retailers should be evaluated collectively as delivery capabilities and automation increasingly shape market dynamics.
In a series of rating moves, Rothschild maintained a Buy on Walmart and raised its price target to $145 from $110, upgraded Dollar Tree to Buy, downgraded Dollar General to Sell and left Costco at Neutral. The analysts grouped retailers into three buckets: those likely to gain from agentic commerce, those largely insulated from it, and those driven by company-specific factors.
Walmart and Shopify sit in the first category, according to Rothschild, due to their scale, established digital infrastructure and extensive delivery footprints. The bank argued Walmart's combination of a widespread store network, an in-house delivery platform and growing automation enables the company to match prices and delivery speeds that few rivals can replicate - with the notable exception of Amazon. Rothschild expects these capabilities to support Walmart's market share expansion, lift operating margins toward 6% by fiscal 2030 and produce a three-year EPS growth rate of roughly 14%.
Rothschild increased its Walmart price target to $145, up from $110, reflecting the view that the retailer's investments in fulfillment and automation will translate into stronger margins and earnings growth over the medium term.
Dollar General appears to face headwinds in this evolving environment. The analysts highlighted that the chain's store renovation cycle is peaking, which makes further margin expansion more difficult. They also said improved delivery from larger competitors, including Walmart and Amazon, intensifies competition in Dollar General's core markets. In addition, automated replenishment models could diminish the convenience advantage traditionally enjoyed by small-format stores. Rothschild's fiscal 2027 EPS estimate for Dollar General stands about 13% below consensus.
By contrast, Dollar Tree is repositioning after its 2025 divestment of Family Dollar and is accelerating rollout of a multi-price strategy. Rothschild suggested that this approach could follow a growth path similar to that observed at Dollarama, supporting near-term earnings that the bank estimates to be approximately 13% above consensus forecasts.
Warehouse clubs such as Costco are considered relatively insulated from many structural changes driven by agentic commerce. Rothschild cited Costco's membership-based revenue model, narrow assortment and low markups as factors that add resilience to structural shifts in retail. However, the analysts noted that Costco has limited exposure to AI-driven digital revenue streams and trades at a valuation near 48 times earnings, which the bank views as constraining upside and underpins its Neutral rating.
Key points
- Rothschild kept Walmart at Buy and raised its price target to $145; expects operating margins near 6% by fiscal 2030 and a three-year EPS growth rate of about 14%.
- Dollar Tree upgraded to Buy after refocusing post-2025 divestment and expanding a multi-price strategy; near-term earnings seen about 13% above consensus.
- Dollar General downgraded to Sell amid peak renovation cycle and rising competitive pressure from improved delivery and automated replenishment; fiscal 2027 EPS forecast about 13% below consensus.
Risks and uncertainties
- Execution risk around delivery and automation investments - outcomes depend on how effectively retailers implement and scale digital fulfillment and automation systems, affecting grocery and discount retail margins.
- Competitive dynamics in last-mile delivery - enhanced delivery from large players could erode the convenience advantage of small-format stores, impacting discount and convenience retail segments.
- Valuation constraints for insulated players - despite structural resilience, high multiples, such as Costco's near 48x earnings, limit upside potential if digital revenue growth remains limited.