Walmart is changing its approach in one key category

By almost every measure, Walmart is the country’s largest big-box retailer, which makes it an important barometer for consumer spending.

Which is why its latest earnings report caught some attention.

Comparable sales were up just 2.6% for Q2 FY2027, down from 4.1% during Q1 and marking its slowest comparable sales growth since the start of the pandemic.

But the news wasn’t all bad.

Walmart has continued to gain ground with high-income households, and e-commerce sales jumped 23% globally. Even more importantly, it’s identified several categories beyond grocery where significant growth may be possible.

Fashion is one of them.

Walmart announces Scenario

Walmart has plans to launch an all-new, inexpensive women’s clothing line in the coming weeks, according to an exclusive report from the Wall Street Journal.

The line, called Scenario, will include clothing, bags, and accessories geared at younger shoppers. Most items in the line will be priced at $25 or less in an effort “to appeal to the discount shoppers who are the foundation of Walmart’s business,” WSJ says. 

Traditionally, Walmart hasn’t dominated in the fashion space. 

Shoppers may head to the big-box store to stock up on basics like socks and t-shirts, but they’re heading to other retailers such as Target and Amazon for trendy, fashion-forward pieces to round out their closets.

But now, it seems, Walmart is working to change that.

Over the last seven quarters, the retailer has seen consistent growth in its clothing and accessory categories, WSJ reports. 

Celebrity partnerships, like last spring’s Lee and Kacey Musgraves collaborative line “Kacey Lee,” have played a role in this, but Walmart is on the hunt for an owned, house brand that could provide a stable foundation for long-term growth.

The retailer has had some success with its existing brand, Tried and True, which brings in around $2 billion annually and tends to appeal to shoppers in the 55+ age bracket. 

The line, which primarily consists of elevated basics, is serviceable, but not necessarily widely appealing to a younger, trendier crowd.

“We knew [Walmart wasn’t] servicing all their closet needs,” Denise Incandela, executive vice president of fashion for Walmart U.S., told WSJ. “While our customer gave us credit for extraordinary value, they weren’t giving us credit for style and quality.”

Scenario, then, is the retailer’s attempt to marry the two.

Walmart wants more of its shoppers’ fashion spending

Historically, Walmart has earned the bulk of its revenues through grocery, a category with small margins.

But as the retailer navigates more cautious consumers and capitalizes on the recent influx of high-income shoppers, it’s been working to grow higher-margin areas.

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Fashion was identified as a particularly lucrative category fairly early on. Incandela was tasked with rejuvenating Walmart’s approach to apparel nearly a decade ago.

“80% of the money existing Walmart shoppers spent on apparel was at higher-priced retailers, not Walmart,” she told WSJ. 

That number implies that the retailer’s customers were willing to spend on fashion, just not on the sorts of fashions the company currently offers. 

So Walmart opened a fashion design studio in New York City and got to work building lines like Scenario to attract younger consumers who were shopping for clothes elsewhere.

But launches like Scenario don’t mean the retailer is fully doing away with budget-friendly basic lines such as Tried and True.

“This is an ‘and’ strategy,” Incandela said. “We’re still going to cover those big-volume driving socks and underwear and denim and Ts,” to serve budget shoppers alongside the more elevated items. 

Essentially, the strategy reflects a broader shift in how Walmart views its fashion business. 

The retailer isn’t trying to entirely abandon the value proposition that made it successful. Instead, it’s working to convince shoppers they don’t have to choose between affordability and style.

If Scenario can help Walmart close that gap, the retailer could have an opportunity to capture more of the fashion spending its customers are already doing elsewhere, boosting its overall revenues and establishing it as a go-to spot for the fashion-focused.

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