America's biggest retailer is gaining Wall Street's attention.

On Thursday, Walmart stock (WMT) reached a record closing high of $162.61 per share. The stock started September near its all-time high but closed slightly off the record price at $161.56 on Friday.

So far this year, the company's shares are up more than 13%. That's higher than the Dow Jones Industrial Average's (^DJI) year-to-date gain of almost 5% and significantly outpaces Target stock (TGT), which is down nearly 16%.

Why Walmart is winning: groceries

As consumers' wallets remain pinched with inflation, Walmart's expanding grocery business has been its gateway to consumers who are otherwise more cautious about their discretionary spending.

"This is where we're seeing that Walmart has the upper hand compared to Target," LSEG director of consumer research Jharonne Martis told Yahoo Finance Live. "They've gained those loyal customers because of groceries, and now that's converting into them extending themselves and buying general merchandise."

In the retail giant's second quarter earnings results, Walmart posted same-store sales that rose 6.3%, more than the 4.04% expected, according to data from Bloomberg.

Foot traffic also increased for Walmart, up 2.8%, along with a higher ticket and online sales in the quarter.

On a call with investors, CEO Doug McMillon called its customers "resilient."

"They're looking for value, and they trust us to be there for them," McMillon said. "We see people across income cohorts come to us more frequently looking to save money on everyday needs. That gives us an opportunity to drive conversion in more discretionary categories."

Wall Street's take: Walmart is the 'big dog'

Walmart may still have more momentum to the upside heading into the fall, according to Wall Street pros.

"We see further upside potential pointing to improving trends in general merchandise and continued share gains across income cohorts," Goldman Sachs analyst Kate McShane wrote in a client note.

According to a JPMorgan Research team led by analyst Ken Goldman, Walmart led on "sequential" price increases recently, up 2.1% versus June.

"We continue to be encouraged that the 'big dog' in the industry is showing little sign of getting more aggressive on pricing," Goldman added.

However, whatever Walmart does, other grocery retailers tend to follow.

"Given its size (nearly 25% of food-at-home sales in the US), Walmart’s actions typically reverberate across the industry," Goldman said. "That said, we think it's probably worth monitoring the potentially budding price investments at Kroger and Albertsons."

Goldman also noted that Target's pricing premium is down to 6% from 8% in May and June.

"That's the lowest gap versus Walmart since November 2019 (the typical gap has been 8-10%)," Goldman said. He added it might be a move by Target to "stem traffic and share headwinds."

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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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