Even as other retail companies struggle, Walmart is poised to outperform as more consumers look for value, according to Deutsche Bank. Analyst Krisztina Katai named the big-box retailer a top pick, calling the stock a defensive winner that will build on its recent gains. Walmart shares are up nearly 10% in the fourth quarter after popping 6.7% in July-September period. Year to date, it has lost 1.6%, outpacing the S & P 500. "We think value-focused retailers will continue to gain market share next year on accelerating trade down," she said in a note to clients. Katai has a buy rating on Walmart. Walmart, which is reporting third-quarter earnings next week, is expected to post strong results due to favorable grocery fundamentals that comes on sticky consumer gains and more customers trading down to lower-priced providers amid inflationary challenges, the analyst said. Given this, Katai said Deutsche raised its per-share earnings forecast for the third quarter by 2 cents to $1.33. The firm's full-year earnings per share estimate was raised accordingly to $5.87. Walmart's performance comes as many in the retail world struggle with declining demand after two years of being in vogue, as the pandemic sent consumers to goods from service spending and with more disposable income. Some retailers have seen inventory gluts in recent months as demand slides, leading to actions like discounts to try to get products out of stores and warehouses. The company Is expected to continue performing well during the current economic downturn, as its focus on low prices and value is a draw to increasingly price conscious consumers who feel pinched by inflation. But that performance could be hurt by a change in purchasing habits at the mega-chain, further increases in labor costs or if gross margins shrink due to increased investments, she noted. Within retail more broadly, Katai said investors will be watching for commentary on the upcoming holiday season, progress on clearing inventory gluts and guidance for 2023. She named Target as one to be cautious about given the potential for a weaker gross margin as it tries to move elevated inventory levels through promotions. "While near-term fundamentals will still matter, we think investors will be laser focused on any signs that support (or potentially deter) the 2023 bull cases for these retailers, including traffic and inventory management," he said. — CNBC's Michael Bloom contributed to this report.