Walmart gains on strong results, deal to buy TV maker Vizio

Walmart topped earnings estimates in the fourth quarter as choosy shoppers nevertheless kept buying in its stores.

Separately, Walmart said it agreed to buy smart-TV maker Vizio Holding Corporation for about US$2.3 billion (S$3.09 billion). The deal would accelerate the retailer’s advertising business, called Walmart Connect, and help Walmart and its advertisers engage more with customers. Walmart has been expanding Walmart Connect and other non-retail businesses that have faster growth and better margins.

The deal announcement confirmed a Wall Street Journal report from last week. Vizio shares soared 15 per cent in Feb 20 premarket trading, while Walmart gained 1.9 per cent.

Walmart’s same-store sales excluding fuel – a key metric for retailers – increased 4 per cent for US stores during the quarter through the end of January from the same period a year earlier. Wall Street was expecting 3.1 per cent.

The Bentonville, Arkansas-based company reported adjusted earnings of US$1.80 a share, higher than the analyst forecast of US$1.65. The stock is up about 16 per cent over the past year.

Still, the world’s largest retailer delivered softer guidance for the current fiscal year, as it expects consumers to be selective in their spending. 

“They are being choiceful,” chief financial officer John David Rainey said in an interview. Consumers continue to spend less per trip but have been shopping frequently, he said, adding that the company expects some resilience to continue for the rest of the year. 

The company is forecasting sales to grow between 3 per cent and 4 per cent for fiscal 2025 – slower than growth from the prior year. It expects adjusted earnings of US$6.70 to US$7.12 a share, with analysts’ consensus estimate at US$7.09.

Gaining share

Walmart is gaining share in nearly every category, Mr Rainey said, and e-commerce is among the factors driving growth as the company trims losses associated with handling online orders. While deflation is still a possibility, the company expects it to be less likely based on what it observed during the latest quarter. 

Walmart, while grabbing more spending with low-priced groceries and other basics, has been cautious in recent months about the health of the consumer amid persistent inflation and higher interest rates. 

US consumers have been buying cheaper products and seeking value, as they pull back from discretionary products like general merchandise. That has resulted in softer sales for some retailers, including Target and Home Depot. Other big-box retailers are set to report their quarterly earnings in the coming weeks.

The recent moderation in inflation is another challenge for Walmart and other retail operators that have passed down price increases to consumers over the past few years. This has contributed to higher dollar sales for companies, followed by an uptick in revenue during the pandemic when people bought more groceries and home goods. Such increases are slowing overall, though inflation remains stubborn in some areas like groceries and shelter. 

Walmart has been beefing up automation in warehouses and stores in recent years, while remodelling locations to make them more modern. Pickup and delivery businesses continue to expand, driving share gains among upper-income households and fuelling growth of the Walmart+ membership programme. BLOOMBERG