©Reuters. FILE PHOTO: A shopper leaves a Walmart Supercenter in Secaucus, New Jersey, U.S., June 7, 2023. The store is one of its recently renovated locations. REUTERS/Siddharth Cavale/File Photo
By Siddharth Cavale and Ananya Mariam Rajesh
(Reuters) – Walmart kicked off U.S. retailer reporting season on Tuesday with robust fourth-quarter results after inflation-pressured shoppers flocked to its stores and said it would buy smart TV maker Vizio for 2.3 billion dollars.
Shares of the retail giant rose 6% to an all-time high of $180.31 in early trading after it also gave an upbeat annual sales forecast and announced a 9% increase in its dividend, the largest increase in more than a decade.
Walmart’s (NYSE:) stronger focus on groceries compared to rivals like Target has provided a bulwark against the overall slowdown in discretionary spending. It is attracting more customers, including from higher-income families, keeping food prices low as its size gives it negotiating power over suppliers, analysts say.
The company said it offered significantly larger price cuts on food products at its U.S. stores during the fourth quarter, even after big cuts in the third quarter. In some categories, such as clothing and durable goods, prices are lower than a year ago and even two years ago, the company said on a conference call.
Additionally, its efforts to beautify its massive stores, expand its selection of online merchandise and offer more pickup and delivery options have helped it boost in-store transactions and volumes and surpass $100 billion for the first time. dollars in global e-commerce sales in 2023. time, Walmart CEO Doug McMillon said on a conference call.
“Across all countries, we continue to see a resilient but value-seeking customer,” McMillon said.
GlobalData analyst Neil Saunders said he was encouraged by Walmart’s growth in underlying volumes.
“This is a great comfort as it suggests the chain will continue to make some progress even if inflation falls further and faster,” he said.
Walmart reported a 3.9% increase in comparable sales, excluding fuel, for the fourth quarter ended Jan. 31, compared to LSEG estimates of 2.91%. Adjusted earnings came in at $1.80 per share, compared to expectations of $1.65 per share.
For the fiscal year ending Jan. 31, 2025, Walmart said it expects consolidated net sales to grow between 3% and 4%, well above analysts’ expectations of a 3.4% increase.
The size of the retailer’s 9% annual dividend increase also exceeded expectations.
VICE DEAL
Walmart’s proposed offer to buy Vizio for $11.50 a share in cash is another bet on the retailer’s fast-growing advertising business in the U.S., where ad sales rose 22% in quarter ended Jan. 31 and represents a larger margin driver than its traditional grocery business. .
It also dovetails with Walmart’s efforts to change the composition of its profit streams over the next five years, planning for more of its future earnings to come from selling ads on Walmart properties rather than selling staples like milk and toilet paper.
The Vizio acquisition could help the retail giant build a large group of connected TV users by owning and operating Vizio smart-TVs and Vizio’s SmartCast operating system, giving it more room to sell ads, Sensor Tower said .
Stephens analysts expect Vizio to generate nearly $600 million in software and advertising revenue in 2023.
“We believe global advertising and (Walmart Plus) subscription alone will account for 20% of annual operating income in fiscal 2025,” Walmart CFO John David Rainey said on the conference call. “These profit streams allow us to fund investments in our core business while expanding our operating margins.”
The offering price is a 47% premium to Vizio’s closing price of $7.82 on Feb. 12, the day before reports of deal talks emerged. Vizio shares rose about 15.5% to $11.01 on Tuesday.
“The deal makes sense,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds Walmart shares.
“I’m not at all surprised to see Walmart wanting to be in the same competitive arena (as retail advertising) just because of the sheer amount of dollars available,” he said.