Price-conscious shoppers lift Walmart earnings as it preps $2.3 billion Vizio deal
Reuters
Published Feb 20, 2024 07:15AM ET
Updated Feb 20, 2024 01:21PM ET
By Siddharth Cavale and Ananya Mariam Rajesh
(Reuters) -Walmart kicked off U.S. retailers' reporting season on Tuesday with robust fourth quarter results after inflation-squeezed shoppers flocked to its stores, and said it would buy smart-TV maker Vizio for $2.3 billion.
Shares of the retail giant rose as much as 6.5% to an all-time high of $181.35 after it also gave an upbeat annual sales forecast and announced a 9% rise in its dividend, the biggest increase in more than a decade.
Walmart (NYSE:WMT)'s bigger focus on groceries than rivals such as Target has provided a bulwark against the broad slowdown in discretionary spending. It is attracting more customers, even from higher-income households, by keeping grocery prices low as its size gives it negotiating power over suppliers, analysts say.
The company said it offered significantly more 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 like apparel and hard goods, prices are lower than a year ago and even two years ago, the company said on a conference call.
In addition, its efforts to spruce up its massive stores, expand its selection of online merchandise and offer more pickup and delivery options, helped it drive more transactions in stores and volumes and pass $100 billion in global e-commerce sales in 2023 for the first time, Walmart CEO Doug McMillon said on a conference call.
"Across countries, we continue to see a customer that's resilient but looking for value," McMillon said.
Home Depot (NYSE:HD) said on Tuesday that shoppers are limiting spending on large-scale projects amid higher food prices and mortgage rates. It reported a bigger-than-expected drop in holiday quarter sales and forecast a 1% dip in 2024 sales.
Walmart reported a 4% rise in total U.S. comparable sales, excluding fuel, for its fourth quarter ended Jan. 31, compared to LSEG estimates of 2.91%. Adjusted profit came in at $1.80 per share, compared to expectations of $1.65 per share.
For its fiscal year ending Jan. 31, 2025, Walmart said it expects consolidated net sales to grow between 3% and 4%, largely above analysts' expectations of a 3.4% rise.
A Walmart investor said he found the forecast "conservative" but said it was prudent given that the economy is in a transitory phase, where inflationary trends are not stable and fluctuating up and down on an item-by-item basis.
"The street is recognizing that today by pushing the shares up," said Christian Greiner, senior portfolio manager at ZCM, which holds Walmart shares.
FUTURE-PROOF
Walmart's proposed offer to buy Vizio for $11.50 per share in cash, is another bet on the retailer's fast-growing U.S. advertising business, Walmart Connect, which already rakes in $3 billion in annual advertising revenue and saw ad sales rise 22% in the quarter ended Jan. 31.
Get The News You Want
The deal future-proofs this business at a time several U.S. retailers are entering the ad business to take advantage of a crackdown on the amount of third-party data Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) are sharing with advertisers, analysts said.
"The Vizio deal essentially takes Walmart Connect from being an advertising provider through stores and websites, to one that can penetrate consumers' homes via television," GlobalData's Managing Director Neil Saunders said.
"This multichannel approach gives Walmart a lot more power and reach in the world of advertising and puts it on a more level playing field with the likes of Amazon (NASDAQ:AMZN)," he added.
Owning Vizio not only gives Walmart viewership data from thousands of smart-TVs but also access to Vizio's SmartCast operating system, which streams ad-supported content on its devices, Sensor Tower said. That business generated about $600 million in revenue in 2023, Stephens analysts said.
The deal also aligns 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 businesses like ads and third-party sellers on its online marketplace.
The offer price is a premium of 47% to Vizio's closing price of $7.82 as of Feb. 12, the day before reports about deal talks emerged. Vizio shares were up about 14.8% at $10.92 on Tuesday.
The deal is expected to be mildly dilutive to Walmart's earnings in fiscal 2025, Walmart said.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.