Walmart Stock Price: Walmart’s earnings are shining as it prepares to acquire Vizio, a $2.3 billion deal.
Shares of the retail giant rose 6% to a record high of $180.31 in early trading after the company gave an optimistic full-year sales outlook and announced a 9% increase in dividends, the biggest increase in more than a decade.
Walmart’s greater focus on groceries than competitors like Target has provided a bulwark against a broader slowdown in discretionary spending. Analysts say the company’s size gives it bargaining power over suppliers, so it’s attracting more customers even from high-income households by keeping grocery prices low.
The company said it offered significantly more price cuts on food in its U.S. stores during the fourth quarter, even after making deep cuts in the third quarter. In some categories, such as clothing and household goods, prices are lower than a year or even two years ago, the company said in a conference call.
Additionally, our efforts to refresh our larger stores, expand our online selection, and offer more pickup and delivery options have helped us increase in-store and bulk purchase transactions, helping us surpass $100 billion in global e-commerce sales in 2023 for the first time. Walmart CEO Doug McMillon said on a conference call:
“We continue to see customers across the country looking for value while remaining resilient,” McMillon said. GlobalData analyst Neil Saunders said he was encouraged by Walmart’s underlying volume growth. “This is a huge relief because it suggests that the chain will continue to make some progress even if inflation falls faster and faster,” he said.
Walmart reported comparable sales excluding fuel rose 3.9% in the fourth quarter ended Jan. 31, compared with LSEG estimates of 2.91%. Adjusted earnings came in at $1.80 per share, compared to expectations of $1.65 per share.
Walmart said it expects consolidated net sales to increase 3% to 4% for the fiscal year ending Jan. 31, 2025, well above analysts’ expectations for a 3.4% increase.
The distribution company’s annual dividend increase also reached 9%, exceeding expectations.
VIZIO TRANSACTIONS
Walmart’s offer to acquire Vizio for $11.50 per share in cash is another bet on the retailer’s fast-growing U.S. advertising business. Walmart’s advertising sales rose 22% in the quarter ended Jan. 31, generating larger margins than its traditional grocery business. .
It also comes amid Walmart’s efforts to change the mix of its revenue streams over the next five years, with plans to make more money from selling advertising on its properties than it does from selling everyday necessities like milk and toilet paper.
Sensor Tower’s acquisition of Vizio will help retailers build a massive panel of connected TV users and have more room to sell advertising by owning and operating Vizio smart TVs and Vizio’s SmartCast operating system. He said it would be. Stephens analysts expect Vizio to generate about $600 million in software/advertising revenue in 2023.
“We believe that global advertising and (Walmart Plus) membership alone will account for 20% of our annual operating profit in fiscal 2025,” Walmart CFO John David Rainey said on a conference call. “These profit streams allow us to fund investments in our core business while also expanding our operating margins.”
The offer price represents a 47% premium to Vizio’s closing price of $7.82 as of February 12, the day before reports of deal talks emerged. Vizio shares rose about 15.5% to $11.01 on Tuesday.
“This deal makes sense,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which owns Walmart stock.
“It’s not at all surprising that Walmart wants to get into the competitive field (of retail advertising) simply because of the sheer amount of money available,” he said. (Reporting by Ananya Mariam Rajesh in Bengaluru and Siddharth Cavale in New York; Editing by Susan Fenton)
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