Walmart reports rosy results from 2023 holiday season

Walmart kicked off US 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 $2.3bn.

Shares in the retail giant rose 3% in premarket trading 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’s proposed offer to buy Vizio for $11.50 per share in cash is another bet on the retailer’s fast-growing US advertising business, where ad sales rose 22% in the quarter ended January 31 and is a bigger margin driver than its traditional grocery business.

The deal also gives Walmart access to Vizio’s SmartCast operating system, through which it can rake in advertising revenue by offering its suppliers the ability to display ads on streaming devices. It also gives Walmart control of a fifth of the US television market, analysts have previously said.

“The deal makes sense,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds Walmart shares.

“I am not at all surprised to see Walmart want to be in that same competitive arena (of retail advertising) because of just the sheer amount of dollars that are available,” he said.

The offer price is a premium of 47% to Vizio’s closing price of $7.82 as of February 12, the day before reports about deal talks emerged. Vizio shares were up about 15% at $10.96 in premarket trading on Tuesday.

Walmart reported a 3.9% rise in comparable sales, excluding fuel, for its fourth quarter ended January 31, compared to LSEG estimates of 2.91%. Global e-commerce sales grew 23%.

Fourth-quarter adjusted profit came in at $1.80 per share, compared to expectations of $1.65 per share.

Americans flocked to Walmart’s shops to buy its low-priced and discounted products during the holiday season late in 2023. However, still-high interest rates and rising rents have raised concern that consumers will remain constrained and a recovery in spending will be slower than previously expected.

Still, Walmart said it expects consolidated net sales in fiscal 2025 to grow between 3% and 4%, largely above analysts' expectations of a 3.4% rise.

The size of the retailer’s dividend hike also beat expectations.

“This year’s 9% increase is the largest in over a decade, and a sign of our confidence in our growth potential and cash flow,” Walmart executive vice-president and CFO John David Rainey said.

Reuters