A Walmart store in Chicago, Ill., on Nov. 20, 2018.KAMIL KRZACZYNSKI/Reuters
Walmart Inc. WMT-N 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 US$2.3-billion.
Shares in the retail giant rose 3 per cent in premarket trading after it also gave an upbeat annual sales forecast and announced a 9-per-cent rise in its dividend, the biggest increase in more than a decade.
Walmart’s proposed offer to buy Vizio for US$11.50 per share in cash, is another bet on the retailer’s fast-growing U.S. advertising business, where ad sales rose 22 per cent in the quarter ended Jan. 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 U.S. 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 per cent to Vizio’s closing price of US$7.82 as of Feb. 12, the day before reports about deal talks emerged. Vizio shares were up about 15 per cent at US$10.96 in premarket trading on Tuesday.
Walmart reported a 3.9-per-cent rise in comparable sales, excluding fuel, for its fourth quarter ended Jan. 31, compared with LSEG estimates of 2.91 per cent. Global eCommerce sales grew 23 per cent.
Fourth-quarter adjusted profit came in at US$1.80 per share, compared to expectations of US$1.65 per share.
Americans flocked to Walmart’s stores to buy its low-priced and discounted products during the holiday season late last year. However, still-high interest rates and rising rents have raised concerns 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 per cent and 4 per cent, largely above analysts’ expectations of a 3.4-per-cent rise.
The size of the retailer’s dividend hike also beat expectations.
“This year’s 9-per-cent increase is the largest in over a decade, and a sign of our confidence in our growth potential and cash flow,” said John David Rainey, executive vice-president and chief financial officer at Walmart.