Dive Brief:
- Walmart said Tuesday it plans to buy smart TV maker Vizio for $2.3 billion. The retailer wants access to Vizio’s SmartCast operating system, which will enable Walmart to accelerate Walmart Connect, its retail media network.
- The announcement came as the retailer reported fourth quarter total revenue reached $173.4 billion, up 5.7% from a year ago. For the full year, total revenue rose 6% to $648.1 billion and operating income rose 32.2% to $27 billion.
- U.S. net sales for the year rose 5.1% to $441.8 billion, up from $420.6 billion a year ago. U.S. operating income also rose 7.4% year over year to $22.2 billion. U.S. comparable sales excluding fuel were up 5.6% for the year, a slowdown from the 6.6% growth the retailer reported last year.
Dive Insight:
Walmart began the year by announcing several major initiatives last month regarding employee retention, compensation, store revamps and consumer-facing technology. The company also is executing a three-for-one stock split, which goes into effect after the market closes on Friday.
“We are impressed by Walmart’s execution with what we call the New Retail Nexus or execution across digital advertising, the marketplace model, and artificial intelligence,” analysts with TD Cowen, led by Oliver Chen, said in a note. “Additionally, higher household income share gains particularly in general merchandise also impress.”
McMillon attributed its success in part to a strong holiday season. Walmart also saw strength in its e-commerce unit, surpassing $100 billion in sales this year, McMillon said.
In all of its markets, McMillon said customers are resilient but continuing to look for value. Walmart said grocery, health and wellness led sales for its U.S. business, while general merchandise sales saw a modest decline.
“Given the company was up against some stiff prior year numbers, these are very solid results from Walmart, which continues to benefit from the acquisition of new customers and is solidly gaining market share in grocery,” Neil Saunders, managing director of GlobalData, said in emailed comments.
The latest move to purchase Vizio seeks to leverage the business’ advertising success.
Globally, Walmart’s advertising business grew 28% during the year to reach $3.4 billion. Walmart CEO Doug McMillon said during the company’s earnings call that its “announcement today that we’ve agreed to acquire Vizio gives us the opportunity to reach and serve customers in new ways and connect more dots for those that advertise with us.”
Vizio’s smart TV operating system, SmartCast, has over 18 million active accounts. Its platform has over 500 direct advertiser relationships, including many Fortune 500 companies, according to the announcement. Meanwhile, Walmart Connect, which the retailer describes as a “closed-loop omnichannel media business,” grew 30% during the last fiscal year. The deal is subject to regulatory approval and is expected to close during the next fiscal year, executives said on the call.
“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,” 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.”
And while the deal may not be “terribly material financially” right now, according to Wells Fargo analysts led by Edward Kelly, it speaks to the retailer’s intent to “grow high margin [alternative] value streams.”
For the upcoming fiscal year, Walmart anticipates a 3% to 4% increase in consolidated net sales and a 4% to 6% increase in consolidated operating income.
