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 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 U.S. advertising business, where ad sales rose 22% 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% 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 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 Jan. 31, compared to LSEG estimates of 2.91%. Global eCommerce 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 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% 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," said John David Rainey, executive vice president and chief financial officer at Walmart Inc.
(Reporting by Ananya Mariam Rajesh in Bengaluru and Siddharth Cavale in New York; Editing by Susan Fenton)
