Walmart’s
fourth-quarter earnings report brought a flurry of announcements from the world’s largest retailer. Not only did the results top expectations, the retailer also confirmed it was buying smart TV manufacturer
Vizio
and raised its dividend by the most in more than 10 years.
With inflation and interest rates still running high, many Americans turned to value-focused retailers such as Walmart to stretch their budgets further during the holiday season. Partly as a result, Walmart’s sales jumped by 5.7% from a year earlier, to $173.4 billion. Analysts had projected revenue would rise 4% to $170.9 billion, according to FactSet estimates.
The company gained market share across virtually every category in the fourth quarter. Most of the gains came from higher-income households.
Same-store sales for Walmart’s stores in the U.S. also topped estimates, rising 4% compared with projections for a 3.4% increase. Adjusted earnings of $1.80 a share were also higher than forecasts for $1.64.
Walmart stock rose 5.2% to $179.29 early Tuesday—its largest percent increase since November 2022—bringing its gain so far this year to about 14%. The stock is trading at record highs, and is the best performer in the
Dow Jones Industrial Average
today. The Dow was largely unchanged in midmorning trading, while the
S&P 500
dipped 0.5%.
Management’s financial forecasts offered a mixed picture.
For the fiscal year ending January 2025, Walmart sees net sales rising by 3% to 4%. Adjusted earnings per share will range between $6.70 to $7.12 before the company’s planned stock split, roughly in line with consensus estimates for $7.06. After the split, which is scheduled to go into effect later this week, earnings will be between $2.23 to $2.37.
“We’re not immune to the whims of the economy and certainly there are economic outcomes that could cause us to move to the high end of the range or the low end of the range,” said John David Rainey, chief financial officer, in a call with investors Tuesday. “But given where we are right now, going into the first part of this year, we feel really good about the plan.”
First-quarter forecasts, however, fell a bit short. Adjusted earnings will be between $1.48 to $1.56 pre-split, or 49 cents to 52 cents post-split. Analysts had penciled in earnings of $1.60 a share, per FactSet. Walmart sees sales rising between 4% to 5% year over year.
“The 1Q24 plan is slightly below consensus, but that has been WMT’s consistent ‘M.O.,’ which is to say…’beat, guide conservatively, beat,’” wrote Michael Baker, an analyst at D.A. Davidson. “As such, we are not that concerned about the 1Q outlook, particularly with CFO Rainey’s favorable comments on consumer behavior.”
Walmart raised its dividend for fiscal 2025 to $2.49 a share, or 83 cents a share post-split. That marks a 9% increase, signaling the company’s confidence in its growth potential and cash flow, executives said.
The company also confirmed reports that it was buying smart TV manufacturer
Vizio
Vizio
for about $2.3 billion, or $11.50 a share. Buying Vizio will allow Walmart to expand its advertising business, called Walmart Connect.
Walmart plans to finance the acquisition using a combination of cash and debt. The transaction to be “slightly dilutive” to earnings per share in the short term, executives said.
Walmart’s advertising business grew close to 30% in fiscal 2024 from the previous year, reaching $3.4 billion, the company said. While it still represents a sliver of the total company’s revenue, advertising is rapidly becoming an important driver of profit growth, as Barron’s previously reported. Walmart believes global advertising and membership alone will represent 20% of annual operating income in fiscal 2025, Rainey said, and the Vizio acquisition will act as an “accelerant.”
“These profit streams allow us to fund investments in our core business while also expanding our operating margins,” he added.
This is especially important given that the company has seen continuing weakness in the sale of general merchandise items, which often carry higher margins than grocery products. In comments made Tuesday, Walmart said that weakness is likely to continue through 2025, with some minor improvements in the second half of the year.
“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,” wrote TD Cowen analyst Oliver Chen. “Additionally, higher household income share gains, particularly in general merchandise, also impress.”
Write to Sabrina Escobar at [email protected]
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