By Jaewon Kang | Bloomberg

Walmart topped earnings estimates in the fourth quarter as choosy shoppers nevertheless kept buying in its stores.

Separately, Walmart said it agreed to buy smart-TV maker Vizio Holding Corp. for about $2.3 billion. The deal would accelerate the retailer’s advertising business, called Walmart Connect, and help Walmart and its advertisers engage more with customers. Walmart has been expanding nonretail businesses that have faster growth and better margins.

The deal announcement confirmed a Wall Street Journal report from last week. Vizio shares soared 16% in New York trading Tuesday, while Walmart gained as much as 6.3% — its biggest rise since November 2022.

Walmart’s same-store sales excluding fuel — a key metric for retailers — increased 4% for US stores during the quarter through the end of January from the same period a year earlier. Wall Street was expecting 3.1%.

The Bentonville, Arkansas-based company reported adjusted earnings of $1.80 a share, higher than the analyst forecast of $1.65. Adjusted operating income grew about 13%. The stock was up about 16% over the past year through last week and has been trading around record levels.

Softer guidance

Still, the world’s largest retailer delivered softer guidance for the current fiscal year, as it expects consumers to be selective in their spending.

“They are being choiceful,” Chief Financial Officer John David Rainey said in an interview. Consumers are resilient but looking for value, spending less per trip but have been shopping frequently, he said, adding that the company expects some resilience to continue for the rest of the year.

The company is forecasting sales to grow between 3% and 4% for fiscal 2025 — slower than growth from the prior year. It expects adjusted earnings of $6.70 to $7.12 a share, with analysts’ consensus estimate at $7.09.

Walmart is gaining share in nearly every category, Rainey said, and e-commerce is among the factors driving growth as the company trims losses associated with handling online orders.

While deflation is still a possibility, the company expects it to be less likely based on what it observed during the latest quarter. Price changes vary by products, with food prices rising by low-single-digit percentages and general merchandise products costing less. While sales of general merchandise fell, most of Walmart’s share gain in this area is coming from higher-income consumers making $100,000 or more.

Growing volumes

Walmart executives said on a call with analysts that the company is growing unit volumes and market share. The retailer had better-than-expected holiday sales, and it’s reducing inventory that helps with store operations.

Walmart, while grabbing more spending with low-priced groceries and other basics, has been cautious in recent months about the health of the consumer amid persistent inflation and higher interest rates.

US consumers have been buying cheaper products and seeking value, as they pull back from discretionary products like general merchandise. That has resulted in softer sales for some retailers, including Target Corp. and Home Depot Inc. Home Depot shares are down Tuesday morning after it reported its fifth straight comparable-sales decline. Other big-box retailers are set to report their quarterly earnings in the coming weeks.

The recent moderation in inflation is another challenge for Walmart and other retail operators that have passed down price increases to consumers over the past few years. This has contributed to higher dollar sales for companies, followed by an uptick in revenue during the pandemic when people bought more groceries and home goods. Such increases are slowing overall, though inflation remains stubborn in some areas like groceries and shelter.

Walmart has been beefing up automation in warehouses and stores in recent years, while remodeling locations to make them more modern. Pickup and delivery businesses continue to expand, driving share gains among upper-income households and fueling growth of the Walmart+ membership program.

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