Key Takeaways
- After a positive quarterly report, Walmart is projecting stronger sales in 2024, as it aims to grow income through new lines of business.
- The company’s acquisition of TV maker Vizio provides Walmart an opportunity to expand its fast-growing advertising segment.
- The retail giant is working to improve efficiency and sees profitability ahead for its online division.
- Artificial intelligence is helping the company improve inventory management and order fulfillment.
Walmart (WMT) delivered better-than-expected results on Tuesday as it grew revenue, income and e-commerce in the fiscal fourth quarter.
On a call with investors and analysts, executives at the company said the retail giant was continuing to see growing revenue from new lines of business. And with e-commerce sales hitting $100 billion globally, executives believe profitability for that segment is in sight, while artificial intelligence will help the company manage inventory and improve order fulfillment. Meanwhile, the proposed purchase of Vizio (VZIO), also announced Tuesday, is an advertising play for Walmart.
Here are key takeaways from today’s call.
Retailer Looking to Grow Profits Through New Business Lines
Walmart is forecasting growth in net sales of between 3% and 4% for its upcoming fiscal year, better than its forecast last year, but company officials said the retailer is relying on growing new revenue streams and is not planning on raising its prices.
“We are not relying on raising prices to achieve our long-range plans,” Chief Financial Officer John David Rainey said on the company’s earnings call Tuesday.
This distinction is important as the White House has recently blamed consumer goods companies for taking advantage of inflation and pushing up prices to pad margins.
In expanding its business beyond its big-box stores, Walmart saw 45% annual revenue growth at its Marketplace chain of grocery stores, while global membership income from its Walmart Plus and Sam’s Club subscriptions grew globally by 20%. Executives forecast advertising and memberships will represent 20% of Walmart’s annual operating income this year.
“Together, these businesses have significantly higher structural margins than our core retail business, and they are growing faster, which has the effect of bending our margin upward,” Rainey said.
Vizio Buy is an Advertising Play
Walmart is driving more revenue through advertising and Tuesday’s announcement that it would acquire TV-maker Vizio is part of the retailer’s plan to accelerate that business.
Global advertising sales were up 28% over the past year to reach $3.4 billion. And while CEO Doug McMillon said the details behind the Vizio acquisition were still in the works, the retailer is primarily focused on the advertising potential behind the TV maker’s operating system software.
“Marketplace and advertising are key drivers of profitability growth and this acquisition accelerates the buildout of our advertising platform into the connected TV business, which will be exciting,” McMillon said.
E-Commerce Growth Puts Profitability in Sight
Helped by better utilizing its stores in its delivery process, Walmart grew annual global e-commerce sales by 23%, as executives said the retailer increased its weekly active e-commerce customers.
“Customers are recognizing that they can come to Walmart for convenience, not just price, and it helps the profitability of this channel,” Rainey said.
While e-commerce revenue is growing, it’s still not a profitable segment yet. Rainey said profitability is in “line of sight” and McMillon touted Walmart’s $100 billion in global e-commerce sales last year, the first time the retailer has hit that mark.
“Scale has helped a lot,” McMillon said of reaching the sales milestone. “And it’s nice to have growth on top of that.”
Artificial Intelligence Will Improve Customer Experience
Walmart is using artificial intelligence (AI) technology to improve customer service, including an application for Sam’s Club that lets customers buy products without having to go through a checkout line, using only one scan by an employee.
McMillon said the retailer was using AI to improve not only customer order fulfillment through improved search results but also inventory management. AI is helping eliminate 35 million tasks for associates at Sam’s Club, its President and CEO Chris Nicholas said.
“One of the most popular searches this month was ‘help me buy a Valentine’s Day gift.’ And rather than searching separately for things like chocolates, a car, jewelry, flowers, the search returns a list of results that are relevant and curated,” McMillon said