Earnings Report Preview | Walmart's Q4 sales are expected to grow again, planning to acquire Vizio and increase investment in digital advertising.

Zhitong App has learned that Walmart will announce its fourth-quarter earnings before the U.S. stock market opens on February 20th (Tuesday). The market expects Walmart's Q4 revenue to be $169.26 billion, compared to $162.74 billion in the same period last year; the estimated adjusted earnings per share are $1.65, down from $1.71 in the same period last year.

Market expectations are that Walmart's U.S. same-store sales are expected to increase by 3.2%, a significant decrease from the 8.8% growth in the same period last year. It is expected that Walmart will once again achieve strong quarterly sales growth, but the concept of consumer elasticity seems to be losing momentum.

According to Placer's data, foot traffic in its stores decreased by 1.1% in the fourth quarter, but improved slightly at the end of December and turned positive in January.

For the entire fiscal year, U.S. same-store sales are expected to grow by 5.35%, as consumers, especially high-income shoppers, have been flocking to this value retailer to purchase groceries since the end of 2022.

Bank of America analyst Robert Ohmes wrote in a client report, "We expect that as consumers continue to cope with rising food prices, the increase in market share and discounts in the grocery market will continue to support Walmart's physical and online transactions."

Joe Feldman, Senior Managing Director of Telsey Advisory Group, stated that everyone's focus is on the grocery business and any shifts in discretionary spending this quarter. Investors should also be wary of a return to profit growth outpacing sales growth, which would mean an expansion in profit margins.

In the previous quarter, Walmart CEO Doug McMillon pointed out that the company's forecast for the remaining time in 2023 is relatively weak, "consumers are under pressure." The company has raised its full-year earnings per share outlook to $6.40 to $6.48, higher than the previous expectation of $6.36 to $6.46, but lower than the expected $6.48 at that time.

As Walmart releases its earnings report, it is stepping up its investment in digital advertising. Walmart is seeking to compete with Amazon Prime. It is reported that Walmart is in talks to acquire TV manufacturer and video platform Vizio for $2 billion.

If the deal goes through, it will allow Walmart to "leverage TV viewership data" to promote its products across the entire ecosystem. Wedbush analyst Alicia Reese wrote in a client report that it can also provide direct e-commerce sales on connected TV platforms - a "huge opportunity" as consumers are still cutting the cord - and will provide retailers with more audience and customer data. Feldman stated that consumer data is "extremely valuable" as Walmart is seeking to develop its ecosystem, especially its Walmart+ membership platform.

"Walmart is trying to create a service similar to Amazon Prime; this may be one way to achieve this goal," Feldman added. However, he is skeptical about the price Walmart is willing to pay and what this means for other retailers selling Vizio TVs, such as Costco, Target, and Best Buy.

But Walmart has taken some risks in past acquisitions, including Jet.com (which eventually shut down), Flipkart (not yet profitable), as well as Moosejaw and Bonobos (later resold).

JPMorgan analyst Chris Horvers stated in a report to clients that this could be another example of Walmart's interest in "learning and developing its digital capabilities, while apparently willing to accept some flyers."

Horvers believes that since "consumer electronics are one of the most competitive markets in the world," and Walmart's own brand TV brand "is far behind companies like Samsung, TCL, LG in market share," this deal will not raise antitrust concerns.