Walmart is buying budget TV manufacturer Vizio for $2.3 billion as the retail giant seeks new frontiers for its advertising business, the companies said Tuesday.
John David Rainey, Walmart’s chief financial officer, pointed to ads as one of the important growth areas for Walmart this year. “Global advertising and membership” will generate 20 percent of Walmart’s operating income in its current fiscal year, Rainey said.
Vizeo has more than 18 million active accounts on its SmartCast — the TV operating system — and its platform has free, streamable content supported by ads.
“This is the part of the business Walmart hopes to grow,” said Neil Saunders, managing director of the analytics company GlobalData. “This multichannel approach gives Walmart a lot more power and reach in the world of advertising, and puts it on a more level playing field with the likes of Amazon.”
Walmart reported strong financial results Tuesday, with revenue up 6 percent to $648.1 billion for the fiscal year. The company’s operating income rose 32.2 percent to $27.1 billion.
Retailers want to boost profit margins as consumers pull back in discretionary categories. Electronics sales have been particularly stubborn, as most consumers upgraded their at-home entertainment in 2020 and 2021 during the pandemic.
TV prices fell 9.7 percent in January, compared with last year, according to the Bureau of Labor Statistics consumer price index. The average cost of a TV was $385 last year, down 11.7 percent from 2022, according to Circana. Rainey said he expects “relative weakness to persist” for technology sales.
Walmart already generates more sales for Vizio than any other retailer, Saunders said, but retailers are moving beyond selling just goods.
“At a broader level, the deal underlines that retail is becoming a much more diversified business than it used to be,” Saunders said in a statement. “There are linear linkages from retail into other industries, like advertising and fulfillment, that retailers are looking to capitalize on.”
Under the all-cash deal, Walmart would pay $11.50 per share to acquire Vizio, reflecting a 54 percent premium over the TV maker’s share price before the Wall Street Journal last week broke news of a potential acquisition.
Vizio stock rose almost 15 percent Tuesday morning. Walmart gained about 4 percent Tuesday.
This is a developing story and will be updated.
