Four key takeaways from Walmart’s earnings call

Key learning points

  • After a positive quarterly report, Walmart expects stronger sales in 2024 as the company looks to grow revenue through new lines of business.
  • The company’s acquisition of TV maker Vizio offers Walmart an opportunity to expand its fast-growing advertising segment.
  • The retail giant is working to improve efficiency and expects profitability for its online division.
  • Artificial intelligence helps the company improve inventory management and order fulfillment.

Walmart ( WMT ) delivered better-than-expected results Tuesday as sales, earnings and e-commerce grew in its fiscal fourth quarter.

On a call with investors and analysts, company executives said the retail giant continued to see growing revenue from new lines of business. And with e-commerce sales reaching $100 billion worldwide, 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 a promotional play for Walmart.

These are the main conclusions from today’s call.

Retailer looking to increase profits through new business activities

Walmart forecast net sales growth of between 3% and 4% for the next fiscal year, better than last year’s forecast, but company officials say the retailer is relying on new revenue streams and has no plans to raise prices.

“We are not relying on price increases to achieve our long-term plans,” Chief Financial Officer John David Rainey said during the company’s earnings call on Tuesday.

This distinction is important because the White House recently blamed consumer goods companies for profiting from inflation and driving up prices to increase margins.

By expanding its business beyond major stores, Walmart saw 45% annual sales growth at its Marketplace grocery chain, while global membership revenue from its Walmart Plus and Sam’s Club subscriptions grew 20% worldwide. Executives predict that advertising and memberships will account for 20% of Walmart’s annual operating revenue this year.

“Together, these businesses have significantly higher structural margins than our core retail businesses and are growing faster, which is driving our margins higher,” Rainey said.

Vizio Buy is an advertising game

Walmart is generating 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 rose 28% last year to $3.4 billion. And while CEO Doug McMillon said the details behind the Vizio acquisition are 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,” said McMillon.

Growth of e-commerce brings profitability into view

Helped by better utilizing its stores in the delivery process, Walmart grew 23% annually in global e-commerce sales as the retailer’s number of weekly active e-commerce customers increased, according to executives.

“Customers recognize that they come to Walmart for convenience, not just price, and it improves the channel’s profitability,” Rainey said.

Although e-commerce sales are growing, it is still not a profitable segment. Rainey said profitability is in sight and McMillon touted Walmart’s $100 billion in global e-commerce sales last year, the first time the retailer has reached that goal.

“Scale 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 the customer experience

Walmart is using artificial intelligence (AI) technology to improve customer service, including an application for Sam’s Club that allows customers to purchase products without having to go through the checkout, with just one scan by an associate.

McMillon said the retailer used AI to not only improve customer order fulfillment through improved search results, but also to improve inventory management. AI will help eliminate 35 million tasks for Sam’s Club employees, says President and CEO Chris Nicholas.

“One of the most popular searches this month was ‘help me buy a Valentine’s gift.’ And instead of searching separately for things like chocolates, a car, jewelry and flowers, the search returns a list of results that are relevant and curated,” said McMillon.

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