Walmart announced Tuesday it will buy smart television maker Vizio for $2.3 billion, boosting the retail giant's advertising venture as growth slows in its legacy business from the pandemic boom.

With the all-cash purchase, the US shopping behemoth gains access to Vizio's more than 18 million accounts as another source of strengthened potential connection to those households.

Based in California, Vizio is known for what Walmart called "immersive entertainment" through a "customer-centric platform" that lets viewers stream content for free by watching ads.

Analysts said the deal would propel further growth in Walmart's advertising business, which until now has centered on the company's website and stores.

Walmart has targeted advertising as a major growth area as it competes with Amazon for market share across an increasing panorama of economic goods and services.

Walmart announced the deal along with the release of fourth-quarter earnings, in which it reported solid revenues growth of 5.7 percent to $173.4 billion.

Profits fell 12.4 percent to $5.5 billion because, it said, of higher equity investment-related gains in the prior year.

The quarter included a solid four percent rise in comparable sales in the company's namesake US stores, which account for about two-thirds of sales.

However, four percent comparable US store growth is less than half the rate Walmart reported three years ago under the same metric. As a provider of "essential" goods, Walmart was a major beneficiary of added sales during COVID-19.

Walmart pointed to share gains in grocery and general merchandise, primarily among higher-income households.

For all of last year, Walmart's revenues rose six percent to $648.1 billion. Chief Executive Doug McMillon pointed to e-commerce sales of more than $100 billion as a key threshold crossed last year.

Amazon, which is often seen as Walmart's chief rival, reported 2023 revenues of $574.8 billion.

The Vizio deal comes as Walmart turns to advertising as a prospective area of growth.

Vizio's operating system "provides great viewing experiences at attractive price points," said Walmart Chief Revenue Officer Seth Dallaire, adding that the transaction will help "redefine the intersection of retail and entertainment."

Analyst Neil Saunders of GlobalData said Walmart sees Vizio's advertising platform as an area of potential.

"The Vizio deal essentially takes Walmart Connect from being an advertising provider through stores and websites, to one that can penetrate consumers' homes via television," Saunders said.

"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."

More long-term, Walmart may also use Vizio to develop original content, stepping up another flank in the rivalry with Amazon, "which has built a highly successful ecosystem which helps to promote loyalty with both advertisers and consumers," Saunders said.

McMillon described advertising as a "key driver" of profitability, but declined to comment extensively about plans for Vizio on a conference call because the transaction had not closed.

Walmart shares jumped 4.7 percent in pre-market trading.

© 2024 AFP