Walmart’s quarterly earnings report shows that same‑store sales growth in the United States slipped to 4.1% for the quarter ended April 30, down from an average of about 4.5% over the prior five quarters. The slowdown comes as consumers grapple with higher gasoline prices and look for lower‑cost groceries and household essentials.
Advertising fuels profit margins
While store sales have leveled, Walmart Connect – the company’s retail‑media platform – posted a 44% increase in revenue for the quarter, the fastest growth since the metric was first reported in early 2023. The boost reflects expanding use of Walmart’s membership program, which supplies shopper data that powers the advertising service.
Launched in 2019 and rebranded as Walmart Connect in 2021, the platform lets brands target shoppers across Walmart’s website, mobile app and physical stores. Advertisers can also track whether their ads lead to purchases, giving them a clear return‑on‑investment signal.
Margins and market share
Although Walmart Connect represents only a small slice of the retailer’s $713 billion annual sales, its high margins contribute roughly one‑third of Walmart’s operating income, with analysts estimating gross margins near 70%. The division’s growth helped offset the cost of maintaining low prices on about 7,000 items that the company recently reduced.
Walmart’s advertising share is still far behind Amazon’s, but impressions rose 17% in the second quarter, outpacing Amazon’s 9% increase, according to market‑intelligence firm Sensor Tower.
AI as the next growth engine
Walmart is positioning artificial‑intelligence tools as the next phase for Connect. The retailer has begun testing ads within its AI shopping assistant, Sparky, and is rolling out AI‑driven tools to help advertisers create, manage and measure campaigns. Sparky’s active user base more than doubled in the quarter ending April 30.
Industry data from digital‑commerce consultancy Flywheel shows that nearly one‑third of consumer searches now originate from AI models, making ad placement within chat‑based interfaces a “natural evolution,” according to Flywheel’s chief client officer.
Analyst outlook
Morningstar analyst Brett Husslein raised his fair‑value estimate for Walmart to $70 per share, citing the strength of the advertising business. Logan Capital Management’s managing partner Sarah Henry described Walmart Connect’s potential as “the sky’s the limit.”
Walmart is expected to report earnings for the quarter ended July 31 on Thursday. Analysts anticipate Connect’s growth rate will remain strong even if same‑store sales dip below 4% for the first time since early 2024, according to LSEG data.
Looking ahead
Walmart’s 2024 acquisition of smart‑TV maker Vizio expands Connect beyond its website and stores into streaming television, further diversifying its ad inventory. As the retailer continues to leverage shopper data as a form of currency, its advertising platform may increasingly resemble the model pioneered by Amazon.
Walmart declined to comment while in its quiet period before the earnings release.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
