Walmart Ad Revenue Surges 44%
As same-store sales growth slows to 4.1%, Walmart's advertising business sees rapid expansion, with a 44% increase in revenue in the quarter ended April 30
Walmart's advertising business, Walmart Connect, has grown 44% in the quarter ended April 30, its fastest pace since the company began reporting the metric. This growth comes as the retailer's same-store sales growth slows to 4.1% in the same period.
The company has been focusing on expanding its advertising business, which has high margins of around 70% and contributes about a third of Walmart's operating income. Walmart Connect accounts for a small portion of the company's $713 billion in annual sales, but its growth has been significant, with impressions increasing 17% in the second quarter, compared to 9% growth for Amazon.
Walmart has also been working to keep prices low, lowering prices on around 7,000 items. The company's membership programme, launched in 2020, has strengthened customer loyalty and expanded the data available to its advertising business.
## What's driving growth The growth of Walmart Connect has been driven by the expansion of the company's membership programme, which provides valuable customer information that can be used to improve advertising targeting. The retail media operation allows brands to reach shoppers across Walmart's website, mobile app, and physical stores, and its access to transaction data enables advertisers to measure whether campaigns ultimately generate purchases.
## Why it matters The growth of Walmart Connect is important for the company as it looks to offset the costs associated with keeping prices competitive and maintaining rapid delivery services. With consumers facing higher gasoline bills, they have become increasingly focused on cheaper groceries and everyday essentials, prompting Walmart to reduce prices across roughly 7,000 products. The company's cautious annual outlook has weighed on investor sentiment, but the growth of Walmart Connect has helped to support profitability.
Walmart sees artificial intelligence as the next potential growth driver for Walmart Connect, and analysts expect the business to report a similarly strong growth rate when the company publishes results for the quarter ended July 31. Walmart shares have risen 2.6% this year to $114.33, compared to a 13% gain for the S&P 500.
