Chainkeen|Walmart is buying Vizio for $2.3 billion. Here's why it's buying a TV manufacturer.

Walmart expanding drone delivery service

Walmart on Tuesday said it's buying television manufacturer Vizio for $2.3 billion, an acquisition that could help the retailing giant build its advertising and media business. 

Vizio may be best known for its TV sets, but it also operates the SmartCast Operating System, which has more than 18 million active accounts. The SmartCast system is included in every Vizio TV set, and connects with other services like Apple's Airplay and personal assistants like Amazon's Alexa. 

The deal Walmart comes as the retail giant is facing more pressure on its margins from price-conscious consumers, noted Neil Saunders, managing director of GlobalData, in an email Tuesday. Vizio's SmartCast will allow Walmart to reach more consumers via advertising through the TV sets, putting the retailer on a more even playing field with rival Amazon, he added.

"Longer term, Walmart can also use the Vizio platform to develop more of its own entertainment content — something it might link with the Walmart+ membership scheme," Saunders said. 

Walmart's advertising business grew 28% to $3.4 billion in sales last year, although that represents about 2% of its overall revenue.

In the statement, Walmart Chief Revenue Officer Seth Dallaire said the company believes combining Vizio with its media business, Walmart Connect, "would be impactful as we redefine the intersection of retail and entertainment."

Walmart earnings

Separately, Walmart reported strong results for the fourth quarter, ending the year on a high note as its low prices attracted shoppers looking for deals in an economically challenging environment for many.

"Over the holiday period, Walmart pulled out all the stops to offer the American consumer great value for [their] money and, from our data, this has clearly paid dividends with the highest number of U.S. shoppers ever using Walmart for at least part of their holiday food and essentials shopping," Saunders said.

Shares rose more than 5% in early trading. 

Walmart, based in Bentonville, Arkansas, is among the first batch of major U.S. retailers to report quarterly results. Industry analysts are dissecting the data, seeking to shed more light on how consumers are feeling, particularly after the government reported a significant decline in consumer spending last month.

Shoppers have remained resilient, propped up by a strong labor market and steady wages. But Americans pulled back on spending in January after the holiday season splurge.

Economists attributed part of the pullback to snowy weather conditions, but they also said the slowdown shows that shoppers may finally be buckling under higher interest rates and other financial hurdles and that the economic momentum could be starting to fade. Consumers account for roughly two-thirds of economic activity.

—With reporting by the Associated Press.

In:
• Walmart

Aimee Picchi

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

Twitter