Walmart Connect grew 44% in the quarter as the retailer’s U.S. same-store sales growth slowed to 4.1%. The advertising business uses Walmart’s customer data to target shoppers and has become a larger contributor to operating income as the retailer expands advertising across digital platforms, stores and streaming media.
Key Takeaways
- Walmart Connect’s advertising business grew 44% in the quarter.
- U.S. same-store sales growth slowed to 4.1% for the quarter ended April 30.
- Walmart Connect contributes an estimated one-third of Walmart’s operating income.
- Walmart uses customer data to support advertising targeting and measurement.
- Walmart has expanded advertising capabilities into streaming television and AI-powered tools.
The two figures provide separate measures of Walmart’s business performance. Same-store sales track sales growth from existing retail locations, while Walmart Connect generates advertising revenue from businesses seeking to reach Walmart shoppers.
Walmart Connect uses Walmart’s customer data to help advertisers target shoppers. The business also provides measurement capabilities that connect advertising activity with purchases, giving advertisers a way to evaluate whether campaigns reach customers and generate sales.
The 44% growth rate makes advertising one of the faster-growing parts of Walmart’s business identified in the reported results. The result also gives Walmart a revenue stream that operates alongside its retail sales.
Walmart’s advertising activity covers digital channels and stores. The retailer has also expanded its advertising capabilities into streaming television, increasing the range of channels available to advertisers through its broader business.
The advertising business therefore operates across several parts of Walmart’s customer ecosystem. Its role is not limited to advertisements displayed on Walmart’s retail website or app.
Walmart’s retail operations have also been responding to changes in consumer purchasing behavior. Earlier reporting on Walmart’s value-focused retail strategy described the retailer’s emphasis on lower-priced goods and digital promotions as younger consumers placed greater weight on affordability.
U.S. Same-Store Sales Growth Slows to 4.1%
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Walmart’s U.S. same-store sales growth slowed to 4.1% for the quarter ended April 30. That figure provides the retail-sales measure used alongside the faster growth recorded by Walmart Connect.
Same-store sales growth measures activity at existing stores and is used to assess retail sales performance without relying on changes caused by opening or closing locations. The 4.1% figure therefore describes the pace of sales growth across Walmart’s existing U.S. retail operations.
Walmart Connect follows a different revenue model. Rather than depending directly on merchandise sales, the advertising business sells access to Walmart’s shopper audience and related advertising capabilities.
The slower retail-sales growth does not mean that Walmart’s advertising business operates independently of its retail operations. Walmart Connect relies on customer data generated through Walmart’s digital and physical shopping activities.
That data supports the targeting and measurement services offered to advertisers. The advertising operation can therefore use information connected to Walmart’s retail business while generating a separate source of revenue.
The difference between the reported growth rates also provides context for Walmart’s business mix. Retail sales grew at a slower rate than the advertising operation during the period covered by the results.
Advertising Becomes a Larger Operating Income Contributor
Walmart Connect contributes an estimated one-third of Walmart’s operating income. Its 44% quarterly growth gives the advertising business a larger role in the company’s overall financial structure.
Operating income measures the income generated from a company’s business operations before items such as interest and taxes are considered. Walmart Connect’s contribution means advertising is tied directly to this measure of operating performance.
The advertising business differs from Walmart’s traditional retail model because advertisers pay to reach Walmart shoppers rather than shoppers paying Walmart directly for advertising services. Walmart can therefore generate revenue from businesses that want access to its customer base.
The customer-data component is central to this model. Walmart uses information associated with its shoppers to support advertising targeting and measurement.
For advertisers, the targeting function provides a way to reach customers within Walmart’s digital and retail ecosystem. The measurement function provides information about advertising performance and purchasing activity.
The reported contribution of roughly one-third of operating income also gives context to the 44% growth rate. The advertising operation is not simply a small supplementary service within Walmart’s business. It represents a substantial contributor to operating income.
The use of customer information for marketing also requires businesses to define how data is collected, shared and used. A recent article on U.S. business data sharing practices examined customer demographics, transaction histories and behavioral analytics as examples of information businesses may handle in marketing and retail relationships.
Walmart Expands Data-Driven Advertising Capabilities
Walmart’s advertising model depends on customer data to support both targeting and measurement. Walmart uses that data to help advertisers reach shoppers and assess advertising activity.
The data connects Walmart’s retail operations with its advertising business. Customers interact with Walmart through stores and digital channels, while advertisers use Walmart Connect to reach those shoppers.
Measurement is another component of Walmart Connect’s offering. Advertisers can use the service to assess the relationship between advertising and purchases rather than relying only on exposure figures.
This structure gives Walmart Connect a direct connection to retail transactions. The advertising operation can use information from Walmart’s customer ecosystem to provide services designed around shopping activity.
Walmart’s expansion across digital platforms and stores also broadens the environments in which advertising can reach customers. Advertisers can use Walmart’s available channels rather than relying on a single digital location.
The advertising business combines customer targeting, retail access and measurement within Walmart’s broader commercial operation. Those functions distinguish Walmart Connect from a simple advertising placement service.
Walmart has also used technology to connect retail and advertising experiences. Earlier coverage of Walmart’s shoppable TV strategy described a Walmart and Peacock partnership that used AI to identify products shown in television content and connect viewers with available Walmart products.
Streaming and AI Add New Advertising Channels
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Walmart has expanded its advertising capabilities into streaming television and AI-powered tools. These additions give the advertising business additional channels beyond Walmart’s traditional retail locations and digital shopping platforms.
Streaming television expands the potential advertising environment available through Walmart’s business. It allows the company to connect advertising with a media channel rather than limiting placements to retail-oriented digital properties.
AI-powered tools add another component to Walmart’s advertising capabilities. The company has incorporated AI into its advertising activities as part of its broader set of tools for reaching shoppers.
The combination of streaming and AI gives Walmart Connect additional ways to deliver advertising services. These capabilities sit alongside the customer-data and measurement functions already associated with the business.
Walmart’s advertising operation therefore spans several types of customer interaction. Digital channels, physical stores, streaming television and AI-powered tools are all identified in the reported business activity.
The expansion also changes the range of services that can be connected to Walmart’s shopper audience. Advertisers can use Walmart’s ecosystem across more than one channel while the retailer maintains the data and measurement functions associated with Walmart Connect.
Walmart advertising growth reached 44% during the quarter while U.S. same-store sales growth slowed to 4.1%. Walmart Connect’s estimated contribution of one-third of operating income places the advertising business alongside the retailer’s core operations as a significant source of operating income.
Frequently Asked Questions
What is Walmart Connect?
Walmart Connect is Walmart’s advertising business. It uses Walmart’s customer data to help advertisers target shoppers and measure advertising activity.
How fast did Walmart Connect advertising grow?
Walmart Connect’s advertising business grew 44% in the quarter covered by the reported results.
How much does advertising contribute to Walmart’s operating income?
Walmart Connect contributes an estimated one-third of Walmart’s operating income, according to the figures included in the editorial reporting.
How does Walmart use customer data for advertising?
Walmart uses customer data to support advertising targeting and measurement. The data helps advertisers reach shoppers and assess advertising activity in relation to purchases.
How is Walmart expanding its advertising business?
Walmart has expanded its advertising capabilities across digital channels and stores and has added streaming television and AI-powered tools to its advertising activities.
