Walmart's advertising business grew sharply, with overall ad revenue up 46% in Q2 and Walmart Connect up 31% excluding Vizio. Advertising, membership, and marketplace fees supplied about half of incremental profit in the quarter. Those revenue streams provide flexibility to absorb tariff-driven import cost increases while maintaining low prices to attract shoppers. Tariff hikes have raised import duties substantially and have pushed costs higher as inventory is replenished at post-tariff price levels. Costs have increased weekly and are expected to continue into the third and fourth quarters, making advertising a key lever to protect margins.
Walmart has a plan to stay profitable as President Donald Trump's tariffs push up costs. It's called advertising. In the second quarter, Walmart's ad revenue jumped 46% year over year, a number padded by the addition of Vizio, the smart TV maker it picked up last year. Strip that out, and the U.S. business still looks strong: Walmart Connect, its retail media network, grew 31%.
"From a business model point of view, the fact that we have businesses like advertising and membership growing obviously helps with flexibility as it relates to when we decide to absorb part of a tariff cost increase," said Doug McMillon, president and CEO of Walmart, told analysts as the company reported second quarter results Thursday (August 21). In other words, Walmart's going to lean harder on advertising. It doesn't have much choice.
It's a sobering outlook, coming after a quarter where profits fell short of Wall Street expectations. "The way things have played out so far, the impact of tariffs has been gradual enough that any behavioural adjustments by the customer have been somewhat muted," said McMillon. "But as we replenish inventory at post tariff price levels, we've continued to see our costs increase each week, which we expect will continue into the third and fourth quarters."
Collection
[
|
...
]