Bengaluru: Walmart’s international unit saw operating profits fall by nearly 30% to $900 million in the second quarter ended July of the financial year 2020, primarily due to the inclusion of Flipkart. The company also saw its net sales in international markets fall by 1.1% to $29.1 billion even as the Bentonville-based retail giant reported strong numbers in its home market US.
This is the second continuous quarter for Walmart where its international earnings have been impacted due to Flipkart as it saw a fall of 38% in operating profits to $790 million in the first quarter. After the $16-billion acquisition for a 77% stake in Flipkart, this is the first full financial year where the Bengaluru-based online retailer has been added in its earnings review.
Following the acquisition last year in May, Walmart had said that it is expected to incur a loss of $0.60 a share, which translates into a total loss of $1.8 billion for its financial year ending on January 31, 2020.
The world’s largest retailer also lowered its guidance for net international sales growth (see graphic) to a range of 3-4% against the earlier estimate of 5%, even though it indicated that operating profit is expected to improve. Apart from India, Canada, China and the UK are some of its largest overseas markets. In contrast, Walmart’s better than expected earnings sent its scrip jumping by over 5% in the US as its e-commerce business in the home market moved up 37%. Walmart’s total revenue for the quarter went up by close to 2% at $130 billion, while it also raised the outlook for the rest of the year.
“I’m excited about the opportunity we have in India, and I’m pleased with the progress we’re making in China. For the quarter, nine of 10 markets posted positive comp sales (comparable-store sales)…Although we face macroeconomic and political challenges in some of our markets, our teams continue to find innovative ways to serve customers and deliver solutions that make shopping easier,” said Walmart president and CEO Doug McMillon in a prepared statement.
He also added that he was impressed with Flipkart’s ecosystem companies like Myntra, which used a network of kirana stores to deliver 70% of the 8.5 million packages during its recent sale, and payments unit PhonePe, which has crossed 50 million monthly active users.
Earlier in June, Walmart’s EVP and international CFO Richard Mayfield had said that a Narendra Modi government with a bigger majority is probably the best outcome (in India) for business. But he had added one can expect the unexpected, going forward. He was hinting at the policy changes for FDI in e-commerce here that tightened the noose around foreign e-tailers like Amazon and Walmart.
Even though the Walmart-owned Flipkart managed to limit the impact of regulatory changes earlier in the year, it has forced the company to make operational changes that are affecting its overall efficiency, people aware of the matter said.
No comments:
Post a Comment