NEW DELHI: US-based retail giant Walmart International on Thursday said that its consolidated gross profit margins have taken a sharp hit for the second consecutive quarter due to the inclusion of its recent Indian acquisition: Flipkart.
According to the company’s financials for the May-July 2019 period, net sales during the quarter shrunk to USD 29.13 billion from USD 29.45 billion in the year-ago period, while operating income fell 29.6 per cent to USD 893 million. Walmart’s financial calendar runs from February to January.
“Operating income declined 27.3 per cent in constant currency and 29.6 per cent on a reported basis due primarily to the expected dilution from Flipkart,” Walmart’s EVP & CFO Brett Biggs said. Its US business, however, rose by 2.9 per cent to USD 85.2 billion during April-June, while operating income registered 4 per cent growth at USD 4.65 billion.
This is the second consecutive decline in Walmart’s profitability arising from its Flipkart acquisition, with the company disclosing in May this year that its overall operating income in the January to March period declined 41.7 per cent (37.5 per cent in constant-currency terms) due to the inclusion of Flipkart. Walmart had acquired 77 per cent stake in Bengaluru-based Flipkart last year in a USD 16-billion deal.
However, the retail major’s president and chief executive Doug McMillon said the ecosystem being built by the Indian e-commerce firm is "impressive and comprises strong businesses". McMillon cited the example of Flipkart’s fashion arm Myntra, which recently concluded its largest sale of the year – the End of Reason sale – where more than 2 million customers shopped on the platform during a four-day period with 7,000 plus orders per minute at peak.
To help fulfill these orders, the Flipkart team had partnered with almost 11,000 local Kirana stores to support last mile delivery, he said.