Even as US retail major Walmart maintained that it is upbeat about its acquisition of Flipkart since it gives them greater access to the $680 billion retail market in India, the impact of the acquisition continues to be a drag on Walmart’s finances.
In a recent earnings meet, Walmart has said that integration of Flipkart has hit the gross profit rate and operating income of its international unit in the February-April quarter.
The retail giant’s operating income fell 41.7 per cent as strong results from Walmart US and Sam’s Club were partially offset by the inclusion of Flipkart in 2019. On a constant currency basis, Walmart’s EBIT was down by 37.5 per cent. In comparison, Walmart’s operating income in the US was better than expected and grew 5.5 per cent. The gross profit rate declined 172 basis points on a reported basis, primarily due to Flipkart’s inclusion in this year’s results, the company said in the statement. It may be noted that Walmart’s financial year runs from February to January.
Meanwhile, it has said that the full year income dilution is still in line with the expectations. “A large part of the decline was due to dilution from Flipkart, which was expected, partially offset by the deconsolidation of Brazil,” said Walmart CFO Brett Biggs.
Earlier, Walmart sold 80 per cent of its stake in its Brazilian operations to private-equity firm Advent International which also partly offset the decline caused by Flipkart’s acquisition. While the Bentonville giant continues to see impact on expenses, interest and debt due to its Flipkart acquisition, the management remains upbeat.
“I continue to be excited about the opportunity with Flipkart and PhonePe, the online payments firm owned by Flipkart. I got to visit our teams in India and China a few weeks ago. I’m impressed with the team and their ability to innovate for customers with speed,” Walmart CEO Doug McMillon pointed out.
Walmart acquired Flipkart last May for over $16 billion and started consolidating its results in the third quarter of fiscal 2019, with a one-month lag.