The US retail giant Walmart said the acquisition of Indian e-commerce firm negatively impacted its net income for the financial year 2018-19 (ended January).
The company also expects to pump in USD 1.2 billion in Flipkart, in which it acquired a 77% stake in August 2018 for USD 16 billion.
“The ongoing operations negatively impacted fiscal 2019 net income and this negative impact will continue in fiscal 2020,” the company said in the annual report filing submitted to the Securities and Exchange Commission.
The world’s largest retailer posted total revenue (comprising of net sales, membership and other income) of USD 514.4 billion for fiscal 2019, an increase of USD 14.1 billion or 2.8% year-on-year. Compared to the last fiscal, Walmart's net sales grew 2.9% to USD 510.3 billion, while the consolidated net income stood at USD 7,179 million.
“For fiscal 2019, net sales were positively impacted by overall positive comparable sales for Walmart US and Sam's Club segments, along with positive comparable sales in the majority of our International markets and net sales from Flipkart, which we acquired in the third quarter of fiscal 2019.”
Flipkart represented approximately 1% of the company’s net sales for the fiscal year ended on January 31, 2019.
“Our gross profit rate decreased 18 basis points for fiscal 2019 when compared to the previous fiscal year...due to the mix effects from our growing e-commerce business, the consolidation of Flipkart, our planned pricing strategy and increased transportation expenses,” the company said.
As of January 31, 2019, the company’s cash and cash equivalents amounted to USD 7.7 billion held in various locations around the world. Approximately USD 2.8 billion of that cash and cash equivalents may not be freely transferable to the US due to local laws or other restrictions, the company stated in the report.
Of the USD 2.8 billion as of January 31, 2019, approximately USD 1.2 billion can only be accessed through dividends or inter-company financing arrangements subject to the approval of Flipkart's minority shareholders; however, this cash is expected to be utilised to fund the operations of Flipkart.
Flipkart represented approximately 2% of the company’s total assets (USD 219, 295 million) as of January 31, 2019, after excluding goodwill and intangible assets recorded.
Walmart also saw its total long-term debt soaring to USD 11.6 billion owing to the issuance of long-term debt to fund a portion of the purchase price of Flipkart and for general corporate purposes.
Walmart said global economic conditions, regulatory restriction on e-commerce offering in international markets such as India might affect its revenue.
Founded by brothers Sam M Walton and James L Walton, Walmart started online operations in 2000.
The retailer which first ventured outside the US in 1991, began their first international initiative when they entered a joint venture in Mexico. It currently does businesses in 26 countries.