The gross profit rate and operating income of Walmart’s international business fell in the February-April quarter, primarily due to Flipkart’s inclusion in this year’s financial performance. Walmart’s financial year runs from February to January. However, the full-year earnings dilution related to Flipkart is still in line with expectations, the company said.
“A large part of the decline was due to dilution from Flipkart, which was expected, partially offset by the deconsolidation of Brazil,” Walmart CFO Brett Biggs said in the management commentary statement.
Walmart’s total revenues grew about 1% to USD 123.93 billion and international sales fell 4.9%. The gross profit rate declined 172 basis points on a reported basis.
Walmart’s large international markets — Mexico, Canada, the UK and China — incurred a drop in gross profit during the quarter.
“I continue to be excited about the opportunity with Flipkart and PhonePe. I’m impressed with the team and their ability to innovate for customers with speed,” Walmart CEO Doug McMillon said in the statement.
Walmart acquired Flipkart last May for over USD 16 billion and started consolidating its results in the third quarter of fiscal 2019, with a one-month lag, Economic Times reported.
In its FY20 guidance, Walmart had said consolidated operating income will decline by a low single-digit percentage range including Flipkart, but will increase by a low single-digit percentage range excluding the Indian ecommerce company.
Walmart CEO has recently visited the Flipkart team in Bangalore. “I met with Kalyan Krishnamurthy, Sameer Nigam, and their leadership teams and was excited to see how the Flipkart, Myntra and PhonePe teams are driving the industry with innovative solutions to serve its diverse and growing ecosystem,” McMillan had said in a statement. “There is tremendous progress and we are making a difference. Kalyan, Sameer and their teams have our full support to continue executing the growth strategy for our e-commerce business in India,” he said.
In March, Walmart said the acquisition of Flipkart for USD16 billion negatively impacted its net income in 2018-19 (FY19), and the trend would bleed over to 2019-20 as well.
Flipkart competes with Amazon in India. Both dominated total online retail sales with over 80% market share last calendar, according to Morgan Stanley.