Walmart consolidated gross profit margin slips on Flipkart losses

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Updated: August 16, 2019 4:34:14 AM

The US-based retailer acquired a 77% stake in Bengaluru-based e-commerce major Flipkart last year in a $16-billion deal.

Walmart International's net sales declined to .13 billion from .45 billion reported in the year-ago period. Walmart International’s net sales declined to .13 billion from .45 billion reported in the year-ago period.

Walmart on Thursday said its consolidated gross profit margin declined 46 basis points on both the reported and constant currency basis due to inclusion of Flipkart in this year’s results.

The US-based retailer acquired a 77% stake in Bengaluru-based e-commerce major Flipkart last year in a $16-billion deal. In the three months ended July 2019, Walmart International’s net sales declined to $29.13 billion from $29.45 billion reported in the year-ago period. Operating income fell 29.6% to $893 million in Q2 FY20 compared to the previous year, the company said.

“International continued to make progress on managing costs and delivered 36 basis points of expense leverage in the quarter.

However, the operating income declined 27.3% in constant currency and 29.6% on a reported basis due primarily to the expected dilution from Flipkart,” Walmart’s EVP & CFO Brett Biggs said.

Net sales for US, however, rose 2.9% to $85.2 billion during Q2 FY20. Operating income also registered a 4% growth to $4.65 billion. Walmart’s financial calendar runs from February to January.

President & CEO Doug McMillon said the company is ‘excited’ about the opportunity India brings. “The ecosystem we’re building through Flipkart is impressive and consists of a collection of strong businesses.”

The CEO said Flipkart’s fashion unit Myntra concluded their largest sale event of the year where more than two million customers shopped during the four-day period with more than 7,000-plus orders per minute at peak. McMillon also struck an optimistic note on PhonePe, adding that it recently crossed the milestone of two billion transactions with 50 million monthly active users.

E-commerce companies in India have been at the centre of discourse after the government revised norms on foreign direct investment (FDI) in e-commerce that came into effect in February. The revised norms bar e-commerce firms having foreign investment like Flipkart and Amazon from selling products of the entities in which they hold stake or whose inventory they control.

The government is also in the process of formulating an e-commerce policy that proposes regulating cross-border data flows, setting up storage facilities locally and establishing a data authority to devise a framework for sharing data.

Amazon said last month it was hopeful of working with the government to seek a “stable predicable policy” that would facilitate the company to continue with its investments in technology and infrastructure.

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