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India bet pays for Walmart Int'l, Flipkart helps US giant's Q3 net sales

Operating income takes a hit owing to $290 million impairment towards Jabong merger with Myntra.

Peerzada Abrar  |  Bengaluru 

Walmart has a lot riding on Flipkart

International on Thursday reported solid sales growth in the quarter, helped by its Indian investment and businesses in China and Mexico.

International, the segment which consists of the retail giant’s operations outside the US, posted net sales of $29.2 billion, an increase of 1.3 per cent. Excluding currency, net sales were $30.2 billion, an increase of 4.8 per cent.

The Bentonville-based company acquired for $16 billion last year in May and is now battling Amazon, another American giant, for the top rank in India’s online retail market.

“We like the momentum we see in parts of the business. We’re excited about what’s happening at and PhonePe,” said Doug McMillon, president and CEO of Walmart, during the third quarter fiscal year 2020 earnings event.

“Beyond just our current results, the Indian market represents a significant opportunity for growth, and our team of innovators brings local expertise to a market where understanding the flow of everyday life can help us provide products and services that remove friction from the lives of our customers,” said McMillon.

McMillon said Flipkart’s flagship shopping festival, Big Billion Days, recorded nearly 75 per cent growth in new customers versus last year. “It was great to see record sales in India during The Big Billion Days event,” said McMillon.

Brett Biggs, executive vice-president and chief financial officer of Inc, said because of calendar shifts, two days of the event affected Q3 net sales this year with the remaining four days to be reported in the fourth quarter. Last year, the entire sales event was reported in Walmart’s Q4 results.

McMillon said that the company saw "tremendous growth” in PhonePe, its digital payments arm that competes with Amazon Pay, Google Pay and Paytm. “The company is acquiring more than three million new customers per month. With over 55 million monthly active users, we’re quickly looking for ways to monetize the customer base, including an offering of financial services,” said McMillon.

However, Walmart International’s posted a 46.2 per cent decline in the operating income on a reported basis. “As expected, the inclusion of Flipkart negatively affected operating income,” said Walmart referring to the overall operating income of Walmart which declined 5.4 per cent, or 4.1 per cent in constant currency.

In August the company revealed that for the Q2, Walmart International, posted 29.6 per cent decline in operating income on a reported basis and 27.3 per cent decline in constant currency, primarily due to Indian e-commerce firm Flipkart. In May, Walmart had said its reported international operating income in the Q1 declined 41.7 per cent and went down 37.5 per cent in constant-currency terms was on account of Flipkart.

With regards to the impairment or losses due to revaluation of assets, Walmart also said that Flipkart runs an apparel offering on Flipkart.com and two fashion-focused platforms, com and Jabong.com. Earlier this year, the company decided to consolidate back-office functions for and Jabong to drive efficiencies.

In going through that process, the team decided to focus on a single premium fashion platform, com, simplifying the business and the customer proposition. “We continue to see strong growth in both sales and units across both Flipkart and Myntra fashion and remain confident about performance. Since there was value ascribed to the Jabong name at the time of the Flipkart acquisition, we are taking a non-cash impairment charge on the trade name,” said Biggs.

For Walmart International, China provided a strong quarter with net sales up 6.3 per cent and comp sales up 3.7 per cent. This was the best sales result from China in more than five years. Sam’s Club was the primary driver with double-digit comp growth due to strength in fresh foods and growth in omnichannel sales.

“Customers appreciate having multiple options to shop Walmart, so we’re continuing to lean into omnichannel capabilities, including the rollout of Walmart Daojia and the expansion of JD Daojia,” said Biggs. “Each of these services provide fast delivery of online orders to customers’ homes, often in less than 40 minutes.”

Walmart’s total revenue was $128.0 billion for the Q3, an increase of $3.1 billion, or 2.5 per cent compared to last year.

First Published: Fri, November 15 2019. 12:05 IST
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