- Since the changes in FDI policy in February 2019, the Indian government became a huge problem in Walmart’s plan with Flipkart.
- The acquisition of Indian e-commerce giant Flipkart has hurt Walmart dearly in its gross and operating profit margins.
This is the first complete financial year where Flipkart’s book will be included in Walmart’s consolidated quarterly results and till today the acquisition of Indian e-commerce giant Flipkart has hurt Walmart dearly in its gross and operating profit margins.
In the first quarter of the financial year 2020, the operating profits for Walmart had gone down by 38 percent to $720 million. In the quarter that ended on July 2019, the loss by controlled partially to 29.6 percent and the figure was $893 million.
The international net sales fell from $29.45 billion in Quarter 2 of the financial year 2019 to $29.13 billion in the same quarter of the current financial year. The gross profit margin saw a decline of 46 basis points.
The financial calendar of Walmart runs from February to January.
According to a statement by Walmart’s EVP and CFO Brett to Financial Express, he said that International business made progress with respect to expense management with 36 basis points in leverage.
The decline in the figure on the basis of constant currency was 27.3%.
On the other hand, in the US, net sales have increased by 2.9 percent to $85.2 billion and the operating income grew by 4 percent to $4.65 billion for the quarter. In the international market, the slump is caused by Flipkart.
The continuous loss in gross profit margins and operating income counts Flipkart’s addition in the US retail giant’s books.
As per the statement of the Company last year, Walmart had claimed to be around in loss of 1.8 billion in Financial Year 2022 which means $0.60 worth loss per share. This statement came directly after the famous acquisition of Flipkart in 2018.
These losses raise a lot of questions which because Walmart is a public company and is open to volatile share prices, market share, and capitalization, for how long it will be able to bear the costs of Flipkart’s losses.
Since the changes in FDI policy in February 2019, the Indian government became a huge problem in Walmart’s plan with Flipkart.
Another rumored draft of e-commerce policy is in the works that would regulate the foreign exchange in the segment. If this policy turns out against the favor of Walmart’s plans and expectations, the future of Flipkart will be uncertain.
Doug McMillian, the CEO and President of Walmart has expressed his excitement over the opportunities that Indian market is presenting to the retail giant and he is hopeful that the new policy will be in favor of all parties unlike the last one.
It has even strengthened its investment portfolio in India by committing $50 million to agritech startup NinjaCart.