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Flipkart weighs heavily on Walmart’s Q1 Results

Walmart Inc. saw a substantial decline in its gross profit rate and operating income during the first quarter (February-April) of the current financial year. Much of this decline has happened due to the cost incurred by the inclusion of Flipkart, which the retail giant acquired last year for a whopping $16 bn.

Walmart’s Q1 international operating income due to Flipkart

Walmart said that its International operating income witnessed a drop of 38% on fixed currency rate basis and 42% on a reported basis.  Its international sales dropped by 4.9% whereas gross profit came down by 172 basis points. However, the retail giant did manage to improve its total revenue by 1% to reach annual revenue of $123.93 billion. Without taking into account the impact of global currencies, the total revenue stood at $125.8 billion; a jump of 2.5 percent or $3.1 bn.

Although Flipkart’s was a major drag on Walmart’s global profit, its global profit in other international markets like Mexico, Canada, UK and China also witnessed decline. But the company succeeded in offsetting its unimpressive performance in international markets with  good results in the domestic market. Company’s ecommerce sales in the US saw healthy increase of 37% during the first quarter.

Walmart remains Optimistic about Flipkart

Flipkart may have shaken Walmart’s global earning but the U.S. retail giant maintains that its impact was on the expected lines. Conventionally, most companies have to bear the effect of costly acquisition at least for few quarters.

On a broader scale, the world’s largest retail company continues to remain very upbeat about Flipkart’s future prospects. Walmart’s President & CEO Doug McMillon recently visited India to take stock of things in its recently acquired company. McMillon spoke about his India visit and exuded confidence about Flipkart during the earning call.

I got to visit our teams in India and China a few weeks ago. I continue to be excited about the opportunity I see with Flipkart and PhonePe. I’m impressed with the team and their ability to innovate for customers with speed,” McMillon said.

Flipkart is currently locked in a ruthless battle with Amazon in a race to establish decisive supremacy over India’s e-commerce market. Both companies are neck to neck in terms of GMV and revenue, with hardly any difference between the two.

Analysts claim that race between the two players will continue to remain close affair for long time especially since amazon now no longer enjoys the deep pocket advantage.

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