Flipkart deal may hit Walmart profits

BENGALURU: Walmart Inc., which spent $16 billion to buy a 77% stake in Flipkart earlier this year, cut its earnings forecast for this year because of losses expected at Flipkart, highlighting the challenges that the US retail giant faces in making the expensive acquisition work in the longterm.

On Tuesday, Walmart lowered its earnings forecast for the current financial year, after including the impact from the Flipkart acquisition. Walmart also predicted that its US e-commerce growth next year will be slower than the current financial year.

Walmart faces the prospect of a long-drawn-out battle against Amazon India, which closed the gap with its rival during the first leg of the Diwali season face-off last week.

Flipkart, which had set aggressive targets to more than double its gross sales during its flagship five-day Big Billion Days sale, ended up falling short of that target. According to a company spokesperson, the company grew sales during Big Billion Days by 80% from last year.

could not immediately verify the sales that Flipkart posted during Big Billion Days, but according to reports, Flipkart posted a little over $1 billion in gross sales during the five-day event.

On Tuesday, Walmart said it expected its operating income during 2019-2020 to decline by a low single digit percentage range, but added that it expected operating income to increase by a low single digit percentage range, when excluding Flipkart in both FY19 and FY20.

Walmart also forecast that its earnings during 2019-20 will decline by a low single digit percentage range, compared to 2018-19. It struck a bullish note during a call with investors on Tuesday, despite the near-term hit from the Flipkart acquisition.