Walmart earnings take a hit from Flipkart deal, shares fall

Callaghan O’Hare | Bloomberg | Getty Images

Shoppers wait in line at the pharmacy of a Walmart store in Charlotte, North Carolina, Sept. 13, 2018. 

Walmart cut its earnings outlook, citing the impact of its acquisition of Indian e-commerce company Flipkart, it said Tuesday prior to its annual investors meeting.

The company lowered its fiscal 2019 forecast for adjusted earnings per share to $4.65 to $4.80 from an estimated range of $4.90 to $5.05. Refinitiv estimated their adjusted earnings per share to be $4.79.

Walmart continues to back its prior 2019 sales growth forecast.

Walmart shares were down less than 1 percent in premarket trading Tuesday.

The company bought a 77 percent stake in Flipkart for $16 billion in May as part of its strategy to bulk up its e-commerce business. It was Walmart’s largest deal ever, and was reportedly hard-won as Amazon also made an offer for the company. India is an important market and Walmart saw the deal as critical to gaining a foothold there.

For fiscal year 2020, the company also said it expects its U.S. same-store sales growth to be 2.5 to 3 percent and eCommerce net sales growth to be around 35 percent for fiscal year 2020. Fiscal year 2020 operating income is expected to decline slightly, but increase in 2019 and 2020 when excluding the Flipkart deal.

“We’re adapting and transforming with speed to better serve our existing customers and reach new ones,” said Walmart President and CEO Doug McMillon. “We’re operating with discipline, balancing our short and long-term opportunities. While we’re excited about what we’ve done so far, we aren’t satisfied. As we execute today and build for tomorrow, our associates and unique omni-channel assets position us for success.”

Walmart’s net sales growth for 2020 is predicted to be at least 3 percent, negatively affected by its deconsolidation of its Brazil operations and reduced tobacco sales at Sam’s Club. Internationally, it expects its net sales growth to be about 5 percent.

Walmart has been making changes to compete with other retail giants such as Amazon. It announced a new partnership on Tuesday with Advance Auto Parts to sell its products and offer delivery and services. It recently bought the lingerie company Bare Necessities. Earlier in October, it acquired Eloquii, a retailer that sells plus-sized clothes, for $100 million. It also announced a partnership with U.S. movie studio Metro Goldwyn Mayer to create content with its video-on-demand service Vudu.

The store said it plans to open fewer than 10 new stores in the U.S. and more than 300 stores internationally, mainly in Walmex and China next fiscal year.

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