World’s largest retailer Walmart said its US $16 billion investment in Flipkart may negatively impact its earnings per share (EPS) by US $0.25-0.30 in fiscal year 2019, even though it remains excited about what the future holds in the fast growing Indian e-commerce space.
“The company’s investment in Flipkart… is expected to negatively impact fiscal year 2019 EPS by approximately US $0.25 to US $0.30 if the transaction closes at the end of the second quarter,” Walmart said in its earnings statement.
The US-based company has reported better-than-expected revenue numbers in the first quarter with total revenue growing 4.4 percent to US $122.7 billion. Its online sales grew 33 percent in the said quarter and expects it to grow about 40 percent for the full year.
Walmart’s net sales from international business grew 11.7 percent to US $30.3 billion in the said quarter. The diluted EPS stood at $0.72, while the adjusted EPS was at US $1.14, the statement added.
The statement also noted the steps taken by the company during the quarter to reposition its portfolio of businesses. These include Walmart’s investment in Flipkart, combining Sainsbury and Asda in the UK and divestment of banking operations in Walmart Canada and Walmart Chile.
On the deal with Flipkart in India, Walmart President and CEO Doug McMillon said e-commerce in India is growing rapidly and it expects the segment to grow at four times the rate of overall retail.
“Flipkart is already capturing a large portion of this growth and is well-positioned to accelerate into the future. So, this is an investment in a large, fast-growing country, with an innovative business positioned in the growth area of e-commerce… We’re excited about what the future holds,” he added.
After months of discussions, Walmart had announced the mega deal to pick up 77 percent stake in Flipkart Group holding company that is registered in Singapore. The transaction is subject to statutory approvals, including that of Competition Commission of India (CCI).
The deal, which valued the Bengaluru-based company at US $20.8 billion, is believed to be part of Walmart’s strategy to strengthen presence in the Indian market and also compete head-on with global rival, Amazon.
Amazon is also a rival to Flipkart and the two are locked in an intense battle for leadership in the booming Indian e-commerce market that is forecast to touch US $200 billion in the next few years.