Walmart reduces its 2018 earnings preview after $16 million acquisition of Flipkart.
 |
| Shoppers descend on Walmart despite lower earnings preview after $16 million acquisition of Indian e-commerce company Flipkart. Photo: Getty Images - Kat Wade/Stringer |
By Dawn Geske, International Business Times
Retail giant Walmart Inc. (WMT) has reevaluated its earning potential for 2018, lowering expectations after the May acquisition of $16 billion Flipkart, an Indian e-commerce company. As Walmart continues to battle rival Amazon.com, the company is continuing to reinvent and grow its e-commerce sales with hopes that Flipkart will be the catalyst long-term.
The company, at the time of the acquisition, projected that the purchase would erode share earnings 25 to 30 cents this fiscal year and 60 cents next, according to Reuters. The company’s earnings forecast after its stellar Q2 are now thought to earn $4.65 to $4.80 per share in fiscal 2019. This is a decrease from the $4.90 to $5.05 per share it suggested earlier in the year.
Walmart does, however, estimate double-digit growth for its online sales going forward with an expected 35 percent growth by January 2020. This is a decrease from investor expectations of 40 percent growth for the company this fiscal year.
Online sales are the main driver for Walmart as the company discontinues opening brick and mortar locations at a steady clip. Instead, the company is opting for an online strategy that includes web redesign, more grocery offerings, and the addition of more fashion brands to its online retail collection. Grocery sales for the conglomerate total as much as 56 percent of the company’s overall revenue even as Amazon makes great strides to compete with Walmart in the space, reports Reuters. Walmart holds strong with the ability to offer 90 percent of the U.S. population fresh food within 10 miles.
The retailer plans to double its online grocery services by providing more delivery and pickup options. As many as 800 U.S. stores will offer grocery delivery while another 2,000 will provide pickup services by year-end.
Walmart does expect growth this year at a rate of 3 percent, which exceeds all previous year sales through 2008. This is anticipated to be followed by a 2.5 to 3 percent sales growth for fiscal 2020. Fiscal 2019 is expected to bring a decline for the retailer, hovering around a single digit percentage loss based on the investment in Flipkart.
COMMENTS