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In India, Walmart would like a ‘collaborative regulatory process for a level playing field’

Walmart reported total revenues of $138.8 billion for the quarter ended 31 December 2018 (Q4FY19). Its net sales at Walmart International were down 2.3% to $32.3 billion, and growth was around 5% in constant currency, the company said.

In its Wamart International business, Walmart reported consolidated operating income “decline by a low single-digit percentage range, including Flipkart, and increase by low single-digit percentage range, excluding Flipkart.” Its international arm EPS was down by a “low single-digit percentage range compared with FY19 adjusted EPS.” Capex was approximately $11 billion.

For FY19, Walmart’s operating cash flow was $27.753 billion. In Brazil, its deconsolidation led to an offset from the inclusion of Flipkart’s sales for a quarter. Its Gross profit rate declined 116 bps on a reported basis due to Flipkart.

Pertinent notes from its call with analysts

On its entry into the Indian ecommerce market

  • Doug McMillon, Walmart’s CEO, said that the company is “optimistic about the eCommerce opportunity” in India due to the size of the market, the low ecommerce penetration and the growth pace. McMillon added that the company would like to work with the government for “for pro-growth policies that can allow this nascent industry” to grow.
  • McMillon said that the continued ecommerce growth in India, the growing middle class etc are as true today as they were 6 months ago, and hence it is “excited about the market.”
  • On Flipkart and its investments in Flipkart, Brett Biggs, executive VP and CFO, said, “.. We’ll see how the year goes and respond appropriately… Flipkart is already an ecosystem. There’s the PhonePe, a payment platform. There’s a last mile delivery. There’s a Myntra and Jabong businesses in apparel. So.. there’s a lot of dimension to it… And I think we’ve forecasted it appropriately and we’ll respond as the year goes on.”

On the current regulatory market in India

Last month, we reported that Walmart, Amazon and lobbying groups were working with the Office of the United States Trade Representative (USTR) and the US embassy to oppose the new FDI in ecommerce policy in India. A Walmart spokesperson had admitted that the company had engaged with the US administration on the issue.

On the call, Walmart’s leadership said:

  • “In terms of the regulatory environment, we were disappointed in the recent change in law and the lack of consultation, but the team has worked to ensure that we’re in compliance with the new rulesWe hope for a collaborative regulatory process going forward, which results in a level playing field,” McMillon added.
  • McMillion said, “I can’t comment on the future the guidance for Flipkart in the first quarter. I’ll just say that the things that have happened have been disappointed in some way, but they haven’t shaken our confidence and excitement about what this is going to mean to the company long-term… And this isn’t a story about one quarter or even one year. We hope to have an effective productive dialogue as it relates to future changes that happen. But in terms of how the business has behaved, it’s in line with what we thought it would be.”
  • According to Brett Biggs, executive VP and CFO, the company “made a number of strategic choices to position Walmart International for success including the acquisition of a majority stake in Flipkart and the sale of the majority of our business in Brazil.”

(emphasis ours)

Download: Presentation | Release | Transcript

Read about the opposition to the Walmart-Flipkart merger here.

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