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15th of November 2018

Economy



Walmart rises despite Flipkart hit

Walmart is asking Wall Street to wait for profit growth as it battles to retain its place as the world's largest retailer.

The US discount chain has been buying up smaller companies, investing in India and spending on new technology.

But the investments come at a cost.

On Tuesday, the firm warned that profits per share would decline slightly next year, largely because of losses at its Indian e-commerce unit Flipkart.

Despite the caution, the firm's shares rose by nearly 2%, offering a vote of confidence in Walmart's efforts to remake its business.

Executives outlined plans to investors at an annual meeting on Tuesday.

They said they were looking at everything from introducing more robots to cut costs to expanding revenue by monetising customer data.

In its stores, Walmart is expanding offerings in categories with strong sales, such as wine and toys.

Online, executives said they wanted to improve services such as same-day delivery and increase the number of products available.

"I like the direction we're heading, but it's not going to happen overnight," said Marc Lore, chief executive of Walmart's US e-commerce unit.

Leaning long-term

Walmart has already been on a shopping spree, purchasing online shopping site Jet.com, as well as brands such as Bonobos and Bare Necessities to strengthen its digital muscle.

It spent $16bn (£12.1bn) this year to acquire a majority stake in Flipkart, an Indian e-commerce company.

Executives said they believed that Flipkart will turn profitable eventually, but conceded that the investment, as well as others it is making, would be costly in the short-term.

"We want to be positioned to have a business that's large and growing for the long term," said chief executive Doug McMillon.

"I'm trying to balance short-term and long-term but if you force me to choose, I'd lean long-term."

Sales forecast

The firm expects sales to increase by at least 3% in its next financial year, excluding fluctuations due to currency changes.

In the US, the firm expects sales growth of 2.5% to 3%, helped by a 35% surge in online shopping.

However, profits are expected to decline in the low single digits. The firm's estimate includes Flipkart, but not other changes, such as tax rates.

Executives said a healthy US economy had helped power sales, but they were preparing for the possibility that consumers will pull back.

The firm is also facing rising labour and delivery costs, as well as new US tariffs on Chinese imports.

Executives said the firm was committed to remaining the "low price leader" and had been in intense talks with suppliers in an effort to avoid raising prices.

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