Walmart, the world’s largest retailer, has said that the acquisition of Indian e-commerce firm Flipkart has negatively impacted its profits in fiscal year 2019 (FY19) and will continue to do so next year.
The Bentonville-based retail giant made its largest-ever acquisition when it bought 81% of outstanding shares of Flipkart in August 2018 for a cash consideration of about $16 billion, to gain a foothold in India’s fast-growing retail market.
Walmart posted $514 billion in revenue for FY19 compared with $500 billion in the previous financial year, growth of 2.8%. However, that was slower slightly less compared with the previous financial year’s 3% growth.
The gross profit rate decreased 18 basis points in FY19, mainly due to its efforts to increase the focus on e-commerce businesses, plus consolidation of Flipkart and increased transportation expenses. For FY19 Walmart reported a consolidated net income of $7.2 billion, compared with $10.5 billion in FY18.
The US retail giant has stated that total assets of Flipkart were worth $24.1 billion, some $13.6 billion of which were in ‘goodwill’, which is an intangible asset associated with the purchase of one company by another and the anticipated growth. The other components include $2.2 billion in cash and cash equivalents, plus $2.8 billion in other current assets.
The Indian e-commerce company had liabilities of $3.7 billion, while $4.3 billion represented the non-controlling 23% stake held by minority stakeholders.