In the recent quarterly report, US retail titan Walmart showcased a noteworthy surge in its consolidated gross margin. The delayed start of Flipkart‘s Big Billion Days (BBD) holiday season in India was blamed for this improvement. Let’s delve into the details of how this strategic timing impacted Walmart’s financial landscape.
Consolidated Gross Margin Rise:
Walmart’s consolidated gross margin rate experienced a 32 basis points (bps) upswing. A pivotal factor behind this increase was the altered schedule of Flipkart’s BBD event, shifting from Q3 in the previous year to Q4 this year. This adjustment, as mentioned in the October quarter earnings statement, had a particularly favorable effect on Walmart US.
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Flipkart’s Big Billion Days Impact:
While the delay in Flipkart’s BBD positively influenced gross margins, it did pose challenges to overall sales growth, especially in the ecommerce domain. The international ecommerce sales of Walmart saw a 3% decline, while advertising witnessed a 4% growth, both consequences of the timing shift in Flipkart’s BBD.
Flipkart’s Festive Season and Ecommerce Landscape:
Flipkart’s festive season sale, concluding in early October, held significant weight in the ecommerce sector. Reports suggested a gross merchandise value of Rs 33,000-36,000 crore during this period. In 2023, the festive season emerged as a crucial driver for online shopping, with over 50% of total sales occurring through online platforms. Various sectors, including electronics, food, and grocery, experienced double-digit growth compared to the previous year.
Walmart’s International Performance:
Walmart’s international net sales exhibited a commendable 5.4% year-on-year growth, reaching $26.7 billion. This growth was fueled by robust performances in Mexico (Walmex) and China. The global advertising business also thrived, recording a 20% growth, attributed in part to the strategic timing of Flipkart’s BBD.
Ecommerce and Advertising Outlook:
Despite the negative impact on Indian ecommerce sales, Walmart emphasized strong growth in ecommerce and increased market penetration outside India. The business expects growth in advertising and e-commerce revenues in the second half of the year to be similar to that of the first.
Due in large part to the resolution of claims pertaining to opioid cases, Walmart recorded a consolidated net income of $453 million for the third quarter, a notable improvement above the $1.79 billion loss in the same time previous year.
The third-quarter consolidated revenue reached $160.8 billion, showcasing a 5.2% year-on-year growth. Adjusted earnings per share for the same period were reported at $1.53.
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Future Projections:
Doug McMillon, President and CEO of Walmart, expressed optimism for the future. He highlighted strong revenue growth across segments and a positive outlook for the holiday season. Walmart revised its net sales guidance for FY24 to be in the range of 5% to 5.5%, with adjusted earnings per share projected between $6.40 and $6.48 for the same period.
Walmart’s adept handling of the timing shift in Flipkart’s BBD has not only impacted current financials positively but also set a promising tone for the forthcoming fiscal year.
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