Walmart Inc. WMT has been focused on strengthening its U.S. as well as international e-commerce operations, given consumers’ increased preference for online shopping — a trend that paced up further amid the pandemic. Moving on such lines, the company’s Indian e-commerce arm, Flipkart, has inked a deal with renowned billionaire Gautam Adani’s company to establish one of the biggest retail warehouses in India, per various media reports.
Apparently, Adani Logistics Ltd will create a fulfillment center, spanning more than 534,000 square feet in Mumbai, which will be leased to Flipkart. Sources revealed that this fulfillment center is likely to be operational in third-quarter 2022. We believe that this warehouse is likely to benefit Flipkart, which has been committed to offering its customers access to a broad range of products from countrywide sellers. This, in turn, is likely to work well for Walmart and keep it firmly placed against the growing competition from e-commerce giant Amazon AMZN.
Walmart bought a major stake in Flipkart back in 2018, in a move to bolster its presence in the fast-growing Indian e-commerce market. Certainly, the $16-billion Flipkart deal has been working well for Walmart, as the addition of the former has been boosting the latter’s e-commerce sales in the International segment. Evidently, in the fourth quarter of fiscal 2021, net sales at the Walmart International segment rose 5.5% to $34.9 billion. At cc, net sales grew 6.3% to $35.1 billion on the back of Walmex, Canada and Flipkart. Flipkart’s robust customer base, multiple customer-friendly payment options and ventures like Myntra have been major drivers.
Well, Walmart has long been making efforts to step up its online game. In this regard, the supermarket giant has been taking several e-commerce initiatives, including buyouts, alliances and improved delivery and payment systems. The company’s investment in Ninjacart; contracts with Goldman Sachs GS and Shopify SHOP; buyouts of ShoeBuy, Moosejaw and Bonobos, among others, underscore its intention to build an impressive digital brand portfolio.
Apart from these, Walmart is making aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales. In fact, the company’s e-commerce business and omnichannel penetration have been increasing all the more amid the pandemic-led social distancing. U.S. e-commerce sales soared 69% in the fourth quarter of fiscal 2021 with strength across all channels and solid holiday sales at Walmart.com. Notably, marketplace and pickup & delivery sales surged at a triple-digit rate. At Sam’s Club, e-commerce sales jumped 42% on the back of a robust direct-to-home show and solid curbside performance.
That being said, this Zacks Rank #5 (Strong Sell) company has been seeing high COVID-19 costs, which along with the repayment of the property tax relief in the UK. weighed on its adjusted operating income in the fourth quarter. Apart from this, management’s guidance for fiscal 2022 suggests a decline in net sales, operating income and earnings per share, mainly due to divestitures. Incidentally, the company completed the divestiture of Walmart Argentina in November 2020 and Walmart UK. in February 2021. Further, management expects the sale of its business in Japan to be concluded in the first quarter of fiscal 2022. Nevertheless, these divestitures highlight the company’s strategy of increasing focus on areas with higher growth potential.
Shares of Walmart have lost 4.9% in the past three months compared with the industry’s decline of 4.1%.
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