AMZN Amazon.com Inc

Acquisition of Flipkart for $16 billion earlier this year expected to weigh on results

By Sarah Nassauer 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 17, 2018).

Walmart Inc. lowered its profit targets in the wake of its largest-ever acquisition, but said sales growth will continue next year.

The lowered profit goal for the current year reflects the acquisition of Indian e-commerce company Flipkart, which Walmart paid $16 billion to buy earlier this year. At the time, Walmart said the deal was a long-term bet on a fast-growing market that would depress earnings.

Walmart said it expects to earn between $4.65 and $4.80 a share in the year ending Jan. 31, down from $4.90 to $5.05 earnings per share.

Sales in existing stores will rise between 2.5% and 3% next fiscal year, the company said Tuesday at an investor meeting, continuing a string of solid sales gains for the world's largest retailer amid investments in online growth and a strong economy. In the second quarter, sales for Walmart accelerated at the fastest rate in more than a decade.

Walmart executives laid out their plans for fending off Amazon.com Inc., highlighting their advantage in food. Grocery sales contribute 56% of Walmart's sales, making it the largest grocer in the country.

"Having fresh food within 10 miles of 90% of the population is a structural competitive advantage," Walmart Chief Executive Doug McMillon told analysts gathered near the company's Bentonville, Ark. headquarters. By the end of the year, 800 U.S. stores will offer grocery delivery and over 2,000 will offer grocery pickup service, where shoppers order online and pick up in store parking lots.

The Flipkart deal is part of Walmart's effort to ramp up its web business. The company said Tuesday it expects e-commerce sales -- still a small slice of its total business -- to rise 35% next year, slightly slower than the 40% sales growth predicted for the current year.

Walmart expects its ecommerce business to record a slightly greater operating loss next year, Chief Financial Officer Brett Biggs said.

Earlier this month, Amazon raised the minimum wage it pays all U.S. employees to $15 an hour, putting pressure on some competitors to increase wages to compete for workers.

Walmart has been gradually raising wages since 2015, most recently setting a minimum wage of $11 earlier this year. "We will keep investing in our people with wages and benefits and training by market, as we have this year," Mr. McMillon said.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

October 17, 2018 02:47 ET (06:47 GMT)

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