Walmart slashed its financial forecast, warning that a big acquisition in India will weigh on profits and that e-commerce growth is facing a slowdown next year.
The Arkansas-based discounter said on Tuesday that earnings next year will be hit by its $16 billion acquisition of Indian e-commerce firm Flipkart in May, its largest-ever deal as it squares off against Amazon overseas.
Walmart also estimates a slower growth rate of 35 percent for its online business in the year ending in January 2020, against expectations for 40 percent growth in the current year.
The tamped-down forecasts for earnings and online sales came on the heels of Walmart posting its best quarterly US sales growth in a decade in August. The retailer had hiked its outlook as lower unemployment and tax cuts boosted consumers’ spending power.
Walmart now expects to earn between $4.65 and $4.80 per share for fiscal 2019, down from its earlier forecast of $4.90 and $5.05 per share.
Shares were recently up 0.7 percent at $94.54, after earlier having fallen more than 2 percent in premarket trading.
Investors have been spooked in the past by slowing growth for Walmart’s US e-commerce business. The company has made several efforts over the past year to boost traffic online. These include a website redesign, more online grocery offerings and acquisition of fashion brands to improve its appeal to millennial shoppers, who have typically stayed away from making purchases on the retailer’s websites.
The retailer has lately been on an acquisition spree in the US online fashion space, buying online lingerie retailer Bare Necessities last week after purchasing plus-sized clothing startup Eloquii a week earlier.
Over the years, Walmart has worked to use physical locations as distribution points for online orders of groceries and other goods, in order to retain buyers who increasingly expect quick, cheap shipping.
For fiscal 2020, Walmart said it expects comparable sales growth of 2.5 percent to 3 percent and expects earnings to decline by a low-single-digit percentage range compared to fiscal 2019 on account of Flipkart.
