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Walmart cuts FY'19 earnings guidance to reflect Flipkart acquisition

Walmart Inc. on Oct. 16 lowered its fiscal 2019 earnings guidance to a range of $4.65 to $4.80 per share from its previous guidance of $4.90 to $5.05 per share, reflecting the impact of its acquisition of Indian online retailer Flipkart Online Services Pvt. Ltd.

America's largest bricks-and-mortar retailer also said it expects fiscal 2020 sales growth "to be 3% or greater, negatively affected by about 100 basis points due to the deconsolidation of the Brazil operations and planned reductions in tobacco sales at Sam's Club." The company released its updated guidance ahead of its annual investor meeting. The company's fiscal year ends Jan. 31, 2019.

In premarket trading, Walmart's shares were indicated to open down 47 cents, or 0.5%, at $93.35.

The company said adjusted EPS guidance for 2019 now includes an expected 25 cents per share Flipkart dilution. "Fiscal 2019 guidance provided in August 2018 did not include the impact of Flipkart as the transaction had not closed at the time the guidance was provided," Walmart said in a statement.

In its 2020 guidance, the company said it expects comparable sales growth of 2.5% to 3% at Walmart U.S., excluding fuel, and about 1% at Sam's Club, also excluding fuel. The company expects net sales growth at its e-commerce operations in the U.S. of about 35% and international net sales growth of about 5% in constant currency.

"Our financial strength gives us the flexibility to deliver near-term results while making strategic decisions for the longer term," Walmart CFO Brett Biggs said in the statement.

By the end of fiscal 2020 Walmart expects to have about 3,100 grocery pickup and 1,600 grocery delivery locations. The company said it plans to spend about $11 billion over the course of fiscal 2020 to remodel stores, grow its online business and invest in technology and the supply chain. It expects to open fewer than 10 stores in the U.S. but more than 300 new stores elsewhere, mainly in Mexico and China.

In a separate announcement, Walmart said it was teaming up with Advance Auto Parts Inc. to launch an automotive specialty store on "Expected to begin rolling out in the first half of 2019, the new omnichannel shopping experience will provide customers with access to Advance's extensive portfolio of aftermarket automotive parts, accessories and maintenance items," Walmart said in a press release.

In a note, Moody's retail analyst Charlie O'Shea said the partnership was good for both companies. "The auto parts sector continues to benefit from favorable industry dynamics, including age of vehicles in the U.S., which adds to the mutually-beneficial nature of this strategic tie-up," O'Shea wrote.