Walmart loses $10 B market cap post Flipkart deal

At around 6.30 pm IST, Walmart’s shares on the NYSE were down a little over five percent

Investors and shareholders of the world’s largest retail company gave a thumbs down to the Flipkart-Walmart deal, as soon as the latter announced its intention of buying Flipkart’s 77 percent stake.

At around 6.30 pm IST, Walmart’s shares on the New York Stock Exchange (NYSE) were down a little over five percent. Walmart’s market cap currently stands at $252 billion, according to data from NYSE.

In a statement, Walmart says, “To finance the investment, Walmart intends to use a combination of newly-issued debt and cash on hand. Upon closing, Flipkart’s financials will be reported as part of Walmart’s International business segment. If the transaction were to close at the end of the second quarter of this fiscal year, Walmart expects a negative impact to FY2019 EPS of approximately $0.25 to $0.30, which includes incremental interest expense related to the investment”.

The US retail giant added, “In FY2020, as we look to accelerate growth in this important market, Walmart anticipates an EPS headwind in total of around $0.60 per share, comprising of operating losses of approximately $0.40 to $0.45 per share, assuming minimal tax benefit for losses in the near to mid-term. This amount includes about $0.05 per share related to amortisation of intangible assets, and depreciation of short-lived assets resulting from purchase accounting, which will only last for a few years post-closing.”

Another component of headwind is from interest expense of approximately $0.15 per share, said the company.

“Given the company’s financial strength, we anticipate the continuation of our current share buyback program, while maintaining our strong credit profile,” says the statement.

Assuring its shareholders, Walmart says, “This investment represents a unique opportunity in a market with significant long-term growth prospects. Walmart is investing in a local leader with strong leadership, and a culture of innovation and service, and the company is aligned with a strategic and committed shareholder group focused on serving customers. In the mid-to-long term, as the business scales and efficiencies are realised, Walmart expects losses to decline and returns to improve.”