American retail giant Walmart Inc. said Tuesday that net sales for its international business was impacted as its Indian subsidiary Flipkart was unable to make non-essential deliveries during the virus lockdown.
“As a result of the crisis and towards the end of the quarter, we had pretty extensive stores and operational closures in markets like South Africa, India … and our Flipkart operations were impacted by restrictions on non-essential deliveries,” said Brett Biggs, executive vice president and chief financial officer, Walmart said in their first quarter (February-April) earnings call.
Walmart follows the February to January period as its financial year.
Separately, in an investor presentation, Walmart said, “E-commerce (for Walmart International) contributed 9% of total segment net sales, led by growth in China, Canada, UK and Mexico. Limited operations of the company’s Flipkart business in India for a portion of the quarter negatively affected growth.”
Online retailers in India were permitted to sell only essentials during the nationwide lockdown that began on 25 March. The government has since eased the curbs, and in the fourth phase of the lockdown, these retailers have been allowed to operate and deliver non-essential goods in so-called red zones as well.
“… The closure of stores and warehouses in some of our markets contributed to volatility of sales for the quarter and we expect even more in Q2. For instance, the Flipkart business was limited by government regulations to selling only essential items for several weeks,” said Doug McMillon, Walmart’s president and CEO.
He said that April falls in Q2 for several of Walmart’s international markets and it was a challenging month due to how different markets and governments reacted with regulation to the covid-19 crisis.
Walmart expects volatility to continue in several international markets in its second quarter (May-July).
Curbs on selling non-essential items, particularly mobile phones, electronic gadgets and apparel, also hit margins and revenues of several e-commerce players, since it comprises the bulk of their business.
In the investor presentation, Walmart also said that gross profit rate for its international business has risen primary due to its Flipkart India business.
“Gross profit rate increased 10 basis points on a reported basis primarily due to the company’s Flipkart business. This was partially offset by an outsized change in mix towards lower margin categories and formats in response to covid-19,“ the company said.
The article was first published on livemint.com