In 2016, Walmart took over then e-commerce newbie Jet, for nearly $3.3B, considering it critical for the company’s omni strategy. However, looks like 4 years down the line that $3Bn investment isn’t bearing much fruits for the retail giant. As a result, Walmart today announced the discontinuation of Jet in its quarterly report released this Tuesday.
Though the shut down was only announced today, it has been in the looking for quite some time for people who have closely observed Jet’s underwhelming progress. Walmart had also overlooked the brand since last year as its personal shopping and delivery unit, Jet Black, was mostly unsuccessful in gathering attention.
The declaration about shutting down Jet.com was short and simple as the company noted “Due to continued strength of the Walmart.com bran, the company will discontinue Jet.com.” The data also revealed that the COVID-19 pandemic that has taken the economic world by a storm has proven to be a blessing in disguise for the online retail as the eCommerce sales grew 74% with grocery pickup and delivery services being high on demand.
As for the numbers for the first quarter of 2020, U.S. sales saw an increase of about 10% where the areas of focus were consumables, food and the need of the hour being health and wellness. Total revenue, on the other hand, did fairly well with an 8.6% rise relative to last year with the figure coming up to $134.6B.
”Due to unprecedented variability in the macro environment brought on by COVID-19, the company is withdrawing financial guidance for fiscal year 2021” the statement included. Brett Biggs, Walmart Inc. chief financial officer added “Our business fundamentals are strong, and our financial position is excellent. Customers trust us to deliver on our brand promise, and I’m confident in our ability to perform well in most any environment. While the short-term environment will be challenging, we’re positioned well for long-term success in an increasing omni world.”
Flipkart drags down growth
However, Flipkart, the most recent multi-billion addition to Walmart’s international businesses, resulted in lower-than-expected results for the company. In its quarterly presentation, Walmart mentions “eCommerce contributed nine percent of total segment net sales, led by growth in China, Canada, U.K. and Mexico. Limited operations of the company’s Flipkart business in India for a portion of the quarter negatively affected growth.”
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. Flipkart had switched to only delivering essentials in India, based on government’s lockdown orders. That seems to have significantly impacted Walmart’s profit growth rate.
In terms of operating income, growth for Walmex and Canada, along with the effects of the company’s Flipkart business in India, were partially offset by a decline for Asda in the U.K. and China, Walmart said in its press presentation.
Another area wherein Flipkart negatively impacted company growth was the overall ROI. ROI was 13.4 percent and 14.5 percent for the trailing twelve months ended April 30, 2020 and 2019, respectively. The decrease in ROI was primarily due to the decrease in operating income as a result of the dilution from Flipkart and business restructuring charges recorded in fiscal 2020, as well as the increase in average total assets due to the acquisition of Flipkart.
Walmart has also innovated certain reforms in response to the coronavirus outbreak. “The company’s approach to leadership through shared value has never been more evident than it is now. From associates to customers to communities, shareholders and more, Walmart is working hard to make a difference” stated Doug McMillion, President and CEO, Walmart.
The enterprise has decided to temporarily expand pay by $2 per hour in the U.S. fulfilment centers along with the introduction of an Express Delivery in the States which will enable customers an access to their orders in less than 2 hours. Walmart is keeping up strongly like others in its sphere of online retailing like Amazon and has hired an additional 235,000 workers to its workforce unlike several multinational companies surrendering to layoffs.