Walmart took a non-cash impairment charge of$290 million for the value of the 'Jabong' trade name in the third quarter, even as the US retail giant continues to bet on the "significant opportunity for growth" presented by the Indian market.
The Bentonville-based company logged a 2.5 per cent rise in revenue at $128 billion for the third quarter, even as its operating income fell by 5.4 per cent to $4.7 billion.
Its net sales from international operations grew 1.3 per cent to $29.2 billion in the said quarter.
"Excluding the impairment charge related to Jabong, third-quarter international operating income was better than plan, but declined 16 per cent year-over-year in constant currency and 21 per cent on a reported basis due primarily to the expected dilution from Flipkart as well as the overall gross margin..." Walmart Inc EVP and CFO Brett Biggs said in a statement.
Biggs said earlier this year, the company had decided to consolidate back-office functions for Myntra and Jabong (the fashion-focused platforms of Flipkart) to drive efficiencies.
"We continue to see strong growth in both sales and units across both Flipkart and Myntra fashion and remain confident about performance. Since there was value ascribed to the Jabong name at the time of the Flipkart acquisition, we are taking a non-cash impairment charge on the trade name," he added.
Biggs pointed out that the difference between adjusted and GAAP earnings per share "reflects a $290 million pre-tax non-cash impairment for the value of the Jabong trade name".
Walmart had picked up a 77% stake in Flipkart for $16 billion last year.
A Flipkart Group spokesperson said over the last several years, Myntra has created a very strong and premium fashion platform, and that the entity continues to move forward in its strategic direction.
At the end of last year, it had decided to consolidate back-office functions for Myntra and Jabong to drive efficiencies.
"This year, after looking at fashion demand trends, customer overlap and marketing investments, we have decided to focus on a single premium fashion-focused platform - Myntra... There will be no impact on employees as we have a unified workforce for Myntra and Jabong which can work across all our existing and new businesses," the spokesperson said.
In the statement, Walmart Inc President and CEO Doug McMillon noted that the Indian market represents a significant opportunity for growth.
"We like the momentum we see in parts of the business. We're excited about what's happening at Flipkart and PhonePe (digital payments unit). Beyond just our current results, the Indian market represents a significant opportunity for growth," he said.
He added that Flipkart's The Big Billion Days sale was a success, powered by shoppers and sellers from tier II cities and beyond with nearly 75 per cent growth in new customers versus last year.
"We also continue to see tremendous growth with PhonePe. The company is acquiring more than three million new customers per month. With over 55 million monthly active users, we're quickly looking for ways to monetise the customer base, including an offering of financial services," he said.