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Walmart's (WMT) Flipkart Measures Options for U.S. Listing

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Walmart Inc.’s (WMT - Free Report) Flipkart is considering going public in the United States, per various media reports. Other than a conventional U.S. initial public offering, the Indian e-commerce giant is also considering other options, including striking a deal with a special purpose acquisition company (SPAC), which is a relatively faster process.

While sources revealed that Flipkart could seek at least a $35-billion valuation in a blank-check deal, it is still early and nothing has been finalized yet. Apparently, India’s renowned online grocery company, Grofers, is also contemplating getting listed in the U.S. stock market via an SPAC contract.

Flipkart — a Strong Arm for Walmart

Walmart bought a major stake in Flipkart back in 2018, in a move to bolster its presence in the fast-growing Indian e-commerce market. In fact, even when Walmart had first announced plans to invest in Flipkart, the backing from the former was expected to help the latter achieve its ambition of transforming into a publicly-listed, majority-owned subsidiary in the long run.

Certainly, the $16-billion Flipkart deal has been working well for Walmart, as the addition of the former has been boosting the latter’s e-commerce sales in the International segment. Evidently, in the fourth quarter of fiscal 2021, net sales at Walmart International segment rose 5.5% to $34.9 billion. At cc, net sales grew 6.3% to $35.1 billion on the back of Walmex, Canada and Flipkart. Flipkart’s robust customer base, multiple customer-friendly payment options and ventures like Myntra have been major drivers.

What’s More?

Walmart has long been making efforts to step up its online game, which has been keeping it firm amid the growing competition from Amazon (AMZN - Free Report) . In this regard, the supermarket giant has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. The company’s investment in Ninjacart; contracts with Goldman Sachs (GS - Free Report) and Shopify (SHOP - Free Report) ; buyouts of ShoeBuy, Moosejaw and Bonobos, among others, underscore its intention to build an impressive digital brand portfolio.

Apart from these, Walmart is making aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales. In fact, the company’s e-commerce business and omnichannel penetration have been increasing all the more amid the pandemic-led social distancing. U.S. e-commerce sales soared 69% in the fourth quarter of fiscal 2021 with strength across all channels and solid holiday sales at Walmart.com. Notably, marketplace and pickup & delivery sales surged at a triple-digit rate. At Sam’s Club, e-commerce sales jumped 42% on the back of a robust direct-to-home show and solid curbside performance.

That being said, this Zacks Rank #5 (Strong Sell) company has been seeing high COVID-19 costs, which along with the repayment of the property tax relief in the U.K. weighed on its adjusted operating income in the fourth quarter. Apart from this, management’s guidance for fiscal 2022 suggests a decline in net sales, operating income and earnings per share, mainly due to divestitures. Incidentally, the company completed the divestiture of Walmart Argentina in November 2020 and Walmart U.K. in February 2021. Further, management expects the sale of its business in Japan to be concluded in the first quarter of fiscal 2022. Nevertheless, these divestitures highlight the company’s strategy of increasing focus on areas with higher growth potential.

Shares of the company have lost 13.9% in the past three months compared with the industry’s decline of 12.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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