When it bought Flipkart last year, Walmart attributed 77% of Flipkart Group’s $24.1 billion in assets to intangibles and goodwill. Barring its flagship brand, Flipkart owns Myntra, PhonePe and the Jabong trade names.
In 2016, Flipkart bought Jabong for $70 million in cash & has since then been struggling to figure out a definitive long-term strategy for the fashion portal.
“At the end of last year, we 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,” a Flipkart spokesperson said in a statement. “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.”
ET reported on July 12 that Flipkart had started nudging users away from Jabong to Myntra, in what could be a precursor to the imminent shuttering of Jabong as an independent brand.
“After Walmart’s acquisition of the Flipkart businesses, strategic and operational rationalisation was inevitable. Walmart is looking at paring costs and focusing on assets that are core to future growth, which will inevitably come with some hard calls,” said Devangshu Dutta, chief executive at management consulting firm Third Eyesight.
Walmart said in a statement earlier that it had “adjusted EPS (earnings per share) for an impairment charge related to the Jabong.com trade name as a result of a strategic decision to focus on the Myntra.com fashion platform.” Operating income declined 5.4%, in part due to a non-cash impairment charge for Walmart International, the company said.
Walmart’s International sales which include Flipkart went up by 1.3% to $29.2 billion during the third quarter. Total revenue grew 2.5% to $128 billion from $124.89 billion a year ago, but fell below expectations of analysts. However, Walmart shares rose 1.7% in premarket trading on account of the company’s strong performance in the US online business which saw a growth 41% year on year.
Separately, in its guidance for fiscal year 2020, Walmart also forecast that earnings were expected to “increase slightly compared to FY19, including Flipkart, and increase by a high single-digit percentage range, excluding Flipkart.”
“As expected, the inclusion of Flipkart negatively affected operating income,” Walmart said.