India will probably become the largest market in the world this year: Walmart CFO

India is likely to surpass China to become Walmart’s largest international market this year, said John David Rainey, chief financial officer and executive vice president of Walmart, Inc. The US retail giant owns e-commerce company Flipkart and fintech company PhonePe.

“You’ve noticed China and India, very excited about both markets, also excited about what’s going on in our other markets. But those are two markets that are definitely growing faster,” Rainey said Tuesday night at the Raymond James 44th Annual Institutional Investors Conference.

“In India we have Flipkart and PhonePe. I was in India just last year… to meet those teams and understand what they are doing,” Rainey said in response to an analyst’s question about the opportunities, investments and long-term returns in these markets.

“And both[are]really exciting opportunities. Both have large parts of the market share there. And I think the opportunity and what I think India will become the largest market in the world this year will surpass China. It really is a promising opportunity for the future,” said Rainey.

According to a BCG-RAI report, the country’s retail industry is likely to grow at an annual rate of 10 percent to about $2 trillion by 2032. According to the experts, the industry is on the cusp of innovations in both physical and e-commerce through the use of new advanced technologies. In India, Walmart-owned Flipkart competes with players such as Amazon, Meesho, Reliance’s JioMart and Tata Group.

Rainey’s comments come as Walmart has been at the forefront of China’s retail modernization since 1996, when it opened a hypermarket and Sam’s Club in Shenzhen. It now serves communities nationwide as a leader in omnichannel retail. It provides services to customers through nearly 400 stores and clubs, as well as multiple e-commerce platforms. Chinese employees make up 99.9 percent of the total workforce. Walmart China is led by Xiaojing Christina Zhu as president and chief executive officer.

When asked to comment on the early stages of China’s reopening after Covid-19 restrictions, Rainey said “it’s been really good”.

“Our Sam’s stores in China are two of our largest and best stores in the entire club network. Very impressive with what’s going on there and a huge opportunity. And that really appeals to the value proposition there, slightly different than here, and also appeals to a slightly different customer segment, which resonates,” said Rainey.

In February, Rainey said in a post-earnings call that much of the company’s gross trade value and revenue growth comes from Flipkart. But Walmart International, which includes Flipkart, was cautious in its economic outlook for 2023. The chain’s full-year forecast was below estimates, posting net sales of $27.6 billion for the quarter under review. That was an annual growth of more than 2 percent.

Walmart International’s business took a hit in the fiscal fourth quarter with operating income down 65.3 percent, mainly due to the separation of the Indian entities Flipkart and PhonePe.

In December 2020, a partial split was announced. The PhonePe Group was acquired by the Flipkart Group in 2016 and is now India’s largest digital payment platform. The company has more than 440 million registered users.

In December last year, e-commerce giant Flipkart and PhonePe announced full ownership separation of the digital payments platform, allowing the two companies to chart their own paths and unlock enterprise value for shareholders.

However, PhonePe’s investors had to pay around Rs 8,000 crore in taxes to allow the fintech company to reside in India from Singapore.

Last month, PhonePe’s separation from Flipkart Group was also reported in Walmart’s earnings. This contributed to an increase in operating expenses of 262 basis points (bps). Walmart International gross profit also increased 52 basis points before sales events. This included Flipkart’s flagship Diwali sale from BigBillionDays.

Flipkart is reportedly trying to save money and focus on profitability in an uncertain macroeconomic environment. The company will not hand out raises to its senior leadership in the Grade 10 and above category — which includes roles as diverse as managers to vice presidents — in a “difficult decision” likely to affect 4,500 staff. However, 70 percent, or 10,500 employees, below the level of a manager, this cycle gets an increment.

Late last year Kalyan Krishnamurthy, Chief Executive Officer of Flipkart, said India cannot be isolated from the impact of the current global macroeconomic environment. He had said that Flipkart was cutting back on new experiments and capital expenditures, and that the company would be more cautious about acquisitions and businesses in an uncertain macroeconomic climate.

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