Walmart earnings gain from e-commerce push, top Street view

Walmart’s (WMT) efforts to revitalize its e-commerce business yielded the desired results in the first quarter when earnings rose sharply and surpassed estimates. The company said the recent acquisition of Flipkart — marking its foray into the Indian market — will impact earnings in fiscal 2019.

Adjusted earnings jumped 14% year-over-year to $1.4 per share in the first quarter, exceeding analysts’ forecast. Meanwhile, reported earnings plunged to $2.13 billion or $0.72 per share from $3.04 billion or $1.00 per share last year, hurt mainly by unrealized losses on equity investment in JD.com. The bottom line was also dragged by a 23-basis-point fall in gross margin owing to higher transportation costs.

Total revenues advanced 4.4% to $122.7 billion and came in above market expectations. The upturn reflects the company’s ongoing efforts to ramp up its digital platform amidst growing competition from Amazon (AMZN). E-commerce sales growth accelerated to 33% in the first quarter, prompting the company to raise its full-year growth outlook for the segment to 40%.

The primary contributor to the top line growth was a 12% increase in sales at Walmart International to $30 billion. Walmart US sales moved up around 3%, while Sams Club registered a 2.7% decline. The company expects the planned closure of 63 Sam’s Club stores and the decision to remove tobacco from some stores would impact operating results in 2019.

Comparable store sales growth at Walmart US and Sam’s club were 2.1%and 3.8% respectively in the first quarter.

“We are changing from within to be faster and more digital, while shaping our portfolio of businesses for the future. Our strong cash flow and balance sheet provide flexibility to do so,” said Walmart CEO Doug McMillon.

Earlier this month, the retail powerhouse signed an agreement to acquire 77% stake in India’s leading e-commerce firm Flipkart for about $16 billion. The strategic deal is expected to give Walmart an edge over arch-rival Amazon and its Asian peer Alibaba (BABA) in the region. The company expects the transaction to negatively impact fiscal 2019 earnings by $0.25-$0.30 per share if it closes at the end of the second quarter.

Shares of Walmart dipped more than 2% in early trading Thursday after gaining modestly in the premarket after the earnings announcement. The stock had suffered a sharp loss following the company’s disappointing earnings results in the fourth quarter.