ADVERTISEMENT

‘Anxious’ Walmart Holders Bore In on Results 

‘Anxious’ Walmart Holders Bore In on Results 

(Bloomberg) -- Walmart Inc. investors stomached the surprise resignation of a key international executive this week, showing that they are focused less on day-to-day drama and more on quarterly results due Thursday.

The world’s largest retailer said Tuesday that Binny Bansal, co-founder and chief executive officer of its new Indian e-commerce unit Flipkart, had resigned after an investigation into unverified allegations of sexual assault. The news was embarrassing for Walmart given the $16 billion bet the company has placed on that money-losing business, but shareholders largely shrugged it off, as the stock fell less than 1 percent on a day broader markets also declined.

The shares dropped 1 percent to $101.88 at 11:49 a.m. in New York on Wednesday. The three-day decline -- the most since July -- indicates there’s some concern on Wall Street about the upcoming report.

“I would rather have not seen that news, but at the end of day, I’m anxious to see the next quarter and go from there,” said Walter Todd, chief investment officer at Greenwood Capital, which holds Walmart shares. “Flipkart will take a while to pay off. What will drive the stock is the comp sales and traffic.”

‘Anxious’ Walmart Holders Bore In on Results 

Those key metrics -- same-store sales and customer foot traffic -- have been robust lately. Last quarter, Walmart posted its best U.S. sales growth in more than a decade, fueled by its grocery business, which accounts for more than half of revenue in its home market. The retailer also boosted its full-year sales and adjusted profit forecasts, then gave a generally rosy outlook for the upcoming year at its annual investor day last month.

‘Other Things’

All that has earned Walmart some leeway as it prepares to release third-quarter results before U.S. markets open on Thursday. “I’m worried about a lot of other things before I’m worried about this,” said Mark Stoeckle, portfolio manager of the Adams Diversified Equity Fund. “Nobody in their right mind owns Walmart because of Flipkart.”

Still, investors will be alert for any signs of a slowdown at Flipkart, which is battling Amazon for e-commerce supremacy in a nation of 1.3 billion. There, employees are raising their own questions about how their corporate parent handled Bansal’s ouster. Flipkart will lower Walmart’s earnings this year and next, although the company has said it sees “a path to profitability” for the business, and an eventual public offering as well. Walmart’s international operations have a checkered history, and in recent months the retailer has sold or scaled back businesses in the U.K. and Brazil to focus squarely on India and China.

Related: Walmart Narrows Price Gap With Amazon and Has Lowest Baby Prices

Only one research analyst published a note on Binsal’s resignation. Most experts are looking forward to what the company has to say about the third quarter and the upcoming holiday season, as Black Friday discounts are already under way.

“While a disappointing development,” said Baird Equity analyst Peter Benedict, there’s “no change to our view on Walmart.”

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder, Lisa Wolfson

©2018 Bloomberg L.P.