Walmart sees international growth potential, better margin growth

Walmart has reduced its international footprint in recent years by divesting operations in Japan, Asda in the United Kingdom, Brazil and Argentina, but the retail giant still expects to double international sales revenue from $100 billion to $200 billion in the next five years.

Judith McKenna, CEO of Walmart International, made the statement at the retailer’s recent shareholder’s event. She admitted it was a bold prediction but said all of the 19 countries in the international portfolio have plans in place to make it happen.

Walmart CFO John Rainey reiterated the international goal Tuesday (June 14) at the Evercore Consumer & Retail Conference. Rainey said Walmart has no plans to expand the portfolio but instead focus on growing sales and building out ecosystems in Mexico, India and elsewhere.

Rainey said there is a lot of attention focused on India with the rapid growth of Flipkart and PhonePe, which each have the ability to become $100 billion businesses in the next several years. Walmart does not break out the sales of Flipkart and PhonePe, but the company has said the Indian market of 1.4 billion people has a “significant opportunity” for growth. Walmart owns a 77% stake in Flipkart. McKenna said it is the partners’ goal to transition Flipkart to a publicly listed company.

Walmart said in the quarter ending April 30, Flipkart’s business generated double-digit sales growth, boosted by new shoppers in some cities and a 50% jump in ad sales. In late 2022, investors valued Flipkart at $40 billion. McKenna also recently said PhonePe was spun off because of its incredible growth potential as the fastest-growing mobile payments platform in India. She said PhonePe hit an annualized payment value of $1 billion, led by the Unified Payments Interface, a popular format for making real-time payments. She said the platform is also expanding to offer insurance services.

Walmart expanded its global marketplace – a platform that allows third-party sellers to use Walmart’s system – by allowing Indian sellers to join in 2022. Walmart said at that time, the marketplace had 120 million shoppers each month. Walmart said it set an ambitious goal of exporting $10 billion from India each year by 2027. Rainey said half of Walmart’s sales in China and most all sales in India come from e-commerce. He said the levels of online penetration vary from country to country. Still, there are considerable opportunities to grow the segment because most of the items sold are higher-margin general merchandise.

Rainey said the U.S. advertising business and marketplace also continue to have tremendous upside, again reiterating that Walmart Connect has the runway to be among the top 10 revenue-producing advertising firms in five years with sales upwards of 6% of the total sales. He said Walmart is coming from behind when compared to some competitors who see their media businesses approach 10% of sales. That’s partly because so much of Walmart’s sales are for food. Rainey said it’s easier to sell ads for sneakers than broccoli. At Walmart’s scale, Rainey said there is still an upside to growing the business, but the retailer will be cautious not to do so at the expense of a good shopper experience.

When asked about Walmart’s plan to grow margins faster than sales, Rainey said Walmart’s typical 4%-5% margin retail business would improve when paired with advertising, fulfillment services, data ventures, and rapid international growth.

When asked about Walmart’s headcount, Rainey said the retailer expects to hold steady at 2.1 million employees around the globe. He said the company is also comfortable with the wages it’s paying. He expects as more technology is deployed in stores and the supply chain, job descriptions will change with employees transitioning into different roles.

Rainey also announced this week the departure of D.K. Singh, senior vice president and chief procurement officer at Walmart. He said Singh’s last day will be July 14, and the company will soon announce his replacement. Singh joined Walmart in 2018 to lead global retail procurement for Walmart.