Walmart to incur higher charges on India joint venture split

Walmart to incur higher charges on India joint venture split
New York: 

American retail giant Walmart expects to incur higher expenses related to its split with Indian joint venture partner Bharti Enterprises.

Various charges, including those related to India joint venture, would also be impacting its quarterly as well as full-year earnings, according to the retailer.

Walmart and Bharti Enterprises decided to part ways in October last year, bringing an end to their six-year long partnership. They had decided to independently own and operate separate business formats in the country.

(Read: Why Walmart, Bharti split in India)

With respect to the India transaction, Walmart said it has terminated the franchise and supply agreements related to retail stores.

"The estimated charge for this transaction is now approximately $0.05 per share versus the previous estimate of $0.04 per share," the company said in a statement on January 31.

In November last year, the retailer had projected the charge related to India transaction at $0.04 per share.

However, the quantum of overall expenses related to the India transaction is not available.

"We now anticipate that our underlying EPS for the fourth quarter of fiscal 2014 will be at or slightly below the low end of our range of $1.60 to $1.70," Walmart Stores chief financial officer Charles Holley said.

For the full year, the underlying EPS is expected to be at or slightly below the low end of the $5.11 to $5.21 range.

The revised estimates have been made on account of various discrete items that would impact its EPS results for the fourth quarter as well as full fiscal year 2014.

Besides the India transaction, Walmart expects charges from closure of about 50 "underperforming units" in Brazil and China.

Other discrete items include charges related to non-income tax as well as employment claim contingencies in Brazil, China store lease expense, and Sam's Club US restructuring and club closure.

"Sam's Club is implementing a new in-club leadership and staff structure to better align US club teams with the sales volume of each club, and expects to record a charge for severance -- related costs. Additionally, one club is being closed," the statement said.

Walmart also stated that the guidance range of $1.50 to $1.60 provided on November 14 last included $0.10 per share for the store closures and India transaction. With the latest update, the "additional impact on EPS from the new discrete items ($0.15) and the change on the India transaction ($0.01) are estimated to be approximately $0.16," it said.

The retail giant would be announcing its fourth quarter and full year results on February 20.

After parting ways with Bharti group last year, Walmart had said it was studying the feasibility of India's foreign direct investment (FDI) policy in multi-brand retail before finalising plans to enter the segment. The retailer has also registered a new company called 'Wal-Mart India Private Ltd' in the country.

"We are excited about India and we continue to be so. We see the potential of the country and we have a long term view. At the moment we are focussed on cash and carry business under our Best Price brand," Walmart president and CEO Doug McMillon had told PTI last month.

When asked about registering a new company in India, he had said that Walmart was positioning itself for the future, but the focus for the moment remained on Best Price cash and carry format.

Regarding possible timeline for multi brand entry, Mr McMillon had said it is not possible as of now to predict any timeline as it would depend on the decision taken by the "people of India and the government of India with regard to the regulations for foreign direct investment."

"We will respectfully wait, answer all questions and try to demonstrate that having Walmart in India is a good thing for the country."

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