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Walmart shuts one of Flipkart’s fashion arms

In its earnings report, Walmart said inclusion of Flipkart negatively affected its operating income.

Online fashion portal Jabong that remained in Flipkart’s stable of brands for three years since it was bought for USD 70 million from the hands of Rocket Internet, is being shut down by the US-based retail giant Walmart as it declared a “non-cash impairment charge” of about USD 290 million on Thursday during its earnings call.

Although its international revenues saw a jump of 1.3%, Jabong’s impairment and Flipkart’s acquisition of USD 16 billion last year costed its bottomline negatively. “Excluding the impairment charge, operating income would have increased slightly. As expected, the inclusion of Flipkart negatively affected operating income,” Walmart said in a statement.

However, this is not unexpected, as after acquiring 77% stakes in Flipkart in May, Walmart had said the buyout will show a loss of around USD 1.77 billion for the financial year 2020, ending on January 31.

Walmart also mentioned its net cash—that it defines as free cash flow—declined to USD 14.5 billion for the nine months ended October 31, 2019, from USD 17.3 billion in the corresponding period last year. It factored “the timing of vendor payments and U.S. associate payroll, as well as the inclusion of Flipkart operations” as the reason for this fall.

Even though, Flipkart had another fashion-focused online portal Myntra, it let Jabong run on its own for three years. But after Walmart’s acquisition of Flipkart, the e-tailer has been gently nudging Jabong buyers to its sister portal Myntra, setting the platform to shut down Gurugram-based fashion portal.

“Earlier this year, we decided to consolidate back office functions for Myntra and Jabong to drive efficiencies. In going through that process, the team decided to focus on a single premium fashion platform, Myntra.com, simplifying the business and the customer proposition. We continue to see strong growth in both sales and units across both Flipkart and Myntra fashion and remain confident about performance,” Brett Biggs, CFO at Walmart said in its earnings release.