Fitch affirms Walmart

Fitch Ratings said it affirmed the ratings of Walmart, Inc. following the company's announcement that it entered into a definitive agreement to acquire a roughly 77% stake in Flipkart Private Ltd. for about $16 billion.

The affirmation also considers Walmart's April 30 announcement that it plans to merge its U.K. Asda operations with J Sainsbury plc.

The outlook is stable.

“Walmart's ratings reflect its dominant retail market share position, with over $500 billion of annualized revenue, positive comparable store sales (comp) trend, substantial cash flow, and consistent financial strategy, which has resulted in stable leverage over time,” the agency said in a news release.

“Fitch projects organic annual revenue growth in the low-single-digit range, relatively flat EBITDA as growth in the U.S. retail business offsets losses at Flipkart and loss income from the sale of Asda, EBITDA margin in the low 6% range, and FCF (cash flow from operations less capex and dividends) of at least $10 billion annually over the next several years.

“Total adjusted debt/EBITDAR is expected to increase from 2.0x in 2017 to 2.3x in 2018 following the debt-financed Flipkart transaction but trend back toward 2.0x by 2020 due to debt reduction.”

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