The company says it expects profits to shrink from 6 10 12 percent in the next fiscal year.
Advertisement
Such investments are expected to take a toll on profit in the near term, the company said.
On Wednesday, Wal-Mart’s USA chief executive, Greg Foran, said that his team has made big strides in its effort to get its stores “clean, fast, friendly”, which is helping improve sales and increase the number of people flowing through stores.
“Wal-Mart’s sizable reset of expectations has shaken the overall market”, Chad Morganlander, a money manager at Stifel, Nicolaus & Co in Florham Park, New Jersey, told Bloomberg.
So far this year, Walmart (NYSE: WMT) has lost almost 30 percent of its market value – the equivalent of $79 billion. The multinational retailer also said it would invest several billion dollars over the next three years in its online, e-commerce business, as well as on initiatives to raise wages for entry-level workers.
The retailer anticipates sales to rise 3 percent for its current fiscal 2016 year, excluding the impact of currency exchange fluctuations, the company said during its investor day Wednesday.
The dip in the broader consumer staples and retail sector may be short-lived as the Wal-Mart weakness is related to more structural changes within the individual company, albeit Wal-Mart is still the largest retailer in the world.
One of the noted positives for the stock was its strong dividend yield of 3%, which has only grown that much stronger in the wake of this morning’s drop. Stocks in the Basic Materials and Energy industries led, each gaining at least 0.95% on the session.
He said fiscal 2017 would represent the heaviest investment time and estimated that operating income would have an effect of $1.5 billion from the second phases of investments previously announced in training and wages.
In separate action, Walmart said on Wednesday that it would start a new share buyback program of $20 billion over the upcoming two years. He said the company will close a few stores internationally “that should be closed”, but “we don’t believe in shedding assets in a hurry for less than they are worth”.
Rival Target (TGT.N) was down 3.5 percent at $76.20, and Sears (SHLD.O) fell 3.0 percent to $24.41.
Inflation continued to be a no-show as producer prices fell more than expected in September.
Advertisement
Health insurance premiums have increased between 39% and 56% since early 2013, meaning additional costs of $US230 per month for the average family.
