The company also expects to spend about $1.1 billion on wages, training and its e-commerce-digital initiative in fiscal 2017, which is crucial if Wal-Mart expects to win in the future of retail.
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He said these factors would account for three-quarters of the expected 6-12% drop in earnings per share next year. JPMorgan declined almost 3% after the bank missed third-quarter earnings.
Wal-Mart surprised investors by predicting a sharp drop in earnings next year, citing in large part its pledge to raise wages for most United States workers.
Wal-Mart delivered a few less than exciting news to investors at its earning forecast on Wednesday. Its shares were down almost 9% at $60.83. The stock was already down 22 percent this year before the decline.
Walmart, which notched net sales of $482 billion last year, said it expects those figures to rise by between $45 billion and $60 billion over the next three years.
Wal-Mart also announced a new $20 billion share repurchase program and “retired the $8.6 billion remaining on its 2013 authorization”. “We will be the first to build a seamless customer experience at scale to save our customers not only money but also time”, McMillon said.
Wal-Mart executives depicted the hit to near-term profits as a period of short-term pain that would lead to long-term prosperity.
Wal-Mart said on Wednesday that net sales will grow 3 percent to 4 percent annually over the next three years, though they’ll be “relatively flat” in the current year.
Achieving that goal is key to the company’s long term growth, but to get there the company disclosed the significant investments it has made in technology, wages, pricing and a weak dollar will pressure profits.
In addition, Wal-Mart is actively reviewing its portfolio for ways to streamline the business, McMillon said at the company’s investor day on Wednesday. It has put a greater emphasis on improving the look of its stores, trying to make them more desirable places to shop.
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Global Brands, a spinoff of Li & Fung and which relies on the USA market for majority of sales, fell 1.2 percent at HK$1.62 in Hong Kong as of 10:07 a.m. In another negative development, it reported that operating expenses would eclipse its sales growth for the fiscal year, which has not been aided by the much-publicized raising of its pay-floor, which will reportedly cost it $1.2 billion in fiscal year 2016.
