A rise in hourly wages and investment in training has also eaten into company profits.
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“What we’re talking about is how we transform the company”, he told Bloomberg Television’s Stephanie Ruhle and David Westin.
The company also said it now expected earnings per share to decline by 6-12 percent next fiscal year.
The outlook was “far worse than anyone expected”, Charles Grom, an analyst with Sterne Agee & Leach, said in a note to clients. Near 1530 GMT, the Dow member’s shares were off 9.0 per cent at US$60.75. The stock is down 30% this year, which may be the worst performance since 1973 and a sign the investor community has lost confidence in the retailer.
Wal-Mart faces tough competition on multiple fronts, from the relentless expansion of online leader Amazon.com Inc to dollar stores and supermarkets fighting for a piece of Wal-Mart’s grocery business, which accounts for more than half of its USA sales.
The Walton family-led company could spend about $1.1bn in added outlays towards digital initiatives, going forward. According to the report, those affected the most from the stock’s nosedive are the heirs to the big box store chain fortune – which is upwards of $120 billion dollars – who kissed $11 billion of that fortune goodbye on Wednesday.
Separately, CNBC said supermarket operator Albertsons’initial public offering was likely to price at US$20 or less as bidders are concerned about the Wal-Mart forecast, while First Data’s IPO is likely to price at US$16. The move “implies significant margin contraction along with modest sales growth”, he said.
Under McMillon, Wal-Mart has accelerated the openings of smaller stores, which tend to be more conveniently located and let customers get in and out faster. In April, the company raised the minimum wage it pays store employees to $9 and will raise that to $10 for most in February. If you strip out higher wages, Wal-Mart has other issues.
Shares of the Bentonville, Ark. company were down 8.7% at $60.90 on the unexpected news Walmart executives delivered at the company’s annual investors conference as they provided strategic outlook and growth plans for the future.
By fiscal 2019, it expects earnings per share to be up 5% to 10% from this year.
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“Watch out for falling prices”, announced earlier Wednesday that earnings will slip as much as 12 percent in fiscal 2017, which ends in January that year.
