The stock had been on course for its most severe one-day performance in more than a period of 17 years. The company attributed a big portion of the decline to its plan on raising wages and providing more training for workers, which Wal-Mart hopes will lead to improved service.
Advertisement
Wal-Mart has responded by investing heavily in making stores clean, fast, friendly and well-stocked.
Wall Street did not like what Wal-Mart execs had to say on Wednesday (Oct. 14) about the heavy investments in people, technology and supply chain changes.
Wal-Mart also said its board has authorized $20 billion in stock buybacks. Looking out to 2018, management expects earnings per share to rise by 5% to 10% over fiscal 2017’s results, finally reaching a level higher than where earnings are today.
Last year, McMillon also replaced Wal-Mart’s U.S CEO last year with Greg Foran, who was previously head of Wal-Mart China business.
The company also pointed to a bigger-than-expected hit from adverse foreign-exchange rates on its sales growth.
Now what: Wal-Mart’s plan is for these investments in its employees, its stores, and e-commerce to pay off in the long-run, and the company expects to return to earnings growth in 2018, with 5%-10% EPS growth in 2019.
The news added to worries about the outlook for U.S. earnings, with S&P 500 profits forecast to have dropped more than 4% in the third quarter compared with a year ago, according to Thomson Reuters data.
Shares of Wal-Mart plunged after the company unexpectedly predicted a decline in earnings for its fiscal 2017 year, underpinning concern that slowing global economic growth is eating into corporate profits. That’s after an estimated $12.4 billion of capital investments in fiscal 2016. What will be profitability of Wal-Mart, if its revenues don’t grow at four percent?
Shares in Wal-Mart, eclipsed by Amazon this year as the world’s biggest retailer by market capitalization, fell as much as 9 per cent as executives met with investors in New York.
Walmart, which has been struggling with sluggish sales, announced a new chief financial officer and appointed a chief merchant last week.
Advertisement
Wal-Mart has also been trying to win back customers by improving the shopping experience, expanding its online grocery pickup service, and opening more small-format stores, called Neighborhood Markets, Bloomberg noted, but investors “have been skeptical that the changes will reignite growth”.
