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Wal-Mart cuts profit outlook, sending shares plunging
[NEW YORK] Wal-Mart Stores cut its profit outlook due to increased spending employee wages and e-commerce on Wednesday, sending shares in the world's largest retailer plunging.
Wal-Mart predicted earnings per share will fall between six and 12 per cent in fiscal 2017 that begins on February 1, which will be its "heaviest" period of investment as it executes a plan to lift US employee wages and boost investment in digital commerce.
The company also trimmed its current fiscal 2016 sales outlook to "relatively flat" from a prior projection for a gain of one-two per cent, citing the strong dollar.
Wal-Mart executives depicted the hit to near-term profits as a period of short-term pain that would lead to long-term prosperity. Chief financial officer Charles Holley said fiscal year 2019 earnings would rise five-10 per cent compared with the prior year.
"These are exciting times in retail given the pace and magnitude of change. We have strengths and assets to build on and are making progress to position the company for the future," said Doug McMillon, Wal-Mart's chairman and chief executive.
"Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money but also time." Wal-Mart also announced that it plans US$20 billion in share repurchases.
Near 1530 GMT, the Dow member's shares were off 9.0 per cent at US$60.75.