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The Bentonville, Arkansas-based company now expects earnings to decrease 6 percent to 12 percent in fiscal 2017, which ends in January of that year, whereas analysts had estimated an average gain of 4 percent. Wal-Mart is facing strong competition from other retailers, online and offline. The company attributed a major part of this decline to its plan for raising wages & providing workers with more training which Walmart believes will help improve their service.
The company announced a new chief financial officer and appointed a chief merchant last week. Mexican telecom tycoon Carlos Slim has the largest individual loss with US$12.5 billion, followed by Warren Buffett, whose Berkshire Hathaway Inc is a Wal-Mart investor, at US$12.1 billion.
The retail chain also said its board has authorized $20 billion in stock buybacks over a two-year period. In the United States, chief executive Doug McMillon said recently, “we had leaned too far toward expense leverage”, meaning that the desire to cut costs had detracted from the in-store shopping experience.
Wal-Mart shares plunged today after management warned that sales for the full year will be flat, compared to their previous guidance of between 1% and 2% growth.
Rival retailers such as Amazon (AMZN) are offering shoppers more of the same items that Wal-Mart sells, like household goods and groceries, but with the ease of delivery.
Companies from all sectors have been warning that the strength of the USA dollar against foreign currencies is weighing on their results for the last several quarters, and Wal-Mart blamed currency headwinds as well.
Wal-Mart had lowered its profit forecast for this fiscal 2016 in August, saying it expects earnings to be between $4.40 and $4.70 per share, down from $4.70 to $5.05 per share. Economists had expected a rise in September of 0.2 per cent. The increase was largely due to a 1.8 per cent month-over-month increase in auto sales.
In an interview on CNBC’s “Squawk Box, “O’Shea said it was possible to back into the numbers, given previous comments from Wal-Mart about the cost of wage hikes”.
