Profit Warning Drives Walmart Stock Down 10 Percent in One Day
by October 16, 2015 9:32 am 125 views
Shares of Wal-Mart Stores Inc. fell 10 percent to $60.03 on Oct. 14, after the retailer warned that profits could take a hit in the next few years.
It represented the biggest one-day stock price drop for the retailer in almost three decades, according to the Associated Press.
During its annual investors meeting in New York City, the company announced it expects profits to fall 6 to 12 percent during its fiscal year 2017, and sales for the current year, previously forecasted to grow 1 to 2 percent, are expected to be flat.
The company attributes its projected flat sales to unfavorable currency change rates, and the profit decline can be linked to several factors.
Walmart has faced increased competition from dollar stores and online retailers, and it has also made investments in its workforce and in technology.
Earlier this year, the retailer announced an increased minimum wage for its hourly workers, planned to reach $10 per hour by February 2016. The wage hikes cost $1 billion this year, and are expected to cost about $1.5 billion next year, according to Walmart.
Investments in e-commerce are expected to reach between $1.2 billion and $1.5 billion this year, up from last year’s $1 billion, according to the AP.
By fiscal 2019, the company expects earnings per share to be up 5 to 10 percent from this year.
The company also authorized a $20 billion share buyback program for the next two years, according to the AP.
However, the stock has continued to decline, reaching $59.33 on Friday.
“The reaction by the market — while not what we’d hoped — was not entirely surprising,” CEO Doug McMillon wrote, in a post on Walmart’s website. “We’re making significant investments in our people and technology. These investments are critical to our current and future success as a company. Simply put, it’s the right thing to do.”
McMillon said the end goal is to marry the online and in-store retailing worlds.
“No matter how you choose to shop with us, it will be fast and easy. Walmart will be the first to deliver a seamless shopping experience,” he wrote.