WAL-MART WARNS: Our profits are going to fall next year
Wal-Mart just sent a warning shot across the retail world.
On Wednesday the retail giant cut its profit outlook for the next two years, forecasting a 6%-12% earnings decline in 2017 at its annual investor day presentation.
In response to this news, shares of the nearly $200 billion company fell as much as 9% in morning trade, the biggest single-day decline in at least six years. This drop took about $18 billion in market cap from the company.
"Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience," Wal-Mart CFO Charles Holley said in a statement.
"As a result of these investments, we expect earnings per share to decline between 6 and 12 percent in fiscal year 2017, however by fiscal year 2019 we would expect earnings per share to increase by approximately 5 to 10 percent compared to the prior year."
This is the slide from the company's presentation with the slashed earnings forecast:
'"The company also indicated that as a result of a stronger than anticipated impact from currency exchange rate fluctuations, it now expects net sales growth for the current fiscal year to be relatively flat," Wal-Mart said.
Excluding the currency impact, Wal-Mart estimated that its net sales would grow by 3% for this fiscal year.
Wal-Mart also announced that it will spend $20 billion buying back its shares.