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.

But the thing about Wal-Mart's announcement that should have the rest of the retail world concerned is that this profit cut is really about one thing: Wages.

"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:

And like many multinational companies, the strength of the US dollar is also set to take a bite out of Wal-Mart's profitability this year and in upcoming quarters.

'"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.

More to come ...