The company also said Wednesday it now expects sales growth for the current fiscal year to be relatively flat.
Wal-Mart had earlier estimated net sales expansion of 1-2% for the present year ending January.
After the market close, shares of Netflix (NFLX.O) fell 2.4% after the company reported USA subscriber additions below its own forecast.
The disappointing guidance comes as Walmart stores face a tough economy and pressure from rivals including traditional grocers, dollar stores and Amazon.com.
“Having a supply chain that is connected and more dynamic will help us take out costs”, McMillon said. Shares plummeted 10 percent after the world’s biggest retailer released a dismal outlook on sales for the year as they continue to work at realigning business strategy to focus more on the wage increase mentioned above and to invest in the continually growing trend of e-commerce.
The higher pay will add US$1.2bn to costs this year and another US$1.5bn next year, it said.
Shares at the Bentonville, Arkansas based company were lower by 8.7% on the unexpected announcement, delivered by Walmart executives during the annual investor’s conference. “WMT calls out specifics of wage and price investments – and yes these are discrete actions taken by WMT; but we believe they are just symptoms of where WMT sits in its history”. He said the company expected to spend an additional $1.2 billion on wages this fiscal year and another $1.5 billion in fiscal 2017.
Shares dropped as much as 9.9 percent to $60.12, hitting a three-year low, and putting the stock on course for its worst trading day in roughly 15 years. On Wednesday, it also said it was expanding its online grocery with free pickup to 10 additional markets, making the service available in a total of 20 markets in the U.S.
Wal-Mart is now covered by 30 Wall Street analysts.
The company announced a new chief financial officer and appointed a chief merchant last week.
Hoping to temper the bad news somewhat, the company announced a $20 billion share buyback program Wednesday.
Last year, McMillon also replaced Wal-Mart’s U.S CEO last year with Greg Foran, who was previously head of Wal-Mart China business.
Due to this, Walmart is expecting its per share earnings to drop 6% to 12% during the 2017 fiscal year.
Wal-Mart’s second-quarter earnings missed analysts’ estimates.