Walmart Stock Plummets on Forecast of Lower Earnings

Shares dropped US$6.70 or 10% to US$60.03, the biggest dip since January 1988, and the stock’s lowest level since March 2012. Wal-Mart is facing strong competition from other retailers, online and offline.

Wal-Mart (WMT) shares are down more than 9.5 percent in late-day trading Wednesday on the news that growth for the company for the next three years would be at a disappointing three to 4 percent. The prediction jolted analysts, who had estimated a gain of 4 percent on average, according to data compiled by Bloomberg.

To counter the bad news delivered to investors on Wednesday, Wal-Mart announced a $20 billion share buyback program. Nonetheless, the surprise warning highlights the company’s challenges.

Wal-Mart Stores Inc. surprised investors by predicting a sharp drop in earnings next year, citing in large part its pledge to raise wages for most USA workers.

Wall Street did not like what Wal-Mart execs had to say on Wednesday (Oct. 14) about the heavy investments in people, technology and supply chain changes.

Wal-Mart said the lower profit forecast was because it was investing in e-commerce as well as increasing employee wages.

This doesn’t come cheap.

Separately, the department said inventories at the end of August were unchanged from July to $1,811 billion but jumped 2.4% from a year ago month. Even with a tough period coming, those are formidable advantages. Its shares tumbled 10 percent to $60.03.

Shares of Wal-Mart plunged after the company unexpectedly predicted a decline in earnings for its fiscal 2017 year, underpinning concern that slowing global economic growth is eating into corporate profits. The retailer plans to spend approximately $1.1 billion on these areas while also battling in-store and pricing problems.

BlackRock, Inc (BLK) jumped 2.2% or $7.19 to $322.31 after the investment management company said revenues in the third-quarter ending in September rose 2% from a year ago to $2.91 billion. The stock was already down 22 percent this year before the decline. He also said it was the “right decision” to increase wages for their employees. He said the move indicates considerable margin reduction in conjunction with modest sales growth.

Grom stated the repurchases could be an indication of further trouble.

Under McMillon, Walmart has accelerated the pace of smaller store openings and stepped up its e-commerce efforts.

Rival Target was down 3.5 percent at $76.20, and Sears fell 3.0 percent to $24.41.