Wal-Mart: Wage hikes are killing our profits

He said fiscal 2017 would represent the heaviest investment time and estimated that operating income would have an effect of $1.5 billion from the second phases of investments previously announced in training and wages.

Wal-Mart shares are seeing their worst one day drop sin more than six years after predicting a profit decline during the next fiscal year.

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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.

In an attempt to compete, Wal-Mart recently unveiled plans to improve the overall shopping experience by raising employee wages and investing in its e-commerce sector.

“The guidance is very disappointing”, Edward Jones analyst Brian Yarbrough said.

Wal-Mart delivered a disappointing message to Wall Street on Wednesday: Sales will remain sluggish, and profit will be hampered next year by efforts to raise workers’ salaries and improve e-commerce capabilities.

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.

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.

“You clean up your house before you invite people over”, said chief executive Doug McMillon. Wal-Mart shares fell 10 per cent in yesterday’s trading and reached their lowest level since May 2012, according to data compiled by Bloomberg.

Wal-Mart Stores Inc (NYSE:WMT)’s stock was decreased to Neutral by analysts at Merrill Lynch, who have a TP of $65.00 on WMT.

McMillon said Walmart is bringing a disciplined approach to managing the company’s financial resources and portfolio.

Wal-Mart expects sales growth of 3 to 4 per cent annually over the next three years.

McMillon also said he was willing to close stores that were underperforming, as well as sell assets, prompting speculation over a potential sale of businesses, like Sam’s Club, whose performance has lagged.

The sell-off wiped off more than $20 billion from Wal-Mart’s market capitalization on Wednesday.

The retail chain also said its board has authorized $20 billion in stock buybacks over a two-year period. He pointed out that the retailer has been able to reverse slides in customer traffic and same-store sales in the USA and sees “that positive momentum continuing”.