Walmart's stock took a major hit yesterday following the company's announcement that its profits could decrease by as much as 12 percent in the next fiscal year as it continues to make investments in e-commerce, higher wages for hourly workers, remodeling stores and lowering prices on the goods it sells.
While Wall Street responded as though Walmart had taken a catastrophic hit — analysts were expecting a four percent gain in profits — the company's message remained upbeat, according to Bloomberg.
"These are exciting times in retail given the pace and magnitude of change. We have strengths and assets to build on and are making progress to position the company for the future," said Doug McMillon president and CEO, Walmart Stores, Inc., in a statement. "We're encouraged by recent customer feedback and will continue to get stronger. Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money but also time."
Doug McMillon - Source: Walmart investor webcast
Charles Holley, Walmart's executive vice president and chief financial officer, said the company expects to improve sales between three and four percent annually over the next three years. He pointed out that the retailer has been able to reverse slides in customer traffic and same-store sales in the U.S. and sees "that positive momentum continuing."
While Walmart's management remains positive, the same is not true for Wall Street.
"There is no way they can continue to grow, they are just too big," Ivan Feinseth, chief investment officer at Tigress Financial Partners, told Bloomberg. "They do $500 billion worth of revenue — how are you going to grow that?"
Not everyone on Wall Street was ready to bail on Walmart. In another Bloomberg report, analysts at Deutsche Bank were quoted as saying, "labor and e-commerce investments are part of the cost of doing business today, in our view, and we believe it will be branding, product, convenience, and experience that ultimately drives market share shifts. Target likely has the most direct overlap (and need to keep up) with Wal-Mart's changes, in our view."
The hit to Walmart's stock also took other retailers down with it on concerns the company will spark a price war as it seeks to regain lost ground. Walmart's stock fell 8.5 percent in yesterday's trading. Best Buy saw its shares slip 5.8 percent and Target was down 3.7 percent.
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