Wal-Mart offered a tepid profit forecast on Thursday and said it plans to slow down on the number of brick-and-mortar stores it’s opening.
The world’s largest retailer has been increasingly turning its attention to e-commerce and said it plans to blow through about $11 billion next year, largely to beef up its digital capabilities and remodel existing stores.
As Wal-Mart adjusts to a shifting retail landscape, its bottom line has suffered. On Thursday, it reiterated its expectation that adjusted earnings this year will come in at $4.15 to $4.35 per share, whereas Wall Street analysts had been forecasting $4.34 per share. This is down from $4.57 last year. The retailer doesn’t expect earnings growth to return until fiscal 2019, with earnings expected to remain relatively flat next year.
The company gave its updated outlook at an annual meeting with investors. Wal-Mart’s stock, which is up 13% this year, edged down 2% to $69.64 on Thursday morning.
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Wal-Mart has become a retail behemoth by opening stores one after another and today its footprint spans more than 11,000 locations around the globe. Now, however, it’s tapping the breaks. Whereas Wal-Mart opened 471 stores in its last fiscal year, it expects to open no more than 351 stores before this fiscal year is over and a maximum of 279 next year. Earlier this year, it made the bold decision to shutter 269 stores, which marked the first time in its history that it closed stores en masse.
Instead the company is doubling down on e-commerce. It made waves in August when it declared that it would buy e-commerce upstart Jet.com for $3.3 billion and has nearly doubled its investment in online Chinese retailer to 9%, according to a Wednesday filing.
“We’re moving with speed to position the company to win the future of retail,” said Wal-Mart CEO Doug McMillon. “Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly – so that’s what we’re doing.”
The company has tested investor patience with its aggressive spending toward this end, which it describes as crucial for its future, but that eats into the bottom line. This time last year its stock suffered its worst day in 15 years when the company said earnings would decline as much by as 12% in fiscal 2017 and things would essentially get worse before they got better.
Date: October 06, 2016