Walmart Cuts Earnings Forecast -- WSJ
October 17 2018 - 3:02AM
Dow Jones News
Acquisition of Flipkart for $16 billion earlier this year
expected to weigh on results
By Sarah Nassauer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 17, 2018).
Walmart Inc. lowered its profit targets in the wake of its
largest-ever acquisition, but said sales growth will continue next
year.
The lowered profit goal for the current year reflects the
acquisition of Indian e-commerce company Flipkart, which Walmart
paid $16 billion to buy earlier this year. At the time, Walmart
said the deal was a long-term bet on a fast-growing market that
would depress earnings.
Walmart said it expects to earn between $4.65 and $4.80 a share
in the year ending Jan. 31, down from $4.90 to $5.05 earnings per
share.
Sales in existing stores will rise between 2.5% and 3% next
fiscal year, the company said Tuesday at an investor meeting,
continuing a string of solid sales gains for the world's largest
retailer amid investments in online growth and a strong economy. In
the second quarter, sales for Walmart accelerated at the fastest
rate in more than a decade.
Walmart executives laid out their plans for fending off
Amazon.com Inc., highlighting their advantage in food. Grocery
sales contribute 56% of Walmart's sales, making it the largest
grocer in the country.
"Having fresh food within 10 miles of 90% of the population is a
structural competitive advantage," Walmart Chief Executive Doug
McMillon told analysts gathered near the company's Bentonville,
Ark. headquarters. By the end of the year, 800 U.S. stores will
offer grocery delivery and over 2,000 will offer grocery pickup
service, where shoppers order online and pick up in store parking
lots.
The Flipkart deal is part of Walmart's effort to ramp up its web
business. The company said Tuesday it expects e-commerce sales --
still a small slice of its total business -- to rise 35% next year,
slightly slower than the 40% sales growth predicted for the current
year.
Walmart expects its ecommerce business to record a slightly
greater operating loss next year, Chief Financial Officer Brett
Biggs said.
Earlier this month, Amazon raised the minimum wage it pays all
U.S. employees to $15 an hour, putting pressure on some competitors
to increase wages to compete for workers.
Walmart has been gradually raising wages since 2015, most
recently setting a minimum wage of $11 earlier this year. "We will
keep investing in our people with wages and benefits and training
by market, as we have this year," Mr. McMillon said.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
October 17, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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