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Walmart Lowers Projected Profits; Doug McMillon Discusses Shifting Strategy

Walmart Lowers Projected Profits; Doug McMillon Discusses Shifting Strategy


BENTONVILLE, AR
Wednesday, October 17th, 2018

Despite Walmart's role as one of grocery's leading players, the company's President and CEO Doug McMillon advised investors to “expect [Walmart] to test a lot and fail a lot” in the coming year. And the surprises didn't stop there. The retail behemoth also announced that it was lowering its earnings forecast at its annual investor meeting earlier this week.

Walmart held its annual investor meeting on October 16, 2018

During the meeting, McMillon noted that Walmart's e-commerce growth next year would not be as incremental as this fiscal year ending in January. Specifically, Walmart revealed its earnings would be taking a hit from its $16 billion acquisition of Flipkart, which Walmart had initially expected to affect earnings by only 25 to 30 cents.

Doug McMillon, President and CEO, Walmart“We’re adapting and transforming with speed to better serve our existing customers and reach new ones,” McMillon said in a press release prior to the meeting. “We’re operating with discipline, balancing our short- and long-term opportunities. While we’re excited about what we’ve done so far, we aren’t satisfied. As we execute today and build for tomorrow, our associates and unique omnichannel assets position us for success.”

According to a company press release, Walmart projects fiscal year 2020 to include the following:

  • Consolidated net sales growth: At least 3 percent in constant currency, negatively affected by deconsolidation of Walmart Brazil and planned tobacco sales reduction at Sam’s Club
  • Comp sales growth: Walmart U.S. +2.5 percent to +3 percent increase
  • Walmart U. E-Commerce Net Sales and Growth: Around 35 percent
  • Walmart International net sales growth: Around 5 percent in constant currency
  • Consolidated Operating Income: Decline by a low-sing digit percentage range
  • Grocery Pickup and Delivery: Approximately 3,100 grocery pickup and 1,600 grocery delivery locations by year-end fiscal year 2020
  • Capital Expenditures: Approximately $11 billion; strong focus on store remodels, customer initiatives, e-commerce, technology, and supply chain
  • New Units: Walmart U.S. expects to open fewer than 10 stores; Walmart International expects to open slightly more than 300 new stores primarily in Walmex and China

Despite its less-than-ideal forecast, Walmart’s shares were up 2.1 percent at $95.85 per share following the meeting, according to a report by ET Retail.

Will Walmart’s forecast alter its position in the grocery retail race as 2018 comes to a close? Deli Market News will continue to report on the latest.

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