Walmart To Slow Store Openings and Focus More on Online Growth

Walmart Stores, Inc reported a tempering of its profit forecast over the next two years, Thursday, as its online business investments and retail sales are slowing. As such, company shares fell in premarket trading, even as the company is holding its annual investor day. However, they are making adjustments—with plans to slow store openings—and still have high hopes.

“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail,” explains 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.”

Furthermore, Wal-Mart commented that it expects flat earnings for next year (fiscally ending January 31, 2018), with capital expenditures to hit roughly $11 billion. Previously, the company had forecast profit growth.

“Wal-Mart’s forecasts announced this morning are in line with our expectations, especially when the costs involved in building out its online capability are considered,” explains Moody’s analyst Charlie O’Shea. “It will take a while for the company to become a true multi-channel retailer.”

In August, Wal-Mart reported expectations of a modest drop in earnings. That makes some sense, since the company has not been as successful in building digital revenue as they have been with its big-box stores, in the past. On the other hand, comparable sales through US stores—which were greatly struggling at one point—exceeded expectations in the first half of this year.

Indeed, since its second quarter earnings report, the company reset its current guidance from the $4-$4.30 range to $4.15-$4.35.
But Wal-mart did complete its $3.3 billion acquisition of and had expected a 5 percent hit when it closed; the deal was expected to close in the fourth quarter but when the deal completed in the middle of the third quarter, the company cautioned a new expectation of marginal dilution over its earlier estimate.

Still, Wal-Mart shares continue to show growth, as they are, in fact, up 17 percent on the year. Shares are near $72, but fell by 1.9 percent or $1.33 to $70.34 in premarket trading, on Thursday.