Walmart shares were destroyed on Wednesday after the company released its quarterly earnings. Shares at Walmart fell by 10% for a single day loss of $21 billion.
Chief Financial Officer Charles Holley lowered the boom at its annual investor day at the New York Stock Exchange (ICE),and revealed that profits will decline between 6% and 12% in fiscal 2017. Analysts had expected a 4% drop. He also stated that 75% of the reduction was tied to higher wages.
Earlier in the year Walmart said it would increase the minimum wage it paid to approximately 500,000 employees. In April, employees started receiving $9 an hour and pay may get bumped to $10 next year.
The increase in employee pay will cost Walmart more than $3 billion over the next several years.
Worker pay increases have been championed by CEO Doug McMillan, who told investors, “Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones.”
Walmart stock is down 30% in 2015, it’s worst performance since 1973.
Comparable store-sales for Wal-Mart and Sam’s Club rose a modest 1.5% for the 13-week period ended July 31. Total net sales in fiscal 2016 are expected to fall flat.
Walmart is facing increased competition from Amazon, Instacart, and other company’s that can deliver items right to a customer’s home in a short period of time.
Walmart also noted that the strong dollar will cost the company $15 billion in revenue this year.
Walmart now plans to buyback $20 billion worth of stock over the next two years.
Deutsche Bank cut the price target on shares of Wal-Mart by 14% to $60 a share – exactly where the stock closed after the bell.