WalMart Carnage: Stock Plummets Most In 17 Years After Slashing Earnings Guidance, Blames Wage Hikes

Tyler Durden's picture

Do you see what happens Larry when Wal-mart succumbs to "progressive" pressure and hikes wages? This:

  • WMT CFO: NEW HIRES TO START AT $10 PER HOUR NEXT YEAR
  • WMT CFO: 2017 RISE IN WAGES TO COST $1.5B
  • WMT PLANS REDUCTION IN CAPITAL EXPENDITURES THROUGH FY19
  • WAL-MART SEES FY2017 EPS DECREASING 6-12% VS FY2016

More from Reuters:

  • Company says strong dollar expected to hurt full-year revenue by $15 bln
  • Company says full-year net sales growth expected to be "relatively flat", mainly due to strong dollar; Walmart had earlier forecast 1-2 pct growth
  • Says expects fiscal 2017 earnings per share to fall by 6-12 pct due to higher wages and training costs
  • Company's $20 bln share buyback shrugged off in another sign that allure of buybacks is fading
  • Up to Tuesday's close, stock had fallen about 22 pct this year

The summary from WSJ:

Wal-Mart, which is hosting a meeting with analysts today, also said it projects per-share earnings to decline by 6% to 12% in its next business year. Analysts, according to Thomson Reuters, have anticipated $4.73 in per-share profit for fiscal 2017, higher than the $4.54 expected for 2016.

 

“Fiscal year 2017 will represent our heaviest investment period,” said Charles Holley, Wal-Mart’s Chief Financial Officer. Operating income will be affected by previously announced investments, Mr. Holley said. Those investments include about $1.1 billion in e-commerce and digital initiatives.

 

By fiscal 2019, Wal-Mart said it expects earnings per share to rise 5% to 10%. Separately on Wednesday, Wal-Mart said its board approved a new $20 billion share repurchase program, replacing the $8.6 billion remaining on its program authorized in 2013.

 

In August, the retailer warned its profits would suffer this year as it steps up spending amid increasing competition. The company’s investments on behalf of customers have crimped profits but helped reverse a sales slump: Sales at U.S. stores open for at least a year rose 1.5% in the most recent quarter, the fourth quarterly increase after a long period of decline.

Yes, the company just slashed its 2017 earnings forecast by up to a whopping 12%... but at least the workers are happy, if not so much the market as WMT stock plunges the most since Lehman February 2000 September 1998, and has lost more market cap than Twitter.

 

Carnage:

 

The news spread quickly, in the process blowing up WMT's bid/ask spread (chart courtesy of nanex)

Sending the dividend yield to record highs...

 

Dropping WMT below $200bn market cap (and AMZN now $56bn larger)...

 

We are sure these analysts will be explaining how the market has it all wrong...

 

Not even the company announcing a just as surprising $20 billion stock buyback is helping it.

Oh and speaking of "happy workers", now that WMT has just become an activist target, and eliminate any growth CapEx for the next 4 years, expect the company to proceed with the logical next step after it hikes wages: massive layoffs.

Congratulations American workers: you lose again!

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Dark Daze's picture

Where's YenCross. I want him to answer to his claim that gold was going down this morning.

ThaBigPerm's picture

I can't play this drinking game at work

RadioFlyer's picture

Just buy a bottle of your favorite Russky white lightning on the way home and make up the ones you missed...

hedgeless_horseman's picture

 

 

Fuck Wal-Mart, the destroyer of small towns throughout America.

Stop sending your capital to Wal-Mart, Wall Street, and The Great Wall.

Buy local, and give your capital a chance to come back to you.

glenlloyd's picture

I try to source everything I need from anyplace but walmart...

LetThemEatRand's picture

I love the open contradiction in announcements like this.  The wage hike will cost $1.5B, while they simultaneously have $20B sitting around for stock buybacks.  But it's the $1.5B that is the problem.

Gaius Frakkin' Baltar's picture

It's not just that, they're business model of the '90s is well past its prime. They've done sucked the life out of every small and medium town store. There's nothing left to suck.

They're building Walmarts across from Walmarts around here... peak Walmart indeed.

Normalcy Bias's picture

Aldi is far more efficient than WM. Of course, when you only have 3 employees in the store... lol

Nenad's picture
Obama will not finish his second term! Current Events Linked to Ancient Biblical Prophecy! http://motivationdose.com/is-america-babylon/
pods's picture

So sorry Walmart that you are encountering financial difficulties, wish we could help.

-Former Mom & Pop store owners

JRobby's picture

Wage hikes? Followed by cutting hours = spreading poverty over a larger population base.

No friends, This is a collapse of demand. Across the board.

 

Shocker's picture

Retail is taking a whipping in this economy.

Layoff / Closing List: http://www.dailyjobcuts.com

-

Alea Iactaest's picture

@Dark Daze

 

YenX called it correctly: Au down and Cable up. Maybe you slept in and missed the move? And his reasoning was/is sound, but its been a long time since these markets followed reason.

Enjoy your day!

clooney_art's picture

The fuckers knew their results are not going to be get better, so they hiked the wages - for some people - and fired a bunch of people - to compensate for the hike. The real reason is that ECONOMY SUCKS and is going down the tube.

FireBrander's picture

For Christs Fucken Sake, they HIKED WAGES because MARKET FORCES demanded it! You are complaining about the fucken FREE MARKET mechanism of demand driving wages!

The $8 an hour worker was becoming HARD TO FIND (and wasn't generating $8+ anyway in profit)...so WM upped it to $9 which they feel isn't enough to attract the workers they want, so they're going to $10...WHAT's THE FUCKEN PROBLEM WITH THAT?

Wage competition is now a bad thing?

Antifaschistische's picture

Well, there is good news.   No Pension Fund, No Retirement Fund, no 'low net worth' investor has any stake in WalMart stock price performance.  (do I have to say that stupid sarc thing)

Keyser's picture

The poor, poor Walton family... Imagine if they didn't receive over $6 billion in tax subsidies every year from the US government, i.e. the taxpayer... That cheap shit at Wally World isn't so cheap after all, except in quality... 

 

economicmorphine's picture

Yes, correct.  Collapse of demand it is indeed.

cornflakesdisease's picture

There is nothing on their shelves.  Business envelopes; out.  Cabinet hinges; out.  And their is no selection.  The same is true of Home depot.  Void empty spots all over the place; lumber, hardware, etc.

Md4's picture

Absolutely.

Folks are worried, and beginning to hunker down. The pseudo recovery mantra isn't playing anymore. If the Fed dare not raise rates a quarter percent, why would you risk valuable capital on more Walmart (or anyone else's) shit you don't need.

What these shortsighted corporate hacks, who caused all of this--and STILL continue the same fatal practices--should be worried about...is the long term change in consumer psyches that lead to a rethink about needs and wants.

The American consumer has had it with western corporate SOB's that don't invest in growing a prosperous middle class, but DO expect YOU to consume their way to rewarding THEIR protected class (corporate big shots and shareholders (Wall Street)).

If people are fed up with the way these corporations treat them...and do something about it through their spending patters...then, regardless of how we go from here, it's the right thing to do. Given their (and so many other traitorous western corporate) behavior leading us to this point--they deserve it.

If these bastards want consumers, then start finding a way to rebuild what YOU helped destroy: good-paying, western middle class manufacturing JOBS.

Otherwise, stop your whining and beat it.

Who really needs ya?

m

booboo's picture

Just think, when you get old you start saying walmartS, "I swear it's an old people thing. "I'm going to WalmartS". "I got it at Walmarts"

Colonel Klink's picture

You got your user name wrong, it should have been GOnad!

messymerry's picture

I wiill reiterate my usual harangue about WalMart.  WMT is a TLA.  They get most of their imcome from taxpayers via EBTs. 

;-D    

mademesmile's picture

No joke!

My small town Aldis has 3 employees. Hours are a suck. BUT, if I cant grow it, it's where I go to for groceries. Literally cut my bill in half. You do have to gird up the loins and prepare to do battle with the chained carts. Love it!

 

cornflakesdisease's picture

In Texas they are all over the place, but they are stripped, not equiped.  We shop at HEB, a regional grocery.  Much cheaper, cleaner, and nicer then Fecal Mart.

ali-ali-al-qomfri's picture

 

Harry E. Butts, Harry is the guy over there....scratchin' himself....

Iam_Silverman's picture

"We shop at HEB, a regional grocery.  Much cheaper, cleaner, and nicer then Fecal Mart."

Boy, you got that right!

We tried Aldi's - once.  It wasn't until we got home and noticed that the reason for lower prices was due strictly to their smaller product size (canned goods).

 

The great thing about HEB is that they carry a lot of stuff from their Central Market stores too.

cynicalskeptic's picture

They're building Walmarts across from Walmarts around here... peak Walmart indeed.

 

The old ones will be repurposed as detention centers - a 'win-win' for Walmart and government.... though I suspect nobody thought about what Walmart's future will be when all of their customers are no longer working or 'available' to actually buy anything

Stroke's picture

They will have some plumbing problems for sure.......Do the camps need plumbing?

dontgoforit's picture

Detention centers?  You think they'll detain us?  Eradicate is a more likely option.

goldsaver's picture

Holding area until the showers are freed up.....

HowdyDoody's picture

Do you self-identify as George Soros?

WillyGroper's picture

I hear their air conditioning/refigeration is very efficient.

They have to store the bodies somewhere so CAT's stock can rebound.

No worries. The circle jerk of money continues as they erect cell towers on their RE.

They won't pay them for long...at all.

pazmaker's picture

I would venture to say most of their customers already aren't working.  Their target customers are the SNAP recipients and Disablity and Social Security recepients.

ghostzapper's picture

The new Stawk Gift Cards donned with the mugs of Cramer and Pisani will hockey stick FCF to new all time highs next year.   

Superdave532's picture

Agree that it's amusing, but I doubt that 20 bil is in cash-ish form... 

cynicalskeptic's picture

So.... are the 7 Walmart heirs now worth only as much as 39% of all Americans instead of 40%?

Boo-hoo......

......or are they worth MORE because of stock buybacks?

wizteknet's picture

Stock still 18$ higher then its 2008 low...

economicmorphine's picture

And I love it when someone who doesn't know the difference between a P&L and a fucking balance sheet posts on a ZH article about stock valuation and removes all fucking doubt.

FireBrander's picture

 "The wage hike will cost $1.5B, while they simultaneously have $20B sitting around for stock buybacks.  But it's the $1.5B that is the problem."

A-FUCKEN-RIGHT-ON-BROTHER!

PS> Who forced Walmart to pay $9 this and $10 next year for starting wages? The market forced it!...and fuckshits complain about paying people more money "ruining" Walmart while BILLIONS are pumped into shareholders already STUFFED pockets!

MUCH OF THE MONEY COURTESY THE TAXPAYERS VIA THE FEDERAL SNAP PROGRAM which OPENLY BRAGS that it takes 18% of every year...$14 BILLION of SNAP money straight into Walmarts pockets in 2011 ALONE!

>>Wal-Mart Approves New $15 Billion Share-Buyback Program

"The new buyback program was effective yesterday and replaces the previous $15 billion authorization, which had about $712 million remaining,"

>>>$30 BILLION IN STOCK BUYBACKS!

>>>$30 BILLION IN STOCK BUYBACKS!

>>>$30 BILLION IN STOCK BUYBACKS!

>>>$30 BILLION IN STOCK BUYBACKS!

>>>$30 BILLION IN STOCK BUYBACKS!

 
>>>$30 BILLION IN STOCK BUYBACKS!

 

http://www.bloomberg.com/news/articles/2013-06-07/wal-mart-approves-new-...

PTR's picture

I love the open contradiction in announcements like this.  The wage hike will cost $1.5B, while they simultaneously have $20B sitting around for stock buybacks.  But it's the $1.5B that is the problem.

 

I'm guessing the $1.5b is from cash flow and the $20b is financed (in all, or some,) with ZIRP credit.

Apocalicious's picture

Simple, really. One's an income statement item, one's a balance sheet item. They teach accounting lots of places.

Chris88's picture

It amazes me that a complete lack of basic acounting skills gets 86 upvotes here.  LTER, the wage hike is an expense (comp/salaries), the stock repurchase is a capital management activity that is NOT an expense - you imbecile.  The fucking stock repurchase has nothing to do with them trying to maintain a certain net margin or gross margin, you can say what you will about it helping things on a per share basis which it does, but this really was just a total jackass comment.

On the broader Walmart picture, again, the problem is welfare, not Walmart.  Yes, WMT and anyone else should not have subsidized customer bases and employees, but nobody should.  And if anybody thinks this particular issue pertains only to WMT, you're clueless.  If WMT wants to compete and offer products people voluntarily buy, so be it.  If they fail, well, fuck 'em let them fail.  But nobody has a right to tell the company what to do, unless you own part of it in which you vote with your money (more effective than, say, politics in which voting is a joke).  

kliguy38's picture

"its all good" ......"its all good".......

two hoots's picture

Setting Walmart itself aside, this is a bleak indicator for the near future, especially for the bluecollar class.

Normalcy Bias's picture

Agreed. Things are going pretty much the opposite of the official narrative.

Buckaroo Banzai's picture

Yes, exactly. Whether we like it or not, the welfare class and the minimum-wage class are entirely dependent on low-cost retailers like Walmart. It's a three-legged stool in fact: Walmart, Target, and the "dollar" stores. Kick out one of those legs and you'll have chaos.