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Walmart lowers its adjusted earnings outlook for 2019

Walmart’s newest acquisition and lower e-commerce growth are expected to take a toll on profits in the next fiscal year and beyond.

While the discount giant is standing by its total sales growth expectations for fiscal year 2019, it lowered its adjusted earnings per share to $2.65 to $2.80, down $2.90 to $3.05.

Meanwhile, adjusted EPS is now $4.65 to $4.80, down from $4.90 to $5.05. This is lower than analyst expectations of $4.79.

Walmart’s lower forecast incorporates an estimated impact from incremental interest expenses needed to fund its newest acquisition, Flipkart. The discount giant acquired India’s largest e-commerce player in August for $16 billion, Walmart’s largest acquisition to date. The deal, which closed in August, made Walmart the largest shareholder in the e-commerce company with a 77% share.

Walmart also lowered its expected same-store sales growth in the United States to be in a range of 2.5% to 3%.

Looking ahead, e-commerce net sales growth is expected to be around 35% for the fiscal year 2020, a drop from the 40% climb the company is expecting during the current fiscal year. However, the company is still bullish on its digital efforts, such as continuing to roll out online grocery pickup locations at stores. Overall, the company expects to operate approximately 3,100 grocery pickup and 1,600 grocery delivery locations by year-end fiscal year 2020.

Despite the company’s ongoing digital focus, Walmart is pulling back on store openings with a plan to open fewer than 10 stores in 2020.

Based on this plan, Walmart’s earnings per share for the fiscal year 2020 is expected to decline by a low single-digit percentage range versus earnings for fiscal 2019. Excluding Flipkart, earnings are expected to increase by a low to mid-single digit percentage range versus fiscal 2019.

“We’re adapting and transforming with speed to better serve our existing customers and reach new ones,” said Walmart president and CEO, Doug McMillon. “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.”

The company expects to position itself for the future by leveraging “our scale, assets and financial strength in ways unique to Walmart to enhance and build competitive advantages,” said Walmart CFO Brett Biggs.

“We continue to operate with discipline, we’re strengthening our cost culture and we’re leveraging technology, data and analytics in new ways to be more productive,” Biggs added. “Our financial strength gives us the flexibility to deliver near-term results while making strategic decisions for the longer term.”
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