Why Walmart Cut its Earnings Forecast for 2019

03:46 10/19/2018

You never want to hear that monster company like Walmart cut its EPS estimates.

But that’s what just happened.

The company just announced it was cutting its fiscal year 2019 EPS guidance from a range of $2.90 to $3.05 to a new range of $2.65 to $2.80. Adjusted EPS was also cut from a prior range of $4.90 to $5.05 to a new range of $4.65 to $4.80.

That’s not because of a slowing consumer.

It has more to do with company efforts to fight back against a behemoth like Amazon.com, which is crushing traditional retail. But you know that.

So why the haircut?

The recent EPS trimming come courtesy of a $16 billion acquisition of India’s Flipkart, a rather large e-commerce player in India.

But none of this is a surprise to anyone.

In August 2018, analysts at Raymond James noted, “Flipkart will likely weight on consolidated operating earnings for the next couple of years.

The good news is that internationally, Flipkart “transforms Walmart’s position in a country with more than $1.3 billion people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and e-commerce penetration,” as noted by Forbes.

Going forward, same-store sales are expected to fall in a range of 2.5% and 3% for the next fiscal year thanks to investments in online projects and a stronger than expected economy.

Walmart also announced plans to fend of Amazon.com as well with food.

As it battles WMT for market share, the company believes its food supercenters are its most effective weapon in its fight. At the moment, grocery sales contribute 56% to Walmart sales.

"Having fresh food within 10 miles of 90% of the population is a structural competitive advantage," Walmart Chief Executive Doug McMillon said, as quoted by Morningstar. By the end of the year, 800 U.S. stores will offer grocery delivery and over 2,000 will offer grocery pickup service, where shoppers order online and pick up in store parking lots.

However, it’s not just food that Walmart is after.

The company recently bought online lingerie retailer Bare Necessities, and retailer Eloquii. The company even opened an e-book store and revamped Jet.com.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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