Walmart share price drops after announcing wage increases

Shares in Wal-Mart suffered their worst losses in 15 years after the US retailer warned profits would fall in the face of rising wages and sluggish growth.

Shares in the world’s biggest retailer endured their worst daily fall since Feburary 2000, plunging as much as 9.9pc, to $60.12, in early trading, wiping almost $20bn off the value of the company.

Wal-Mart, which owns the Asda supermarket chain in the UK, said during an investor day that plans to increase wages and extra staff training will add $1bn (£640m) in costs this year, and $1.5bn next year.

The US giant said lifting wages to at least $10 (£6.40) an hour from next year will result in earnings falling by 6pc to 12pc for the 12 months to January 2017.

Employees at the retail giant were making a minimum of $9 (£5.76) an hour in April and will get at least $10 an hour in February next year.

Wal-Mart has said about 500,000 of its 1.3m US employees are getting raises and all employees will be able to benefit from the new scheduling and training programmes.

The profit warning comes at a difficult time for the retailer as it spends heavily to try and improve its shopping experience and win back customers.

The Bentonville, Arkansas-based chain generated annual sales of $486bn and pre-tax profits of about $16bn last year, but in the face of slow growth it has been forced to cut prices to encourage demand.

The retailer has lowered its profit forecast once already in 2015 and the shares are now down 29pc in the year to date.

Management's attempts to pacify investors by announcing a $20bn share buyback over a two-year period seem to have done little to calm nerves.

Wal-mart shares recovered slightly and were trading down $5.53, at $61.25 in afternoon trading.

Source : John Ficenec – The Telegraph
http://www.telegraph.co.uk/finance/11931893/Wal-Mart-profit-warning-sends-shares-tumbling.html