+ A
A -
AFP
New York
Walmart trimmed its full-year earnings forecast on Tuesday following the major acquisition of India's online retailer Flipkart and vowed to plow ahead with more investment in the battle for retail market share with Amazon.
Walmart, which also signaled that sales growth at US stores could slow next year, said heavy investment was needed to meet customer expectations in a fast-changing retail environment. Investors appeared to buy that view, bidding shares higher after early weakness.
"A business that won't invest won't last,"Walmart Chief Financial Officer Brett Biggs said during a presentation at investor day."The payoff from past investments is paying for new investments."
Biggs reiterated the company's concerns about tariffs from ongoing US trade conflicts with China and others but said it would work to minimize the effect on consumers.
"Our goal is to always be the low-price leader,"he said.
The world's biggest retailer cut its profit target for the current year to a range of $2.65 to $2.80 per share from the prior range of $2.90 to $3.05 following the hit from Flipkart. Walmart also signaled that spending on Flipkart would also dent profit levels next year, its fiscal 2020.
Walmart closed the $16 billion acquisition of a 77 percent stake in Flipkart in August, its biggest-ever deal.
Walmart executives, who have occasionally taken heat in recent years over heavy investment on higher store wages, eCommerce and acquisitions, vowed to stay the course as it adapted to the changing retail environment.
Shares of Walmart, which had initially sunk on the forecast, rose 1.8 percent to $95.54 in morning trading as investors seemed to take the heavy spending in stride.
"They need to invest because they are looking over their shoulder at Amazon, which is breathing down their neck,"said CFRA Research analyst Tuna Amobi.
Before sealing the deal for Flipkart, Walmart competed directly with Amazon, which had designs on accelerating its own growth in India. Flipkart and Amazon have been going head-to-head in a costly battle for domination of one of the fastest growing online retail markets since 2013.
Walmart's revenues last year were more than twice that of Amazon, but the latter has seen massive growth as it has expanded into more business lines and further afield from its Seattle home and original mission of selling books online.
But just as Amazon has made more forays into brick-and-mortar retail with its purchase of Whole Foods Market and the opening of some of its own physical stores, Walmart has made major eCommerce acquisitions and spent heavily on mobile applications and other tech-oriented services.
