16.10.2015, 08:29
Walmart strategy drives growth and sustainable returns, Plans $20 billion share repurchase program over two years
OREANDA-NEWS. Wal-Mart Stores, Inc. (NYSE: WMT) today provided its strategic outlook and growth plans for the future at the company’s 22nd annual meeting for the investment community. The investments outlined today are part of a framework designed to drive sales growth by strengthening the U.S. and e-commerce businesses. This framework is intended to enhance the experience in stores, leverage Walmart’s unique supply chain capabilities to lower costs and build deep digital relationships with customers.
"These are exciting times in retail given the pace and magnitude of change. We have strengths and assets to build on and are making progress to position the company for the future,” said Doug McMillon president and CEO, Wal-Mart Stores, Inc. "We’re encouraged by recent customer feedback and will continue to get stronger. Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money but also time."
Financial Outlook
The company also indicated that as a result of a stronger than anticipated impact from currency exchange rate fluctuations, it now expects net sales growth for the current fiscal year to be relatively flat. Excluding the impact of currency exchange fluctuations, net sales growth would be approximately 3 percent for fiscal year 2016. In February, the company indicated that it expected net sales growth of between 1 and 2 percent.
Charles Holley, Walmart’s executive vice president and chief financial officer, outlined the company’s financial priorities for growth and detailed the investment and expansion plans for fiscal year 2017.
“Our sales growth over the next three years is estimated to range between 3 to 4 percent annually, which will add approximately $45 to $60 billion in sales. Within the last year, we have experienced traffic and comp sales improvements in our Walmart U.S. business, and our plan reflects that positive momentum continuing,” said Holley.
McMillon said Walmart is bringing a disciplined approach to managing the company’s financial resources and portfolio. “We are actively reviewing our portfolio to ensure our assets are aligned with our strategy. But we will be thoughtful in our approach, recognizing our responsibility to drive shareholder value,” he said.
Holley also discussed the company’s profitability over the long-term and provided more insight into certain financial metrics.
“Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience,” said Holley. “As a result of these investments, we expect earnings per share to decline between 6 and 12 percent in fiscal year 2017, however by fiscal year 2019 we would expect earnings per share to increase by approximately 5 to 10 percent compared to the prior year.”
Share repurchase
The company also announced that its board of directors has authorized a new $20 billion share repurchase program and retired the $8.6 billion remaining on its 2013 authorization.
“We remain committed to our strong balance sheet and have said that we would only use it for strategic purposes. Last year and this current year, we have not utilized that capacity as we felt it was not the right time to drive a larger volume of share repurchase. We expect over the next three years to generate around $80 billion in cash. Given the current landscape, we have a strategic opportunity, and our intent would be to utilize this new $20 billion authorization over the next two years,” said Holley.
“This share repurchase program, combined with our annual dividends, reinforces our continued commitment to delivering increased value to shareholders. We remain committed to maintaining a strong balance sheet and financial position that enables us to continue focusing on growth-oriented opportunities,” continued Holley.
"These are exciting times in retail given the pace and magnitude of change. We have strengths and assets to build on and are making progress to position the company for the future,” said Doug McMillon president and CEO, Wal-Mart Stores, Inc. "We’re encouraged by recent customer feedback and will continue to get stronger. Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money but also time."
Financial Outlook
The company also indicated that as a result of a stronger than anticipated impact from currency exchange rate fluctuations, it now expects net sales growth for the current fiscal year to be relatively flat. Excluding the impact of currency exchange fluctuations, net sales growth would be approximately 3 percent for fiscal year 2016. In February, the company indicated that it expected net sales growth of between 1 and 2 percent.
Charles Holley, Walmart’s executive vice president and chief financial officer, outlined the company’s financial priorities for growth and detailed the investment and expansion plans for fiscal year 2017.
“Our sales growth over the next three years is estimated to range between 3 to 4 percent annually, which will add approximately $45 to $60 billion in sales. Within the last year, we have experienced traffic and comp sales improvements in our Walmart U.S. business, and our plan reflects that positive momentum continuing,” said Holley.
McMillon said Walmart is bringing a disciplined approach to managing the company’s financial resources and portfolio. “We are actively reviewing our portfolio to ensure our assets are aligned with our strategy. But we will be thoughtful in our approach, recognizing our responsibility to drive shareholder value,” he said.
Holley also discussed the company’s profitability over the long-term and provided more insight into certain financial metrics.
“Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience,” said Holley. “As a result of these investments, we expect earnings per share to decline between 6 and 12 percent in fiscal year 2017, however by fiscal year 2019 we would expect earnings per share to increase by approximately 5 to 10 percent compared to the prior year.”
Share repurchase
The company also announced that its board of directors has authorized a new $20 billion share repurchase program and retired the $8.6 billion remaining on its 2013 authorization.
“We remain committed to our strong balance sheet and have said that we would only use it for strategic purposes. Last year and this current year, we have not utilized that capacity as we felt it was not the right time to drive a larger volume of share repurchase. We expect over the next three years to generate around $80 billion in cash. Given the current landscape, we have a strategic opportunity, and our intent would be to utilize this new $20 billion authorization over the next two years,” said Holley.
“This share repurchase program, combined with our annual dividends, reinforces our continued commitment to delivering increased value to shareholders. We remain committed to maintaining a strong balance sheet and financial position that enables us to continue focusing on growth-oriented opportunities,” continued Holley.
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