Wal-Mart Lost $21 Billion in One Day, Here’s How

Wal-Mart (WMT), the world’s largest retailer, saw its shares get whacked 10% or more than 6 points Wednesday, the biggest drop ever. The mauling evaporated over $21 billion in market value. As a Dow member the drop shaved over 44 points off the average.

Investors revolted after Chief Financial Officer Charles Holley lowered the boom at its annual investor day at the New York Stock Exchange (ICE), disclosing that profits will decline between 6 and 12% in fiscal 2017. The consensus was for a drop of 4%. He also stated that 75% of the reduction was tied to higher wages.

You may recall, earlier this year, Wal-Mart led the charge in raising wages for about 500,000 workers. In April, workers started receiving $9 an hour and pay may get bumped to $10 next year. Over the next two years this will cost the company nearly $3 billion, according to Holley.

Boosting worker pay has been an initiative of CEO Doug McMillian, who said, “Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones.” Despite these optimistic remarks, just last month McMillian indicated that the company could be doing a better job of controlling costs, including wages, as covered by FOXBusiness.com.

That was a big clue. If you strip out higher wages, Wal-Mart has other issues. The stock is down 30% this year, which may be the worst performance since 1973 and a sign the investor community has lost confidence in the retailer. Comparable store-sales for Wal-Mart and Sam’s Club rose a modest 1.5% for the 13-week period ended July 31. Total net sales in fiscal 2016 are expected to fall flat. (Read more from “Wal-Mart Lost $21 Billion in One Day, Here’s How” HERE)

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