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Walmart to Increase Investments in E-Commerce and Technology to Take on Amazon

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Walmart boxes fulfillment center
Walmart’s never-ending mission to unseat Amazon has been kicked into high gear.

The retail giant outlined its plan Thursday to spend about $11 billion in fiscal 2018 as it slows store openings, speeds up the pace of remodels and pumps capital into e-commerce and digital initiatives.

It’s all part of the company’s efforts to create a seamless shopping experience across all channels, both in the United States and abroad. Earlier this year, Walmart spent more than $3 billion on Jet.com and according to rumors last week it’s now in talks to invest in India’s Flipkart. Then on Wednesday, Walmart announced it had nearly doubled its investment in China’s JD.com.

“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail,” shared Doug McMillon, president and chief executive. “Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly—so that’s what we’re doing.”

But with the additional cost of technology and e-commerce investment on its plate, the company is expecting profits to be flat from 2017 to 2018, before increasing by about 5 percent in 2019. It had previously forecast growth of between 5 percent to 10 percent.

According to Charlie O’Shea, Moody’s lead retail analyst, Walmart’s forecast is in line with expectations, especially when the costs involved in building out its online capability are considered.

Walmart shares (WMT) declined by more than 3 percent in early trading Thursday, ahead of the company’s annual investment community meeting.

In addition to the lackluster profit outlook for 2018, Walmart reiterated its 2017 earnings per share (EPS) guidance of $4.29 to $4.49. Brett Biggs, chief financial officer, said the company will rely more on comparable sales and e-commerce growth to drive the top line.

To that end, Walmart is projecting 130 new U.S. stores in 2017—100 fewer than this year—and only 55 new locations will open in 2018. That’s a far cry from the 316 stores added to its base in 2015.

“It will take a while for the company to become a true multi-channel retailer, which occurs when cost efficiencies begin to generate and duplication reduces dramatically as physical assets and personnel are optimized,” O’Shea said. “In addition, we view the doubling down of Walmart’s stake in JD.com as a positive on a variety of fronts, particularly from a knowledge perspective as, similar to the benefits provided by Jet.com, there is much to learn from more developed online retailers.”

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