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Walmart to Pump Billions Into E-Commerce, Expects No ROI Until 2019

Walmart store front

Walmart’s stock took a nearly 9 percent nosedive on Wednesday after executives warned that they’re spending more on wages and training as well as investing $2 billion in e-commerce over the next two years and expect profits to fall in fiscal 2017.

The immediate result of that statement: the Bentonville, Arkansas-based company lost nearly $20 billion in market value.

Speaking at Walmart’s 22nd annual investors meeting, Executive Vice President and Chief Financial Officer Charley Holley said, “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.”

However, as a result of investing about $1.5 billion to raise employee wages and provide an expanded training program, as well as the company’s commitment to spending $900 million on e-commerce capabilities in 2016 and $1.1 billion the year after, Holley forecasted a fall in earnings per share of between 6 and 12 percent in fiscal 2017.

“By fiscal year 2019 we would expect earnings per share to increase by approximately 5 to 10 percent compared to the prior year,” he added—a prediction that would bring earnings back above where they are now.

President and CEO Doug McMillon stressed, “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.”

Walmart also announced a $20 billion share repurchase program and retired the $8.6 billion remaining on its 2013 authorization, but it wasn’t enough to restore investors’ faith.

“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,” Holley noted.

McMillon added, “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.”