The Chilling Thing Wal-Mart Said about Financial Engineering

[marmar]

The Chilling Thing Wal-Mart Said about Financial Engineering
by Wolf Richter • October 14, 2015


[font size="3"][font color="green"]Once financial engineering fails, all bets are off[/font][/font]

Wal-Mart had a bad-hair day. Its shares plunged $6.71, the largest single-day cliff-dive in its illustrious history. They ended the day down 10%, at $60.02, a number first kissed in 2001. Shares are 34% off their peak in January. So it wasn’t just today.

But Wal-Mart didn’t do anything that special at its annual investor meeting today. It announced big “capital investments,” (we’ll get to the quotation marks in a moment), a crummy outlook, and a huge share buyback program. All of which it has done many times before. Only this time, the outlook is even worse, but the promised share buybacks are even larger.

Wal-Mart proffered its strategies on how it would try to boost revenue growth in an environment where its primary customers – the 80% that got trampled by the Fed’s policies – are struggling to make ends meet. A problem Wal-Mart has had for years.

The news release hints at these new initiatives, spells out costs, and forecasts the resulting earnings debacle.

Wal-Mart will goose “capital investments” by $11 billion in Fiscal 2017, on top of the $12.4 billion it’s spending on “capital investments” in fiscal 2016. This will maul earnings per share. In 2017, they’re expected to drop 6% to 12%, when the analyst community had forecast an increase of 4%. But 2019 is back in the rosy scenario of earnings growth. ...................(more)

http://wolfstreet.com/2015/10/14/have-share-buybacks-suddenly-lost-their-magic-wal-mart-financial-engineering/

[Galileo126]

1. May Walmart die by carving out it's own heart with a dull spoon. -n/t

[Erich Bloodaxe BSN]

2. Given how enduring their problems have been, and the obvious solutions to fixing many of them

you have to wonder if the Walton heirs are deliberately trying to drive stock prices down far enough to buy out all the smaller investors and take the company private before fixing them.