On Wednesday, retailing giant Wal-Mart shocked investors as it delivered a disheartening guidance for growth and profit when it sent its stocks down 10 percent to $60.03. It was the biggest stock decline in decades, which surprisingly wiped out over $21 billion of shareholders' wealth.
Wal-Mart's depressing fallout came as the company announced low growth rates, which made investors worry about the company's long-term investments paying off. While the downturn was bad news to everyone who owns Wal-Mart shares, it was remarkably disappointing for the company's top 10 shareholders, who collectively own two-thirds of the company's stock, leading to the disappearance of $14.7 billion in wealth, USA Today revealed.
The Wal-Mart stock downfall on Wednesday also hurt some of America's wealthiest people including Walton family members Alice, Jim, John and S. Robson, who lost more than $12 billion. Famed investor Warren Buffett's Berkshire Hathaway also is a huge owner of Wal-Mart stock and also lost nearly $405 million. In recent years, each was on the front line for one of the biggest implosions of a blue-chip stock.
Meanwhile, Wal-Mart has also warned that higher wages and e-commerce spending as well as low prices would cut earnings per share as much as 12 percent next fiscal year, sending its shares down 10 percent. According to NBC News, the retail giant is facing tough and challenging competition on multiple fronts —from Amazon's relentless expansion to dollar stores and supermarkets struggling for a piece of its grocery business. Its international operations are also under pressure as stronger dollar feeding into sales.
Wal-Mart, the world's largest retailer by revenue, said it would invest several billion dollars to lower prices over the next three years. However, the announcement further sparked worries of a price war and the decline of shares of rivals including Target and Home Depot.
"We can deliver stronger financial performance in the short-term simply by running our core business better but that won't be enough," Wal-Mart Chief Executive Doug McMillon said.
In other news, a union has recently slammed Wal-Mart, who just revealed its gloomy fiscal outlook, that the company is using wage hikes as an excuse for its poor performance. CNN Money has learned that higher labor cost are suddenly a major pressure point for the company.
"Walmart should be ashamed for trying to blame its failures on the so-called wage increases," United Food & Commercial Workers International Union spokesperson Jess Levin said. "The truth is that hard-working Walmart employees all across the country began seeing their hours cut soon after the new wages were announced."
As to offset Wal-Mart's terrible Wednesday guidance, the company announced that they are planning to buy back $20 billion in stock. However, experts said it wasn't enough.
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