Walmart cuts earnings outlook for 2019

Walmart on Tuesday cut its earnings forecast, citing the impact of its acquisition of Indian e-commerce company Flipkart, and said e-commerce growth will be less robust next fiscal year as the company is still fighting to win more shoppers online.

In a statement before its annual investors meeting, the company lowered its fiscal 2019 forecast for adjusted earnings per share to a range of $4.65 to $4.80, from $4.90 to $5.05. Refinitiv had estimated adjusted earnings per share would be $4.79.

Walmart reaffirmed its prior 2019 sales growth forecast.

Its shares were up slightly in premarket trading on the news.

The company bought a 77 percent stake in Flipkart for $16 billion in May as part of its strategy to bulk up its e-commerce business, outbidding e-commerce giant Amazon. It was Walmart's largest deal ever at the time. Walmart saw the acquisition as critical to gaining a foothold in India's rapidly growing market.

Helped by the investments Walmart has been making in its e-commerce business, U.S. online sales are on track to climb about 40 percent during the current fiscal year. Next year, the retailer said it sees its e-commerce division posting net sales growth of about 35 percent — not quite as robust. It continues to roll out online grocery pickup locations at stores and add more items to its website, including dresses from Lord & Taylor. The initiatives have all been spearheaded by Jet.com founder Marc Lore.

For fiscal year 2020, the company said it expects its U.S. same-store sales growth to be 2.5 to 3 percent. Fiscal year 2020 operating income is expected to decline slightly. Excluding the Flipkart deal, Walmart said, it expects to see increases in 2019 and 2010.

Walmart CFO Brett Biggs told CNBC's Courtney Reagan on Tuesday morning that he "feels good about the things we can control." The company plans to be "innovating more, and more quickly, than in the past year or two," he said.

Walmart's said net sales growth for 2020 is predicted to be at least 3 percent, hurt by deconsolidation of its Brazil operations and reduced tobacco sales at its wholesale division, Sam's Club. It expects net sales to climb about 5 percent internationally.

"We're adapting and transforming with speed to better serve our existing customers and reach new ones," CEO Doug McMillon said in a statement. "We're operating with discipline, balancing our short and long-term opportunities. While we're excited about what we've done so far, we aren't satisfied. As we execute today and build for tomorrow, our associates and unique omni-channel assets position us for success."

As for the impact of an ongoing trade war with China on its operations, Biggs said the company's plan is to "manage margin in a way that makes sense for customers and shareholders."

Walmart has been investing heavily in recent months to compete with other retailers including Amazon and Target. It announced a new partnership on Tuesday with Advance Auto Parts to sell its products and offer delivery and services. It recently bought the lingerie company Bare Necessities. Earlier this month, it acquired Eloquii, a retailer that sells plus-sized clothes, for $100 million. Walmart also announced a partnership with U.S. movie studio Metro Goldwyn Mayer to create content with its video-on-demand service Vudu.

But these investments have also been eating into Walmart's gross margins, stoking fear among the financial community that they will continue to weigh on the bottom line.

"While the top line outlook for 2019 looks healthy and was generally in-line with expectations, the margin view for next year did come in softer than expected," Gordon Haskett analyst Chuck Grom said.

The retailer said within the next fiscal year it plans to open fewer than 10 stores in the U.S. and more than 300 internationally, mainly in Mexico and China.

Walmart is also one company expected to benefit from Sears Holdings filing for Chapter 11 bankruptcy protection earlier this week and planning to shut nearly 150 stores before the year is over.

Walmart shares have fallen about 5 percent so far this year. The retailer has a market cap of about $275 billion, compared with Amazon, which has a market cap of roughly $859 billion.

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