Wal-Mart Stores Inc. said earnings per share would decline as much as 12 percent next fiscal year due to investment in technology, higher wages and lower prices, sending its shares down more than 8 percent.
Wal-Mart also announced a $20 billion share buyback but the drop in its share price wiped out close to the same amount in market value, and the intra-day low of $60.18 put the stock on track for its worst one-day performance in more than 17 years.
The world's largest retailer by revenue said it would invest several billion dollars to lower prices over the next three years, which along with investments in its online business and to boost wages for entry-level workers, would weigh on earnings.
"We can deliver stronger financial performance in the short-term simply by running our core business better but that won't be enough," Chief Executive Doug McMillon said at an investor meeting in New York.
Wal-Mart faces tough competition on multiple fronts, from the relentless expansion of online leader Amazon.com Inc to dollar stores and supermarkets fighting for a piece of Wal-Mart's grocery business, which accounts for more than half of its U.S. sales.
The company said it now expected earnings per share to decline by 6-12 percent next fiscal year. The company forecast earnings per share would grow 5-10 percent by the fiscal year ending in January 2019.
Wal-Mart Stores said full-year sales would be flat due to the stronger-than-anticipated impact of the dollar. It had previously forecast net sales growth of 1-2 percent for the current fiscal year ending January.
"The guidance is very disappointing," Edward Jones analyst Brian Yarbrough said. "What if these investments don't lead to better sales. That's the biggest question."
At the same time Wal-Mart projected slower growth in new stores, with 85-95 of the smaller neighborhood markets planned for the fiscal year ending in January 2017, down from 160-170 planned for the current fiscal year. Supercenter openings would slow to 50-60 in fiscal 2017 from 60-70 this year.
McMillon said earlier on CNBC that the strong dollar would likely reduce the company's full-year revenue by $15 billion.
He also said Wal-Mart would add 3,000 department managers in the United States this year to improve its curbside grocery pickup service ahead of the holiday season.
"The opportunity to leverage stores for pickup is a huge one ... we are announcing 11 more markets now and will be up to more 20 markets in the U.S. by end of this year," he said.
Wal-Mart said last month it would expand free grocery pickup service as it seeks to capitalize on its network of physical stores amid growing competition with Amazon.com and others investing in home delivery.
Wal-Mart has been grappling with sluggish sales, leading investors to seek significant changes.
The company announced a new chief financial officer and appointed a chief merchant last week.
The company's shares were down 8.6 percent at $60.96 in midday trade. Shares in other retailers also fell. Target dropped 4 percent to its lowest level in two months.