Wal-mart (WMT) Shareholders Take It On the Chin from Wage Hikes

Shares of retail giant Wal-mart (NYSE: WMT) are reeling after the company issued a steep profit warning for its fiscal 2017, which is in part tied to the company's recently announced worker pay hike. Also heavy investment in e-commerce and digital initiatives for 2017 are adding to costs.

Wal-Mart expects earnings per share to decline between 6 and 12 percent in fiscal year 2017. The warning comes as operating income that year is expected to be impacted by approximately $1.5 billion "from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience."

The company said investments in e-commerce and digital initiatives are expected to total approximately $1.1 billion in fiscal year 2017.

The warning suggests FY 2017 EPS of $4.16-$4.27, which is well below the consensus of $4.73.

A new $20 billion buyback from the company has done little to allay fears and only begs the question "what would EPS look like without the aggressive buyback?"

The company is looking for a turnaround a couple years after the investment. "... by fiscal year 2019 we would expect earnings per share to increase by approximately 5 to 10 percent compared to the prior year."

Shares of Wal-Mart last traded down 9.2% amid the profit warning.

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