Did Wal-Mart’s CEO Just Drop a Major Bombshell?

Updated to include guidance details

NEW YORK (TheStreet) -- Wal-Mart  (WMT) CEO Doug McMillon may be preparing to take drastic action to reverse the giant retailer's slumping stock price and pressured profits.

"We are more than open to re-shaping our portfolio," said McMillon at the company's 22nd Annual Investment Community Day on Wednesday. McMillon added the company continues to "evaluate its portfolio" of assets, and pointed to Wal-Mart's history of exiting non-strategic assets and closing underperforming stores. For example, the retailer exited Germany in 2006 and took a $1 billion hit to profits as a result. 

Wal-Mart shares fell 9.2% on Wednesday to $60.44.

For McMillon, the shocking comments come as some on Wall Street have questioned the need for Wal-Mart to operate certain businesses that may be underperforming or no longer strategic. One is warehouse club Sam's Club, which has lower profit margins relative to Wal-Mart and continues to struggle to gain market share from the more popular Costco (COST) . 

Sam's Club could be spun off to fund investments in online, lower prices and personnel at Wal-Mart stores. Another is an ongoing exposure on an emerging market like Brazil, which continues to battle high inflation and where people still favor shopping in local markets, both factors that weigh on Wal-Mart's performance in the region.  The company may be better off pulling a Germany and exiting Brazil's 559 stores by finding a buyer.  

Wal-Mart may be exploring a pare-down in its portfolio of store assets to help lift its stock, and thwart the approach of activist investors. Shares of Wal-Mart have plunged about 19% since the company's last analyst day in October 2014 because of pressured sales and profits, and a drumbeat of financial warnings. The most recent warning arrived on Wednesday. 

Wal-Mart said it now expects net sales growth for the current fiscal year to be relatively flat. Excluding the impact of currency exchange fluctuations, mostly the stronger dollar, net sales growth is estimated to be about 3%. In February, Wal-Mart forecast net sales growth of between 1% and 2%.

The company said higher wages will dent profits by about $1.5 billion in the 2017 fiscal year, following a $1.2 billion hit this fiscal year. Investments in Walmart's e-commerce and digital initiatives are expected to total about $1.1 billion in the 2017 fiscal year.

The sole piece of good news: Wal-Mart announced a new $20 billion share repurchase plan, likely to help offset pressured profits by reducing the number of shares outstanding. 

"Competition has strengthened," conceded McMillon in his opening remarks on Wednesday. In August, Wal-Mart reported another disappointing quarter of profits. Second-quarter earnings per share of $1.08 fell short of analysts' estimates of $1.12. The result was near the bottom end of the retailer's guidance of $1.06 to $1.18 a share. The company dropped its full-year earnings guidance to $4.40 to $4.70 a share from its previous outlook of $4.70 to $5.05.

Wal-Mart did not respond to request seeking comment.

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