Over the past eight years, the entirety of Wal-Mart’s (WMT) earnings growth has come from a combination of cost cuts and share buybacks. Wal-Mart made $13.5 billion in net profits back in 2008, and this year it is only expected to make around $13.3 billion profits. Despite making $200 million less in expected 2016 profits compared to the 2008 period, Wal-Mart shareholders have nevertheless experienced earnings per share growth from $3.42 to around $4.25 because Wal-Mart repurchased 800 million shares of its outstanding stock to bring the outstanding share count down from 3.9 billion to 3.1 billion.
It plowed around $56 of its retained cash flow, and even borrow a bit, to effect these buybacks. Sales at Wal-Mart haven’t grown since 2013, and so the mega-giant retailer has resorted to financial engineering to maintain its profit margins. Namely, it has adopted a bare-bones approach to hiring employees, perpetually understaffing checkout … Read the rest of this article!