Wal-Mart Stores, Inc. engages in retail and wholesale business. It operates through different business segments such as:
- Walmart U.S.
- Retail and digital retail operations in U.S.
- Offers financial services and related products such as money orders, prepaid cards, wire transfers, check cashing and bill payment.
- Walmart International
- Categorized into retail, wholesale and other formats operations outside U.S.
- Includes supercenters, supermarkets, hypermarkets, warehouse clubs, Sam's clubs, cash and carry, drug stores etc.
- Sam's Club. Walmart
- Membership-only warehouse clubs and samsclubs.com
- Founded by Samuel and James Moore Walton on July 2, 1962
DISCOUNT STORE- RETAIL
HEADQUARTERS - Bentonville, Arkansas USA
Carl Doug McMillon
(2014 - Till)
As of and for the Fiscal Years Ended January 31, 2019
NON GAAP Financial Measures
Permits investors better understand Walmart's underlying performance without the effects of currency exchange rate fluctuations
FREE CASH FLOW
As a measure that provides supplemental information to Consolidated Statements of Cash Flows
ADJUSTED EPS (Earnings Per Share)
Allows better comparison of performance for the comparable period & affords investors a view of what management consider Walmart's core earnings performance & make more informed assessment of core earnings performance
ADJUSTED EPS GUIDANCE
Meaningful metric to share with investors as that metric best allows comparison of the expected performance for fiscal year to the comparable prior period. Affords to make informed assessment of the core earnings performance for the comparable period.
Reconciliation of non-GAAP financial measures presented in press release with accepted GAAP principals
CONSOLIDATED RESULTS OF OPERATIONS
Company Performance Metrics
COMPARABLE SALES METRIC
- Walmart U.S. comparable sales increased 3.7% in fiscal 2019 driven by ticket and traffic growth
- Walmart U.S. eCommerce sales for fiscal 2019 contributed approx. 1.3% to comparable sales.
- Sam's Club fiscal 2019 comparable sales increased 5.4% in fiscal 2019 driven by strong traffic aided by transfer of sales from closed clubs to existing costs and fuel sales.
CONSISTENT OPERATING DISCIPLINE
- Measure operating discipline through expense leverage, defined as net sales growing at faster rate than operating, selling, general and administrative expenses.
- For fiscal 2019, operating expenses as a percentage of net sales decreased 48 basis points, when compared to previous fiscal year. The primary drivers of the expense leverage were strong sales performance in conjunction with productivity improvements and lapping fiscal 2018 charges.
STRATEGIC CAPITAL ALLOCATION
- Allocating more capital to eCommerce, technology, supply chain and store remodels and less to new store and club openings compared to prior years.
- Total fiscal 2019 capital expenditures increased slightly compared to prior year.
STRATEGIC CAPITAL ALLOCATION
COMPARABLE SALES METRIC
CONSISTENT OPERATING DISCIPLINE
- Walmart Inc's Gross Profit for the three months ended in Jan. 2019 was $33,886 Mil. Walmart Inc's Revenue for the three months ended in Jan. 2019 was $138,793 Mil. Therefore, Walmart Inc's Gross Margin % for the quarter that ended in Jan. 2019 was 24.5%
- Gross margin rate declined certain basis points due primarily to the planned pricing strategy, increased transportation expenses, and the mix effects from our growing eCommerce business, which were partially offset by the overlap from last year's hurricanes.
Operating income declined 3.7% on a reported basis and increased 1.0% in constant currency.
• Flipkart is included in operating results for 44 days of the quarter and drove significant operating income dilution in line with expectations.
• They are lapping the approximately $150 million impairment charge from decision to exit certain properties in one of the markets in 3Q18, and benefiting from the deconsolidation of Brazil this year.
• Changes in currency rates resulted in an approximate $60 million headwind to operating income.
For fiscal 2019, operating expenses as a percentage of net sales decreased 48 basis points, when compared to the same period in the previous fiscal year. The primary drivers of the expense leverage were strong sales performance in conjunction with productivity improvements. The improvements in fiscal 2019 were partially offset by additional investments in eCommerce and technology, as well as a $160 million charge related to a securities class action lawsuit.
CASH FLOW / LIQUIDITY
Net cash provided by operating activities for fiscal 2019 declined when compared to the previous fiscal year primarily due to timing of vendor payments, partially offset by lower tax payments mainly resulting from Tax Reform and the timing of tax payments.
Fiscal 2019 net cash used in financing activities decreased $17.3 billion when compared to the same period in the previous fiscal year. The decrease was primarily due to the $15.9 billion of net proceeds received from the issuance of long-term debt to fund a portion of the purchase price for Flipkart
FNet cash provided by operating activities for fiscal 2019 declined when compared to the previous fiscal year primarily due to timing of vendor payments, partially offset by lower tax payments mainly resulting from Tax Reform and the timing of tax payments.
Net cash used in investing activities increased $15.0 billion for fiscal 2019 when compared to the previous fiscal year. This increase was primarily due to the $13.8 billion payment for Flipkart , net of cash acquired, as well as payments for other, smaller acquisitions.
QUANTITATIVE AND QUALITATIVE MARKET RISKS
- Walmart is exposed to certain market risks including changes such as below:
- Interest Rate Risk: As a result of short-term borrowings and long-tern debt, Walmart is exposed to changes in interest rates.
- - For fiscal 2019, net fair value of interest rate swaps increased $13 million primarily due to fluctuations in market interest rates.
- - Bound these risks by managing mix of fixed and variable rate debt and entering into interest rate swaps.
- Foreign Currency Risk: Fluctuations in currency exchange rates as result of net investments and operations in countries other than U.S.
- - For fiscal 2019, movements in currency exchange rates and related impact on translations of balance sheets of subsidiaries caused $2.1 billion loss in currency translation.
- - Bound these risks by entering into currency swaps and by designating foreign-currency-denominated long-term debt as non derivative hedges of net investments of foreign operations
- Investment Risk: Exposed to changes in JD.com stock price due to equity
- investment in JD.
- - For fiscal 2019, loss of $3.5 billion due to decrease in stock price of JD.
" Personal and moral integrity is one of our basic fundamentals and it has to start with each of us"
Sam Walton, Founder
"Don’t compromise your reputation. It’s a precious commodity. Don’t compromise your integrity… have a good name."
Respect for the Individual
Service to our Customers
Striving for Excellence
Act with Integrity
Vision - The vision of Global Ethics is to promote ownership of Walmart’s ethical culture to all stakeholders globally.
Value every associate, own the work they do, and communicate by listening and sharing ideas
Serve customers, support each other, and give to local communities.
Work as a team and model positive examples while individuals innovate and improve every day
Act with the highest level of integrity by being honest, fair and objective, while operating in compliance with all laws and our policies.
- Walmart’s international sales declined 3% y-o-y to $29 billion, driven by the sale of a majority stake in Walmart Brazil and negative currency impacts. On the other hand, Sam’s Club revenues declined 2% y-o-y, negatively impacted by tobacco. However, Sam’s Club comparable sales grew 3.2% y-o-y (ex. fuel) in the quarter, led by a solid jump in traffic.
- Walmart saw its stock gain nearly 50% in 2017, but it has marginally declined over the course of 2018 despite strong financial results. This was largely due to a relative slowdown in the company’s e-commerce growth in fiscal 2019 so far (33% – 43%), which compared to 50%+ levels in the first three quarters of fiscal 2018 (year ending January 2018).
- In addition, Walmart’s shareholders also seem to be concerned about the company’s shrinking margins and increased costs. Going forward, expectation from the company to continue to post an increase in its revenue growth rate, driven by growth across operating segments.
- Also expect the GAAP earnings pressure to continue, due to investments in technology and a rise in employee wages. In addition, we expect online grocery to drive some growth for the company, though the accompanying expenses could result in further margin pressure.