Earnings per share from continuing operations were $0.76, up from $0.72 per share in the same prior year quarter. Earnings per share from continuing operations for the second quarter were impacted by three items that provided a net benefit of $171 million after tax, or $.04 per share. Accruals for general liability and workers' compensation claims were reduced by $196 million after tax. The Company also recognized $41 million in after tax gains from the sale of certain real estate properties. These benefits were offset by charges of $66 million after tax for legal and other contingencies.
Net Sales
Net sales were as follows (dollars in billions):
Three Months Ended Six Months Ended
July 31, July 31,
Percent Percent
2007 2006 Change 2007 2006 Change
Net Sales:
Wal-Mart Stores $59.013 $55.389 6.5% $114.450 $107.888 6.1%
Sam's Club 11.377 10.472 8.6% 21.700 20.247 7.2%
International 21.600 18.663 15.7% 41.227 35.224 17.0%
Total Company $91.990 $84.524 8.8% $177.377 $163.359 8.6%
"Although some people will report that Wal-Mart has had record sales and earnings, our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," said Lee Scott, Wal-Mart Stores, Inc. president and chief executive officer. "For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."
Scott pointed out that consumers continue to be under pressure economically.
"Many customers around the world continue to be under economic pressure and they expect Wal-Mart to be their advocate," Scott continued. "We will continue to be the undisputed price leader, from Asda in the United Kingdom, to every market in the United States."
Segment Operating Income
Segment Operating income from continuing operations for each of the Company's operating segments, which is defined as income before net interest expense, income taxes, unallocated corporate overhead, minority interest and discontinued operations, was as follows (dollars in billions):
Three Months Ended Six Months Ended
July 31, July 31,
Percent Percent
2007 2006 Change 2007 2006 Change
Segment Operating Income:
Wal-Mart Stores $4.273 $4.116 3.8% $8.201 $7.974 2.8%
Sam's Club 0.447 0.402 11.2% 0.810 0.704 15.1%
International 1.042 0.991 5.1% 1.945 1.748 11.3%
As the Company discussed in the first quarter of fiscal 2008, the above measurement of segment operating income was changed starting in the first quarter to be consistent with certain changes to internal management reporting. Therefore, certain direct segment costs that were previously retained and managed as corporate overhead costs are now allocated to the appropriate operating segment.
Comparable Store Sales
The Company reports comparable store sales in this earnings release based
on the calendar months in the quarters and the six-month periods ended July
31, 2007 and 2006. Comparable store sales for the United States were as
follows:
Without Fuel With Fuel Fuel Impact
Three Months Ended Three Months Ended Three Months Ended
July 31, July 31, July 31,
2007 2006 2007 2006 2007 2006
Wal-Mart Stores 1.2% 1.5% 1.2% 1.5% 0.0% 0.0%
Sam's Club 5.9% 2.6% 6.5% 3.6% 0.6% 1.0%
Total U.S. 1.9% 1.7% 2.0% 1.8% 0.1% 0.1%
Without Fuel With Fuel Fuel Impact
Six Months Ended Six Months Ended Six Months Ended
July 31, July 31, July 31,
2007 2006 2007 2006 2007 2006
Wal-Mart Stores 0.6% 2.6% 0.6% 2.6% 0.0% 0.0%
Sam's Club 5.3% 3.4% 5.4% 4.2% 0.1% 0.8%
Total U.S. 1.3% 2.7% 1.3% 2.8% 0.0% 0.1%
Guidance
For the third quarter of fiscal 2008, the Company estimates the comparable store sales increase in the United States to be between 1 and 3 percent.
The Company estimates earnings per share from continuing operations for the third quarter of fiscal 2008 to come in between $0.62 and $0.65. In addition, the Company is updating its full year guidance for earnings per share from continuing operations for the full year of fiscal 2008, which it estimates to be between $3.05 and $3.13. The Company's initial forecast for earnings per share from continuing operations for fiscal year 2008 was between $3.15 and $3.23 per share.
"The Company's current earnings guidance reflects the need to continue to improve our underlying operating performance," said Tom Schoewe, Wal-Mart Stores, Inc. executive vice president and chief financial officer. "This guidance also reflects the economic trends that have developed in many of our major markets."
After this earnings release has been furnished to the SEC, a pre-recorded call offering additional comments on the quarter will be available to all investors. Callers may listen to this call by dialing 203-369-1090. The information included in this release and the pre-recorded phone call will be available in the investor information area on the Company's WebSite at http://www.walmartstores.com/investors.
Wal-Mart Stores, Inc. operates Wal-Mart discount stores, supercenters, Neighborhood Markets and Sam's Club locations in the United States. The Company operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. The Company's common stock is listed on the New York Stock Exchange under the symbol WMT.
More information about Wal-Mart can be found by visiting http://www.walmartstores.com. Online merchandise sales are available at http://www.walmart.com and http://www.samsclub.com.
This release contains statements as to the Company's continuing price leadership and the Company's estimate of its comparable store sales for the third quarter of fiscal year 2008 and its estimate of its earnings per share from continuing operations for the third quarter of fiscal year 2008 and for all of fiscal year 2008 that Wal-Mart believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that act. They can be identified by the use of the word "estimates" or phrase "will continue" in the statements. These forward-looking statements are subject to risks, uncertainties and other factors, domestically and internationally, including, the cost of goods, competitive pressures, geopolitical conditions, inflation, consumer spending patterns and debt levels, currency exchange fluctuations, trade restrictions, changes in tariff and freight rates, changes in the costs of gasoline, diesel fuel, other energy, transportation, utilities, labor and health care, accident costs, casualty and other insurance costs, interest rate fluctuations, capital market conditions, weather conditions, storm-related damage to the Company's facilities, regulatory matters and other risks. The Company discusses certain of these factors more fully in its additional filings with the SEC, including its last annual report on Form 10-K filed with the SEC, and this release should be read in conjunction with that annual report on Form 10-K, together with all of the Company's other filings, including current reports on Form 8-K, made with the SEC through the date of this release. The Company urges you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release. As a result of these matters, changes in facts, assumptions not being realized or other circumstances, the Company's actual results may differ materially from the expected results discussed in the forward-looking statements contained in this release. The forward-looking statements made in this release are made only as of the date of this release, and the Company undertakes no obligation to update them to reflect subsequent events or circumstances.
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in millions except per share data)
SUBJECT TO RECLASSIFICATION
Three Months Ended Six Months Ended
July 31, July 31,
2007 2006 2007 2006
Revenues:
Net sales $91,990 $84,524 $177,377 $163,359
Membership and other income 1,022 906 2,045 1,746
93,012 85,430 179,422 165,105
Costs and expenses:
Cost of sales 70,589 64,585 135,900 124,822
Operating, selling, general and
administrative expenses 17,130 15,741 33,379 30,683
Operating income 5,293 5,104 10,143 9,600
Interest:
Debt 446 387 852 754
Capital leases 42 69 111 137
Interest income (82) (63) (165) (131)
Interest, net 406 393 798 760
Income from continuing operations
before income taxes and minority
interest 4,887 4,711 9,345 8,840
Provision for income taxes 1,676 1,636 3,208 3,025
Income from continuing operations
before minority interest 3,211 3,075 6,137 5,815
Minority interest (106) (91) (206) (170)
Income from continuing operations 3,105 2,984 5,931 5,645
Loss from discontinued operations,
net of tax -- (901) -- (947)
Net income $3,105 $2,083 $5,931 $4,698
Net income per common share:
Basic and diluted income per common
share from continuing operations $0.76 $0.72 $1.44 $1.35
Basic and diluted loss per common
share from discontinued operations -- (0.22) -- (0.22)
Basic and diluted net income per
common share $0.76 $0.50 $1.44 $1.13
Weighted-average number of common
shares:
Basic 4,102 4,168 4,112 4,167
Diluted 4,108 4,172 4,118 4,171
Dividends declared per common share $-- $-- $0.88 $0.67
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
SUBJECT TO RECLASSIFICATION
July 31, July 31, January 31,
2007 2006 2007
ASSETS
Current assets:
Cash and cash equivalents $6,094 $6,386 $7,373
Receivables 2,767 2,522 2,840
Inventories 34,184 32,087 33,685
Prepaid expenses and other 3,342 3,307 2,690
Current assets of discontinued operations -- 1,870 --
Total current assets 46,387 46,172 46,588
Property and equipment, at cost 116,654 103,121 109,798
Less accumulated depreciation (26,773) (23,198) (24,408)
Property and equipment, net 89,881 79,923 85,390
Property under capital leases 5,515 5,523 5,392
Less accumulated amortization (2,448) (2,264) (2,342)
Property under capital leases, net 3,067 3,259 3,050
Goodwill 14,655 13,269 13,759
Other assets and deferred charges 2,959 2,165 2,406
Total assets $156,949 $144,788 $151,193
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Commercial paper $8,117 $6,072 $2,570
Accounts payable 27,748 26,023 28,090
Dividends payable 1,794 1,305 -
Accrued liabilities 13,903 13,028 14,675
Accrued income taxes 170 700 706
Long-term debt due within one year 3,176 6,235 5,428
Obligations under capital leases due
within one year 189 196 285
Current liabilities of discontinued
operations -- 580 --
Total current liabilities 55,097 54,139 51,754
Long-term debt 27,966 24,099 27,222
Long-term obligations under capital
leases 3,594 3,883 3,513
Deferred income taxes and other 5,449 4,741 4,971
Minority interest 2,404 1,554 2,160
Commitments and contingencies
Shareholders' equity:
Common stock and capital in excess of
par value 3,412 3,165 3,247
Retained earnings 55,567 51,091 55,818
Accumulated other comprehensive income 3,460 2,116 2,508
Total shareholders' equity 62,439 56,372 61,573
Total liabilities and shareholders'
equity $156,949 $144,788 $151,193
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
Six Months Ended
SUBJECT TO RECLASSIFICATION July 31,
2007 2006
Cash flows from operating activities:
Net income $5,931 $4,698
Loss from discontinued operations, net of tax -- 947
Income from continuing operations 5,931 5,645
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 3,060 2,642
Other 68 (443)
Changes in certain assets and liabilities,
net of effects of acquisitions:
Decrease in accounts receivable 255 134
(Increase) decrease in inventories (64) 134
(Decrease) increase in accounts payable (1,134) 224
Decrease in accrued liabilities (1,524) (1,030)
Net cash provided by operating activities of
continuing operations 6,592 7,306
Net cash used in operating activities of
discontinued operations -- (46)
Net cash provided by operating activities 6,592 7,260
Cash flows from investing activities:
Payments for property and equipment (6,971) (6,812)
Proceeds from disposal of property and
equipment 319 94
Investment in international operations, net
of cash acquired (467) (68)
Other investing activities (61) (18)
Net cash used in investing activities of
continuing operations (7,180) (6,804)
Net cash provided by investing activities of
discontinued operations -- 45
Net cash used in investing activities (7,180) (6,759)
Cash flows from financing activities:
Increase in commercial paper 5,487 2,297
Proceeds from issuance of long-term
debt 3,818 1,932
Payment of long-term debt (5,435) (2,797)
Dividends paid (1,811) (1,408)
Purchase of Company stock (2,484) --
Other financing activities (435) (393)
Net cash used in financing activities (860) (369)
Effect of exchange rates on cash 169 71
Net (decrease) increase in cash and cash
equivalents (1,279) 203
Cash and cash equivalents at
beginning of year (1) 7,373 6,414
Cash and cash equivalents at end of period (2) $6,094 $6,617
(1) Includes cash and cash equivalents of discontinued operations of $221
million at January 31, 2006.
(2) Includes cash and cash equivalents of discontinued operations of $231
million at July 31, 2006.
SOURCE Wal-Mart Stores, Inc.
investors, Investor Relations, +1-479-273-8446, or Carol Schumacher, +1-479-277-1498, or Anthony Clark, +1-479-277-9558, or media, John Simley, 1-800-331-0085, all of Wal-Mart Stores, Inc., Pre-recorded Conference Call, +1-203-369-1090
http://www.walmartstores.com
