Walmart Second Quarter Earnings Exceed Consensus Estimates

Pre-Recorded Phone Call

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BENTONVILLE, Ark., Aug 13, 2009 -- Wal-Mart Stores, Inc. (NYSE: WMT) today reported diluted earnings per share from continuing operations for the second quarter of fiscal year 2010 of $0.88, at the top of the company's guidance of $0.83 to $0.88. The effect of currency exchange rates reduced earnings by approximately $0.04 per share. Walmart earned $0.86 per share from continuing operations in the second quarter last year.

Net sales for the second quarter were $100.082 billion, a decrease of 1.4 percent from $101.546 billion in the second quarter last year. Without the negative impact of currency exchange rates equal to $4.199 billion, net sales for the quarter increased 2.7 percent to approximately $104.281 billion on a constant currency basis (which assumes currency exchange rates remained the same as the prior year). Income from continuing operations increased to $3.449 billion from $3.401 billion in the same period last year.

"Our earnings exceeded consensus estimates and were at the top of our guidance," said Mike Duke, Walmart president and chief executive officer. "We are pleased with the performance of our operations around the world. We believe that our comparable store sales continued to outperform the retail sector almost everywhere we do business.

"In a sales environment more difficult than we expected, we managed our operations in a disciplined manner. Our U.S. segments delivered strong inventory performance, which contributed to the company's healthy increase in year-over-year earnings," Duke said. "We are accelerating our focus on reducing our expenses.

"Customers around the world are forced to do more with less and they rely on Walmart to help them save money," Duke added. "The improvements in our stores are attracting new customers and keeping the loyalty of the millions who shop with us. We are confident about Walmart's long-term future and ability to build on its leadership position."

Net Sales

Net sales were as follows (dollars in billions):

                           Three Months Ended            Six Months Ended
                                July 31,                      July 31,
                       --------------------------    ------------------------
                                          Percent                      Percent
                       2009        2008   Change     2009       2008   Change
                       ----        ----   ------     ----       ----   ------
    Net Sales:
      Walmart U.S.  $64.209     $63.989     0.3% $125.453   $122.980     2.0%
      International  23.965      25.257    -5.1%   45.228     49.184    -8.0%
      Sam's Club     11.908      12.300    -3.2%   22.872     23.424    -2.4%
                     ------      ------    ----    ------     ------    ----
        Total
         Company   $100.082    $101.546    -1.4% $193.553   $195.588    -1.0%



Reported International sales for the three months ended July 31, 2009 were reduced by the effect of currency exchange rates equal to approximately $4.199 billion. On a constant currency basis, International sales increased 11.5 percent to $28.164 billion in the second quarter, compared to the same quarter last year.

Segment Operating Income

Segment operating income, which is defined as operating income for each operating segment, was as follows (dollars in billions):

                          Three Months Ended            Six Months Ended
                               July 31,                     July 31,
                       ------------------------      ------------------------
                                         Percent                       Percent
                       2009    2008      Change      2009       2008   Change
                       ----    ----      ------      ----       ----   ------
    Segment Operating
     Income:
      Walmart U.S.   $4.901  $4.667         5.0%   $9.365     $8.987     4.2%
      International   1.143   1.218        -6.2%    2.023      2.268   -10.8%
      Sam's Club      0.419   0.441        -5.0%    0.812      0.834    -2.6%



Reported International operating income for the three months ended July 31, 2009 was reduced by $237 million as a result of the effect of currency exchange rates. On a constant currency basis, International operating income increased 13.3 percent to $1.380 billion in the second quarter, compared to the second quarter last year.

Comparable Store Sales

The company reports U.S. comparable store sales in this earnings release based on its 13-week retail calendar, ending July 31, as follows:

                      Without Fuel         With Fuel          Fuel Impact
                  ------------------  ------------------  ------------------
                     Thirteen Weeks      Thirteen Weeks      Thirteen Weeks
                         Ended               Ended               Ended
                  07/31/09  08/01/08  07/31/09  08/01/08  07/31/09  08/01/08
                  --------  --------  --------  --------  --------  --------

     Walmart U.S.     -1.5%      4.4%     -1.5%      4.4%      0.0%      0.0%
     Sam's Club        0.6%      4.1%     -4.3%      7.6%     -4.9%      3.5%
                       ---       ---      ----       ---      ----       ---
       Total U.S.     -1.2%      4.3%     -1.9%      4.9%     -0.7%      0.6%



                     Without Fuel          With Fuel         Fuel Impact
                   ----------------    ----------------    -----------------
                   Twenty-Six Weeks    Twenty-Six Weeks    Twenty-Six Weeks
                        Ended               Ended               Ended
                  07/31/09  08/01/08  07/31/09  08/01/08  07/31/09  08/01/08
                  --------  --------  --------  --------  --------  --------

     Walmart U.S.      1.0%      3.2%      1.0%      3.2%      0.0%      0.0%
     Sam's Club        2.3%      3.5%     -2.5%      6.6%     -4.8%      3.1%
                       ---       ---      ----       ---      ----       ---
       Total U.S.      1.2%      3.2%      0.4%      3.7%     -0.8%      0.5%


Data in the condensed consolidated financial statements included in this news release are based on the calendar quarters ending July 31.

Guidance

"Our performance this quarter has been good, despite headwinds from price deflation, the effects of the recession and currency exchange rates," said Tom Schoewe, Walmart executive vice president and chief financial officer. "We're proud that Walmart reported a year-over-year increase in earnings this quarter.

"In addition, we generated approximately $4.2 billion in free cash flow during the first half of the year," Schoewe added. "Walmart remains strong financially, with a solid balance sheet, great access to capital markets and a double-A rating. Plus, we are one of the few Dow 30 companies so far to report a year-over-year earnings increase this quarter."

A reconciliation of free cash flow (a non-GAAP measure) is attached at the end of this release.

"Based on our view of the economy and our continued focus on managing expenses and productivity, we are updating our guidance for earnings per share from continuing operations this year to a range of $3.50 to $3.60, from $3.45 to $3.60," Schoewe added. "We expect earnings per share from continuing operations for the third quarter of fiscal year 2010 to be between $0.78 and $0.82, including a three-cent negative impact from currency exchange rates."

Walmart U.S. expects comparable store sales during the 13-week period from Saturday, Aug. 1 through Friday, Oct. 30 to be between flat and two percent. Sam's Club expects comparable club sales during the same period to be flat, plus or minus one percent. The company will report these operating segments' comparable store sales result and the total U.S. aggregate comparable store sales result for that period when it reports third quarter earnings on Nov. 12.

Notes

Effective Feb. 1, 2009, the company adopted Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51." This standard requires modifications to financial statement presentation for minority interests in subsidiaries, now referred to as noncontrolling interests. These changes are reflected in Walmart's second quarter condensed consolidated financial statements included in this release. As a result, all references to income from continuing operations or earnings per share from continuing operations in this release refer to income from continuing operations attributable to Walmart, or diluted income per share from continuing operations attributable to Walmart, respectively.

In addition to these changes, beginning Feb. 1, 2009, the company changed the classification of certain revenue and expense items within the financial statements. These changes are reflected in the second quarter condensed consolidated statements of income for all periods presented and did not have an impact on the company's consolidated operating or net income.

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 800-778-6902, or 585-219-6420 outside the U.S. and Canada. Information included in this release, including reconciliations, and the pre-recorded phone call is available in the investor information area on the company's Web site at www.walmartstores.com/investors.

Wal-Mart Stores, Inc. (NYSE: WMT) serves customers and members more than 200 million times per week at more than 8,000 retail units under 53 different banners in 15 countries. With fiscal year 2009 sales of $401 billion, Walmart employs more than 2.1 million associates worldwide. A leader in sustainability, corporate philanthropy and employment opportunity, Walmart ranked first among retailers in Fortune Magazine's 2009 Most Admired Companies survey. Additional information about Walmart can be found by visiting www.walmartstores.com. Online merchandise sales are available at www.walmart.com and www.samsclub.com.

This release contains statements as to Walmart management's forecasts of the company's earnings per share for the fiscal year to end January 31, 2010 and the fiscal quarter to end October 31, 2009 and the comparable store sales of each of the Walmart U.S. and Sam's Club segments of the company for the 13-week period from August 1 through October 30, 2009, that the company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that act. These statements can be identified by the use of the word or phrase "guidance" or "expect," in the statements. These forward-looking statements are subject to risks, uncertainties and other factors, domestically and internationally, including general economic conditions, the cost of goods, competitive pressures, geopolitical events and conditions, levels of unemployment, levels of consumer disposable income, changes in laws and regulations, consumer credit availability, inflation, deflation, consumer spending patterns and debt levels, currency exchange rate 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, financial and capital market conditions, developments in litigation to which the company is a party, weather conditions, damage to the company's facilities from natural disasters, 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.

Ed. Note: Wal-Mart Stores, Inc. is the legal trade name of the corporation. The name "Walmart," expressed as one word and without punctuation, is a trademark of the company and is used analogously to describe the company and its stores. Use the trade name when it is necessary to identify the legal entity, such as when reporting financial results, litigation or corporate governance.

                                      Wal-Mart Stores, Inc.
                           Condensed Consolidated Statements of Income
                                           (Unaudited)

    SUBJECT TO RECLASSIFICATION
                                     Three Months Ended       Six Months Ended
                                           July 31,               July 31,
    -----------------------            ---------------         --------------
    (Amounts in millions
     except per share data)            2009       2008         2009      2008
    -----------------------            ----       ----         ----      ----
    Revenues:
      Net sales                    $100,082   $101,546     $193,553  $195,588
      Membership and other
       income                           828        796        1,599     1,694
    ----------------------              ---        ---        -----     -----
                                    100,910    102,342      195,152   197,282

    Costs and expenses:
      Cost of sales                  75,153     77,118      145,541   148,490
      Operating, selling,
       general and
       administrative expenses       19,875     19,411       38,512    37,662
    --------------------------       ------     ------       ------    ------
    Operating income                  5,882      5,813       11,099    11,130
    ----------------                  -----      -----       ------    ------

    Interest:
      Debt                              447        450          895       938
      Capital leases                     68         77          138       149
      Interest income                   (42)       (71)         (93)     (135)
    -----------------                   ---        ---          ---      ----
      Interest, net                     473        456          940       952
    ---------------                     ---        ---          ---       ---

    Income from continuing
     operations before income
     taxes                            5,409      5,357       10,159    10,178

    Provision for income taxes        1,853      1,826        3,456     3,496
    --------------------------        -----      -----        -----     -----
    Income from continuing
     operations                       3,556      3,531        6,703     6,682
    (Loss) income from
     discontinued operations,
     net of tax                          (7)        48          (15)       41
    -------------------------           ---        ---          ---       ---
    Consolidated net income           3,549      3,579        6,688     6,723
    Less consolidated net
     income attributable to
     noncontrolling interest           (107)      (130)        (224)     (252)
    ------------------------           ----       ----         ----      ----
    Consolidated net income
     attributable to Walmart         $3,442     $3,449       $6,464    $6,471
    ------------------------         ------     ------       ------    ------

    Income from continuing
     operations attributable
     to Walmart:
      Income from continuing
       operations                    $3,556     $3,531       $6,703    $6,682
      Less consolidated net
       income attributable to
       noncontrolling interest         (107)      (130)        (224)     (252)
    --------------------------         ----       ----         ----      ----
      Income from continuing
       operations attributable
       to Walmart                    $3,449     $3,401       $6,479    $6,430
    --------------------------       ------     ------       ------    ------

    Basic net income per
     common share:
      Basic income per share
       from continuing
       operations attributable
       to Walmart                     $0.89      $0.86        $1.66     $1.63
      Basic (loss) income per
       share from discontinued
       operations attributable
       to Walmart                     (0.01)      0.01            -      0.01
    --------------------------        -----       ----          ---      ----
        Basic net income per share
         attributable to Walmart      $0.88      $0.87        $1.66     $1.64
    ------------------------------    -----      -----        -----     -----

    Diluted net income per
     common share:
      Diluted income per share
       from continuing
       operations attributable
       to Walmart                     $0.88      $0.86        $1.65     $1.62
      Diluted income per share
       from discontinued
       operations attributable
       to Walmart                         -       0.01            -      0.01
    --------------------------          ---       ----          ---      ----
        Diluted net income per
         share attributable to
         Walmart                      $0.88      $0.87        $1.65     $1.63
    --------------------------        -----      -----        -----     -----

    Weighted-average number of
     common shares:
       Basic                          3,891      3,945        3,905     3,951
       Diluted                        3,900      3,958        3,915     3,962

    Dividends declared per
     common share                        $-         $-        $1.09     $0.95


                                    Wal-Mart Stores, Inc.
                            Condensed Consolidated Balance Sheets
                                         (Unaudited)
                                    (Amounts in millions)

    SUBJECT TO RECLASSIFICATION
                                               July 31,          January 31,
                                          ------------------     ----------
                                          2009          2008         2009
    ------                                ----          ----         ----
    ASSETS
    Current assets:
    Cash and cash equivalents            $7,997        $6,903        $7,275
    Receivables                           3,684         3,221         3,905
    Inventories                          33,861        35,365        34,511
    Prepaid expenses and
     other                                3,336         3,311         3,063
    Current assets of
     discontinued operations                147           974           195
    ------------------------                ---           ---           ---
        Total current assets             49,025        49,774        48,949

    Property and equipment, at cost:
      Property and equipment, at cost   133,070       126,289       125,820
      Less accumulated depreciation     (35,707)      (31,335)      (32,964)
    -------------------------------     -------       -------       -------
        Property and equipment, net      97,363        94,954        92,856

    Property under capital lease:
    Property under capital lease          5,583         5,740         5,341
    Less accumulated amortization        (2,759)       (2,645)       (2,544)
    -----------------------------        ------        ------        ------
        Property under capital
         lease, net                       2,824         3,095         2,797

    Goodwill                             16,149        16,400        15,260
    Other assets and deferred charges     3,581         2,672         3,567
    -----------------                     -----         -----         -----
        Total assets                   $168,942      $166,895      $163,429
    ----------------                   --------      --------      --------

    LIABILITIES AND EQUITY
    Current liabilities:
      Commercial paper                   $1,122        $4,347        $1,506
      Accounts payable                   28,797        29,912        28,849
      Dividends payable                   2,073         1,927             -
      Accrued liabilities                16,706        15,607        18,112
      Accrued income taxes                1,162           555           677
      Long-term debt due within one year  6,959         2,180         5,848
      Obligations under capital leases due
       within one year                      336           324           315
      Current liabilities of
       discontinued operations               41            77            83
    --------------------------              ---           ---           ---
        Total current liabilities        57,196        54,929        55,390

    Long-term debt                       33,579        34,168        31,349
    Long-term obligations
     under capital leases                 3,246         3,544         3,200
    Deferred income taxes and other       5,773         5,386         6,014
    Redeemable noncontrolling interest      326             -           397

    Commitments and contingencies

    Equity:
    Common stock and capital
     in excess of par value               4,173         3,986         4,313
    Retained earnings                    63,153        57,883        63,660
    Accumulated other comprehensive
     (loss) income                         (318)        4,924        (2,688)
    -------------------------------        ----         -----        ------
        Total Walmart
         shareholders' equity            67,008        66,793        65,285
    -------------------------            ------        ------        ------
    Noncontrolling interest               1,814         2,075         1,794
    -----------------------               -----         -----         -----
        Total equity                     68,822        68,868        67,079
    ----------------                     ------        ------        ------
        Total liabilities and equity   $168,942      $166,895      $163,429
    --------------------------------   --------      --------      --------



                                 Wal-Mart Stores, Inc.
                    Condensed Consolidated Statements of Cash Flows
                                      (Unaudited)
                                 (Amounts in millions)
    SUBJECT TO RECLASSIFICATION
                                                            Six Months Ended
                                                                July 31,
                                                            ----------------
                                                            2009        2008
    -------------------------------------                   ----        ----
    Cash flows from operating activities:
      Consolidated net income                             $6,688      $6,723
      Loss (gain) from discontinued operations, net
       of tax                                                 15         (41)
    ----------------------------------------------           ---         ---
      Income from continuing operations                    6,703       6,682
      Adjustments to reconcile income from continuing
       operations to net cash provided by operating
       activities:
        Depreciation and amortization                      3,457       3,366
        Other                                               (246)        219
        Changes in certain assets and liabilities, net
         of effects of acquisitions:
          Decrease in accounts receivable                    575         578
          Decrease in inventories                          1,394          95
          Decrease in accounts payable                    (1,131)       (150)
          Decrease in accrued liabilities                   (857)       (626)
    -------------------------------------                   ----        ----
    Net cash provided by operating activities              9,895      10,164

    Cash flows from investing activities:
      Payments for property and equipment                 (5,744)     (5,074)
      Proceeds from disposal of property and equipment       172         492
      Investment in international operations, net of
       cash acquired                                           -         (74)
      Other investing activities                            (176)        129
    ----------------------------                            ----         ---
    Net cash used in investing activities                 (5,748)     (4,527)

    Cash flows from financing activities:
      Decrease in commercial paper, net                     (654)       (639)
      Proceeds from issuance of long-term debt             2,956       4,648
      Payment of long-term debt                              (95)     (4,061)
      Dividends paid                                      (2,129)     (1,878)
      Purchase of Company stock                           (2,792)     (2,184)
      Purchase of redeemable noncontrolling interest        (456)          -
      Other financing activities                            (264)       (266)
    ----------------------------                            ----        ----
    Net cash used in financing activities                 (3,434)     (4,380)

    Effect of exchange rates on cash                           9         115
    --------------------------------                         ---         ---
    Net increase in cash and cash equivalents               722       1,372
    Cash and cash equivalents at beginning of year (1)     7,275       5,569
    -------------------------------------------------      -----       -----
    Cash and cash equivalents at end of period (2)        $7,997      $6,941
    ---------------------------------------------         ------      ------

    (1) Includes cash and cash equivalents of discontinued operations of $77
    million at January 31, 2008.
    (2) Includes cash and cash equivalents of discontinued operations of $38
    million at July 31, 2008.



Free Cash Flow

We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We generated positive free cash flow of $4.2 billion and $5.1 billion for the six months ended July 31, 2009 and 2008, respectively.

Free cash flow is considered a non-GAAP financial measure under the SEC's rules. Management believes, however, that free cash flow is an important financial measure for use in evaluating the Company's financial performance, which measures our ability to generate additional cash from our business operations. Free cash flow should be considered in addition to, rather than as a substitute for, income from continuing operations as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.

Additionally, our definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our entire statement of cash flows.

Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by our management to calculate free cash flow may differ from the methods other companies use to calculate their free cash flow. We urge you to understand the methods used by another company to calculate its free cash flow before comparing our free cash flow to that of such other company.

The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a non-GAAP measure.

                                                       Six Months Ended
    (Amounts in millions)                     July 31, 2009      July 31, 2008
                                              -------------      -------------

    Net cash provided by operating activities      $9,895           $10,164
    Payments for property and equipment            (5,744)           (5,074)
                                                   ------            ------
    Free cash flow                                 $4,151            $5,090
                                                   ======            ======

    Net cash used in investing activities         $(5,748)          $(4,527)

    Net cash used in financing activities         $(3,434)          $(4,380)




SOURCE Wal-Mart Stores, Inc.


 
http://www.walmartstores.com