Pre-Recorded Phone Call
Q1 highlights:
- Walmart reported first quarter diluted earnings per share from continuing operations of
$1.09 , which is above guidance of$1.01 to$1.06 . This compares to$0.98 per share from continuing operations last year. - Walmart U.S. comparable store sales rose 2.6 percent in the 13-week period ended
April 27, 2012 , both traffic and ticket were positive. Walmart U.S. comp sales guidance was flat to two percent. - Sam's Club comparable sales, without fuel, increased 5.3 percent for the same 13-week period. Sam's Club comp sales guidance, without fuel, was three to five percent.
-
Walmart International grew net sales 15.0 percent. Constant currency net sales were up 10.9 percent. - Consolidated net sales were
$112.3 billion , an increase of 8.6 percent from last year. Currency exchange rate fluctuations had a negative impact on sales of approximately$800 million . - The company leveraged operating expenses for the quarter.
- Consolidated operating income was
$6.4 billion , up 8.3 percent from last year.Walmart International operating income was$1.3 billion , up 21.2 percent from last year's results. - Walmart ended the first quarter with free cash flow of
$3.1 billion 1. - During the quarter, the company returned
$2.9 billion to shareholders through dividends and share repurchases. - Return on investment (ROI) for the trailing 12 months ended
April 30, 2012 was 18.1 percent1.
Membership and other income increased 3.2 percent, excluding
Income from continuing operations attributable to Walmart for the quarter was
Strong earnings performance
“We are very pleased that Walmart delivered earnings and comparable sales above guidance for the first quarter. Despite a negative impact from currency, we grew sales and operating profit over last year,” said
Duke highlighted the successful performance of the company's three operating segments.
“In a highly competitive retail environment, Walmart U.S. is increasing price separation across categories and driving increased traffic to both the grocery and general merchandise areas of our stores. That strategy was reflected in the 2.6 percent comp,” said Duke. “Customers count on us for one-stop shopping and our merchandising priorities are aligned with that in mind. Walmart U.S. also grew operating income faster than sales this quarter.
“Sam's Club is off to a great start this year, with continued strength in traffic and ticket,” Duke continued. “Membership engagement scores are at record highs, membership income is growing, and renewals and upgrades are strong.
“Walmart International delivered strong sales growth in the first quarter and operating income grew faster than sales, increasing more than 20 percent,” said Duke. “We are very focused on improving profitability and returns, and with greater transitions to everyday low price in more markets, we have stronger customer traffic, which contributed to net sales growth.”
The company leveraged operating expenses for the first quarter, delivering on its commitment to reduce costs and improve productivity.
“Powered by Walmart remains a competitive advantage,” said Duke. “We're sharing best practices on global business processes to improve inventory management and labor scheduling to maximize product availability on the shelf. Our ability to continually find ways to reduce expenses and improve associate productivity means we can pass on those savings to customers.”
Returns and Guidance
Walmart ended the first quarter with strong free cash flow of
“We remain committed to returning value to shareholders,” said
“Based on our current trend in performance, along with seasonal impacts and the current economic and sales environment, we expect second quarter fiscal 2013 diluted earnings per share from continuing operations to range between
Operating Segment Details and Analysis
Net sales results
Net sales, including fuel, were as follows (dollars in billions):
| Three Months Ended | |||||||||
| April 30, | |||||||||
| Percent | |||||||||
| 2012 | 2011 | Change | |||||||
| Net Sales: | |||||||||
| Walmart U.S. | $ | 66.341 | $ | 62.669 | 5.9 | % | |||
| Walmart International | 32.077 | 27.905 | 15.0 | % | |||||
| Sam's Club | 13.854 | 12.841 | 7.9 | % | |||||
| Total Company | $ | 112.272 | $ | 103.415 | 8.6 | % | |||
Constant currency consolidated net sales increased by 7.5 percent to
Net sales for Sam's Club, excluding fuel, grew to
Segment operating income
Segment operating income was as follows (dollars in billions):
| Three Months Ended | |||||||||
| April 30, | |||||||||
| Percent |
|||||||||
| 2012 | 2011 | Change |
|||||||
| Segment Operating Income: | |||||||||
| Walmart U.S. | $ | 5.033 | $ | 4.657 | 8.1 | % | |||
| Walmart International | 1.319 | 1.088 | 21.2 | % | |||||
| Sam's Club | 0.490 | 0.455 | 7.7 | % | |||||
Consolidated operating income for the first quarter, which includes unallocated corporate overhead, was
Walmart U.S. operating income grew 8.1 percent for the quarter, due primarily to higher sales, aided by our price investment strategy, our continued focus on productivity and expense management. Walmart U.S. leveraged expenses for the quarter.
Sam's Club operating income for the first quarter increased 7.7 percent. The impact of fuel was minimal.
U.S. comparable store sales review and guidance
The company reported U.S. comparable store sales based on its 13-week retail calendar periods ended
| Without Fuel | With Fuel | Fuel Impact | ||||||||||||||||
| Thirteen Weeks Ended | Thirteen Weeks Ended | Thirteen Weeks Ended | ||||||||||||||||
| 04/27/12 | 04/29/11 | 04/27/12 | 04/29/11 | 04/27/12 | 04/29/11 | |||||||||||||
| Walmart U.S. | 2.6 | % | -1.1 | % | 2.6 | % | -1.1 | % | 0.0 | % | 0.0 | % | ||||||
| Sam's Club | 5.3 | % | 4.2 | % | 6.2 | % | 8.5 | % | 0.9 | % | 4.3 | % | ||||||
| Total U.S. | 3.0 | % | -0.3 | % | 3.2 | % | 0.4 | % | 0.2 | % | 0.7 | % | ||||||
During the 13-week period, both traffic and ticket rose for Walmart U.S. All merchandise units delivered comparable sales growth for the quarter, with the exception of entertainment, which continues to experience price deflation.
“Our strategy is clear. Our merchants are focused on increasing sales through the right assortment at the right time and for the lowest price,” said
For the 4-5-4 period from
For Sam's Club, comparable traffic and ticket, excluding fuel, increased for both Business and Advantage members for the 13-week period.
“Sam's Club provides quality merchandise at the best price in a clean and efficient shopping environment. Clearly, our first quarter results show that this strategy is resonating with members,” said
Sam's Club expects comp sales, without fuel, for the current 13-week period, to increase between four percent and six percent. Last year, Sam's Club comp, without fuel, for the second quarter comparable 13-week period rose 5.0 percent.
Both Walmart U.S. and Sam's Club will report comparable sales for the 13-week period on
Notes
For the purpose of determining our constant currency results, we calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior period's currency exchange rates. The impact of acquisitions is excluded from the calculation until the acquisitions are included in both comparable periods.
After this earnings release has been furnished to the
1 See additional information at the end of this release regarding non-GAAP financial measures.
Forward-Looking Statements
This release contains statements as to Walmart management's forecast of the company's earnings per share for the fiscal quarter to end
| Wal-Mart Stores, Inc. | |||||||||||
| Consolidated Statements of Income | |||||||||||
| (Unaudited) | |||||||||||
| SUBJECT TO RECLASSIFICATION | |||||||||||
| Three Months Ended | |||||||||||
| April 30, | |||||||||||
| (Amounts in millions except per share data) | 2012 | 2011 | Percent Change |
||||||||
| Revenues: | |||||||||||
| Net sales | $ | 112,272 | $ | 103,415 | 8.6 | % | |||||
| Membership and other income | 746 | 774 | -3.6 | % | |||||||
| Total revenues | 113,018 | 104,189 | 8.5 | % | |||||||
| Cost of sales | 85,186 | 78,177 | 9.0 | % | |||||||
| Operating, selling, general and administrative expenses | 21,445 | 20,116 | 6.6 | % | |||||||
| Operating income | 6,387 | 5,896 | 8.3 | % | |||||||
| Interest: | |||||||||||
| Debt | 503 | 491 | 2.4 | % | |||||||
| Capital leases | 70 | 71 | -1.4 | % | |||||||
| Interest income | (38 | ) | (44 | ) | -13.6 | % | |||||
| Interest, net | 535 | 518 | 3.3 | % | |||||||
| Income from continuing operations before income taxes | 5,852 | 5,378 | 8.8 | % | |||||||
| Provision for income taxes | 1,958 | 1,800 | 8.8 | % | |||||||
| Income from continuing operations | 3,894 | 3,578 | 8.8 | % | |||||||
| Loss from discontinued operations, net of tax | - | (28 | ) | -100.0 | % | ||||||
| Consolidated net income | 3,894 | 3,550 | 9.7 | % | |||||||
| Less consolidated net income attributable to noncontrolling interest | (152 | ) | (151 | ) | 0.7 | % | |||||
| Consolidated net income attributable to Walmart | $ | 3,742 | $ | 3,399 | 10.1 | % | |||||
| Income from continuing operations attributable to Walmart: | |||||||||||
| Income from continuing operations | $ | 3,894 | $ | 3,578 | 8.8 | % | |||||
| Less consolidated net income attributable to noncontrolling interest | (152 | ) | (151 | ) | 0.7 | % | |||||
| Income from continuing operations attributable to Walmart | $ | 3,742 | $ | 3,427 | 9.2 | % | |||||
| Basic net income per common share: | |||||||||||
| Basic income per common share from continuing operations attributable to Walmart |
$ | 1.10 | $ | 0.98 | 12.2 | % | |||||
| Basic loss per common share from discontinued operations attributable to Walmart |
- | (0.01 | ) | -100.0 | % | ||||||
| Basic net income per common share attributable to Walmart | $ | 1.10 | $ | 0.97 | 13.4 | % | |||||
| Diluted net income per common share: | |||||||||||
| Diluted income per common share from continuing operations attributable to Walmart |
$ | 1.09 | $ | 0.98 | 11.2 | % | |||||
| Diluted loss per common share from discontinued operations attributable to Walmart |
- | (0.01 | ) | -100.0 | % | ||||||
| Diluted net income per common share attributable to Walmart | $ | 1.09 | $ | 0.97 | 12.4 | % | |||||
| Weighted-average common shares outstanding: | |||||||||||
| Basic | 3,409 | 3,497 | |||||||||
| Diluted | 3,425 | 3,513 | |||||||||
| Dividends declared per common share | $ | 1.59 | $ | 1.46 | |||||||
| Wal-Mart Stores, Inc. | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| (Unaudited) | ||||||||||||
| SUBJECT TO RECLASSIFICATION | ||||||||||||
| April 30, | January 31, | April 30, | ||||||||||
| (Amounts in millions) | 2012 | 2012 | 2011 | |||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 8,117 | $ | 6,550 | $ | 9,400 | ||||||
| Receivables, net | 5,574 | 5,937 | 4,785 | |||||||||
| Inventories | 41,284 | 40,714 | 38,495 | |||||||||
| Prepaid expenses and other | 2,221 | 1,685 | 3,330 | |||||||||
| Current assets of discontinued operations | 80 | 89 | 108 | |||||||||
| Total current assets | 57,276 | 54,975 | 56,118 | |||||||||
| Property and equipment: | ||||||||||||
| Property and equipment | 158,329 | 155,002 | 151,766 | |||||||||
| Less accumulated depreciation | (47,600 | ) | (45,399 | ) | (45,473 | ) | ||||||
| Property and equipment, net | 110,729 | 109,603 | 106,293 | |||||||||
| Property under capital leases: | ||||||||||||
| Property under capital leases | 5,978 | 5,936 | 6,064 | |||||||||
| Less accumulated amortization | (3,235 | ) | (3,215 | ) | (3,213 | ) | ||||||
| Property under capital leases, net | 2,743 | 2,721 | 2,851 | |||||||||
| Goodwill | 21,003 | 20,651 | 16,895 | |||||||||
| Other assets and deferred charges | 5,349 | 5,456 | 4,068 | |||||||||
| Total assets | $ | 197,100 | $ | 193,406 | $ | 186,225 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Short-term borrowings | $ | 5,799 | $ | 4,047 | $ | 3,451 | ||||||
| Accounts payable | 37,068 | 36,608 | 34,481 | |||||||||
| Dividends payable | 4,059 | - | 3,828 | |||||||||
| Accrued liabilities | 16,637 | 18,154 | 15,962 | |||||||||
| Accrued income taxes | 2,560 | 1,164 | 927 | |||||||||
| Long-term debt due within one year | 2,509 | 1,975 | 3,173 | |||||||||
| Obligations under capital leases due within one year | 322 | 326 | 345 | |||||||||
| Current liabilities of discontinued operations | 24 | 26 | 44 | |||||||||
| Total current liabilities | 68,978 | 62,300 | 62,211 | |||||||||
| Long-term debt | 42,956 | 44,070 | 45,486 | |||||||||
| Long-term obligations under capital leases | 3,040 | 3,009 | 3,211 | |||||||||
| Deferred income taxes and other | 7,735 | 7,862 | 6,902 | |||||||||
| Redeemable noncontrolling interest | 456 | 404 | 423 | |||||||||
| Commitments and contingencies | ||||||||||||
| Equity: | ||||||||||||
| Common stock | 339 | 342 | 348 | |||||||||
| Capital in excess of par value | 3,625 | 3,692 | 3,450 | |||||||||
| Retained earnings | 65,463 | 68,691 | 60,330 | |||||||||
| Accumulated other comprehensive income (loss) | (463 | ) | (1,410 | ) | 878 | |||||||
| Total Walmart shareholders' equity | 68,964 | 71,315 | 65,006 | |||||||||
| Noncontrolling interest | 4,971 | 4,446 | 2,986 | |||||||||
| Total equity | 73,935 | 75,761 | 67,992 | |||||||||
| Total liabilities and equity | $ | 197,100 | $ | 193,406 | $ | 186,225 | ||||||
| Wal-Mart Stores, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| SUBJECT TO RECLASSIFICATION | ||||||||
| Three Months Ended | ||||||||
| April 30, | ||||||||
| (Amounts in millions) | 2012 | 2011 | ||||||
| Cash flows from operating activities: | ||||||||
| Consolidated net income | $ | 3,894 | $ | 3,550 | ||||
| Loss from discontinued operations, net of tax | - | 28 | ||||||
| Income from continuing operations | 3,894 | 3,578 | ||||||
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,106 | 1,985 | ||||||
| Deferred income taxes | (149 | ) | 220 | |||||
| Other | (413 | ) | (429 | ) | ||||
| Changes in certain assets and liabilities, net of effects of acquisitions: | ||||||||
| Accounts receivable | 494 | 341 | ||||||
| Inventories | (150 | ) | (1,713 | ) | ||||
| Accounts payable | (21 | ) | 205 | |||||
| Accrued liabilities | (1,714 | ) | (2,976 | ) | ||||
| Accrued taxes | 1,387 | 763 | ||||||
| Net cash provided by operating activities | 5,434 | 1,974 | ||||||
| Cash flows from investing activities: | ||||||||
| Payments for property and equipment | (2,375 | ) | (2,389 | ) | ||||
| Proceeds from disposal of property and equipment | 50 | 94 | ||||||
| Other investing activities | (111 | ) | 426 | |||||
| Net cash used in investing activities | (2,436 | ) | (1,869 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net change in short-term borrowings | 1,763 | 2,428 | ||||||
| Proceeds from issuance of long-term debt | 5 | 4,921 | ||||||
| Payment of long-term debt | (545 | ) | (2,057 | ) | ||||
| Dividends paid | (1,352 | ) | (1,274 | ) | ||||
| Purchase of Company stock | (1,589 | ) | (2,129 | ) | ||||
| Other financing activities | (89 | ) | (223 | ) | ||||
| Net cash provided by (used in) financing activities | (1,807 | ) | 1,666 | |||||
| Effect of exchange rates on cash and cash equivalents | 376 | 234 | ||||||
| Net increase in cash and cash equivalents | 1,567 | 2,005 | ||||||
| Cash and cash equivalents at beginning of year | 6,550 | 7,395 | ||||||
| Cash and cash equivalents at end of period | $ | 8,117 | $ | 9,400 | ||||
Reconciliations of and Other Information Regarding Non-GAAP Financial Measures
(Unaudited)
(In millions, except per share data)
The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most nearly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (“GAAP”). The company has provided the non-GAAP financial information presented in the press release, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.
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. Free cash flow was
Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the company's financial performance. 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 as 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 statements 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 other companies to calculate their free cash flow before comparing our free cash flow to that of such other companies.
The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash provided by financing activities.
| For the Three Months Ended | ||||||||
| April 30, | ||||||||
| (Amounts in millions) | 2012 | 2011 | ||||||
| Net cash provided by operating activities | $ | 5,434 | $ | 1,974 | ||||
| Payments for property and equipment | (2,375 | ) | (2,389 | ) | ||||
| Free cash flow | $ | 3,059 | $ | (415 | ) | |||
| Net cash used in investing activities | $ | (2,436 | ) | $ | (1,869 | ) | ||
| Net cash provided by (used in) financing activities | $ | (1,807 | ) | $ | 1,666 | |||
Calculation of Return on Investment and Return on Assets
Management believes return on investment (“ROI”) is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term potential strategic initiatives with any possible short-term impacts.
ROI was 18.1 percent and 18.5 percent for the trailing 12 months ended
We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the fiscal year or trailing twelve months divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets of continuing operations plus average accumulated depreciation and average amortization less average accounts payable and average accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year or trailing twelve months multiplied by a factor of eight.
ROI is considered a non-GAAP financial measure. We consider return on assets (“ROA”) to be the financial measure computed in accordance with GAAP that is the most directly comparable financial measure to ROI as we calculate that financial measure. ROI differs from ROA (which is income from continuing operations for the fiscal year or trailing 12 months divided by average total assets of continuing operations for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; adjusts total assets from continuing operations for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities; and incorporates a factor of rent to arrive at total invested capital.
Although ROI is a standard financial metric, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate ROI may differ from the methods other companies use to calculate their ROI. We urge you to understand the methods used by other companies to calculate their ROI before comparing our ROI to that of such other companies.
The calculation of ROI along with a reconciliation to the calculation of ROA, the most comparable GAAP financial measurement, is as follows:
| Wal-Mart Stores, Inc. | ||||||||||||
| Return on Investment and Return on Assets | ||||||||||||
| Trailing Twelve Months Ended | ||||||||||||
| April 30, | ||||||||||||
| (Dollar amounts in millions) | 2012 | 2011 | ||||||||||
| CALCULATION OF RETURN ON INVESTMENT | ||||||||||||
| Numerator | ||||||||||||
| Operating income | $ | 27,049 | $ | 25,701 | ||||||||
| + Interest income | 157 | 194 | ||||||||||
| + Depreciation and amortization | 8,251 | 7,762 | ||||||||||
| + Rent | 2,515 | 2,002 | ||||||||||
| = Adjusted operating income | $ | 37,972 | $ | 35,659 | ||||||||
| Denominator | ||||||||||||
| Average total assets of continuing operations1 | $ | 191,569 | $ | 180,016 | ||||||||
| + Average accumulated depreciation and amortization1 | 49,761 | 45,641 | ||||||||||
| - Average accounts payable1 | 35,775 | 32,927 | ||||||||||
| - Average accrued liabilities1 | 16,300 | 15,790 | ||||||||||
| + Rent * 8 | 20,120 | 16,016 | ||||||||||
| = Average invested capital | $ | 209,375 | $ | 192,956 | ||||||||
| Return on investment (ROI) | 18.1 | % | 18.5 | % | ||||||||
| CALCULATION OF RETURN ON ASSETS | ||||||||||||
| Numerator | ||||||||||||
| Income from continuing operations | $ | 16,770 | $ | 16,093 | ||||||||
| Denominator | ||||||||||||
| Average total assets of continuing operations1 | $ | 191,569 | $ | 180,016 | ||||||||
| Return on assets (ROA) | 8.8 | % | 8.9 | % | ||||||||
| As of April 30, | ||||||||||||
| Certain Balance Sheet Data | 2012 | 2011 | 2010 | |||||||||
| Total assets of continuing operations2 | $ | 197,020 | $ | 186,117 | 173,914 | |||||||
| Accumulated depreciation and amortization | 50,835 | 48,686 | 42,596 | |||||||||
| Accounts payable | 37,068 | 34,481 | 31,372 | |||||||||
| Accrued liabilities | 16,638 | 15,962 | 15,617 | |||||||||
| 1 The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2. |
||||||||||||
| 2 Total assets of continuing operations as of April 30, 2012, 2011 and 2010 in the table above exclude assets of discontinued operations that are reflected in the Company's Consolidated Balance Sheets of $80 million, $108 million and $129 million, respectively. |
||||||||||||
Source:
Wal-Mart Stores, Inc.
Media Relations Contact:
David Tovar, 800-331-0085
or
Investor Relations Contact:
Carol Schumacher, 479-277-1498
or
Pre-recorded conference call:
800-778-6902 (U.S. and Canada)
585-219-6420 (All other countries)