-
Wal-Mart Stores, Inc. (Walmart) reported second quarter diluted earnings per share from continuing operations (EPS) of$1.21 , compared to last year's$1.23 .1 -
Consolidated net sales increased more than
$3.2 billion , or 2.8 percent, to$119.3 billion . -
Walmart U.S. comp sales were flat for the 13-week period ended
Aug. 1, 2014 . Comp sales for the Neighborhood Market format rose approximately 5.6 percent. Walmart U.S. net sales increased$1.9 billion , or 2.7 percent, to more than$70 billion . -
Walmart International grew net sales 3.1 percent to$33.9 billion . On a constant currency basis,2 net sales would have increased 5.3 percent. Currency exchange rate fluctuations negatively impacted net sales by approximately$700 million . -
Sam's Club comp sales, without fuel,2 were flat for the 13-week period endedAug. 1, 2014 .Sam's Club delivered 11.9 percent membership income growth for the quarter. -
E-commerce sales globally increased approximately 24 percent on a
constant currency basis, with double-digit growth in the U.S.,
U.K. ,China andBrazil . -
Consolidated operating income was
$6.7 billion , a decrease of 0.5 percent.Walmart International grew operating income 8.0 percent, more than twice the rate of sales growth. -
Walmart updated full year EPS guidance to a range of
$4.90 to$5.15 , from a previous range of$5.10 to $5.45 . This range includes third quarter EPS guidance of$1.10 to $1.20 . The new full year guidance reflects incremental investments in e-commerce and higher U.S. health-care costs than previously anticipated. This guidance also assumes the effective tax rate will be around 34 percent for the third quarter. The annual effective tax rate is projected to be between 32 and 34 percent. The actual rate will depend on a number of factors, including our performance, discrete items and pending U.S. Congressional actions regarding the extension of certain tax legislation.
1 This amount excludes
2 See additional information at the
end of this release regarding non-GAAP financial measures.
Consolidated net sales for the second quarter were
Consolidated net income attributable to Walmart was
Solid EPS performance
“I’m pleased
with our solid earnings per share performance,” said
Walmart is continuing to invest in enhancing its e-commerce capabilities and McMillon pointed out the need to move quickly to serve customers more effectively.
“We see opportunities to improve in merchandising, pricing and store level service in our supercenters, and we are working to close those gaps,” added McMillon. “Our investments in e-commerce and mobile are very important, as the lines between digital and physical retail continue to blur. Our customers expect a seamless experience, and we’re working to deliver that for them around the world.”
Returns
The company paid
Return on investment1 (ROI) for the trailing 12-months ended July 31, 2014 was 16.6 percent, compared to 17.9 percent for the prior comparable period. The decrease in ROI was primarily due to a decrease in operating income, as well as our continued capital investment in store growth and e-commerce.
Free cash flow1 was
1 See additional information at the end of this
release regarding non-GAAP financial measures.
2 This
amount excludes
Guidance
The company’s financial
guidance reflects a view of global economic trends and assumes currency
exchange rates remain at current levels. Forecasted earnings per share
from continuing operations for the full year are expected to range
between
“Our guidance includes incremental investments in e-commerce and
headwinds from higher health-care costs in the U.S. than previously
estimated. This guidance also assumes the effective tax rate will be
around 34 percent for the third quarter. The annual effective tax rate
is projected to be between 32 and 34 percent. The actual rate will
depend on a number of factors, including our performance, discrete items
and pending U.S. Congressional actions regarding the extension of
certain tax legislation,” said
U.S. comparable store sales results
The
company reported U.S. comparable store sales based on its 13-week and
26-week retail calendar for the periods ended
Without Fuel | With Fuel | Fuel Impact | |||||||||||||||||||||||
13 Weeks Ended | 13 Weeks Ended | 13 Weeks Ended | |||||||||||||||||||||||
8/1/2014 | 7/26/2013 | 8/1/2014 | 7/26/2013 | 8/1/2014 | 7/26/2013 | ||||||||||||||||||||
Walmart U.S. | 0.0 | % | -0.3 | % | 0.0 | % | -0.3 | % | 0.0 | % | 0.0 | % | |||||||||||||
Sam’s Club | 0.0 | % | 1.7 | % | 0.5 | % | 1.7 | % | 0.5 | % | 0.0 | % | |||||||||||||
Total U.S. | 0.0 | % | 0.0 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | |||||||||||||
Without Fuel | With Fuel | Fuel Impact | |||||||||||||||||||||||
26 Weeks Ended | 26 Weeks Ended | 26 Weeks Ended | |||||||||||||||||||||||
8/1/2014 | 7/26/2013 | 8/1/2014 | 7/26/2013 | 8/1/2014 | 7/26/2013 | ||||||||||||||||||||
Walmart U.S. | 0.0 | % | -0.8 | % | 0.0 | % | -0.8 | % | 0.0 | % | 0.0 | % | |||||||||||||
Sam’s Club | -0.3 | % | 0.9 | % | -0.2 | % | 0.8 | % | 0.1 | % | -0.1 | % | |||||||||||||
Total U.S. | -0.1 | % | -0.6 | % | -0.1 | % | -0.6 | % | 0.0 | % | 0.0 | % | |||||||||||||
During the 13-week period, Walmart U.S. comp traffic decreased 1.1 percent, while average ticket increased 1.1 percent. E-commerce sales positively impacted comp sales by approximately 0.3 percent for the 13-week period.
In the 13-week period, excluding fuel,1 Sam’s Club comp traffic was up 0.3 percent, and average ticket was down 0.3 percent. E-commerce sales positively impacted comp sales by approximately 0.3 percent for the 13-week period.
The company’s e-commerce sales impact includes those sales initiated through the company’s websites and fulfilled through the company’s dedicated e-commerce distribution facilities, as well as an estimate for sales initiated online, but fulfilled through the company’s stores and clubs.
1 See additional information at the end of this release regarding non-GAAP financial measures.
Net sales results
Net sales, including
fuel, were as follows:
Three months ended | Six Months Ended | ||||||||||||||||||||||||
July 31, | July 31, | ||||||||||||||||||||||||
(dollars in billions) | 2014 | 2013 |
Percent Change |
2014 | 2013 |
Percent Change |
|||||||||||||||||||
Walmart U.S. | $ | 70.601 | $ | 68.728 | 2.7 | % | $ | 138.453 | $ | 135.281 | 2.3 | % | |||||||||||||
Walmart International | 33.872 | 32.841 | 3.1 | % | 66.296 | 65.730 | 0.9 | % | |||||||||||||||||
Sam’s Club | 14.863 | 14.532 | 2.3 | % | 28.754 | 28.403 | 1.2 | % | |||||||||||||||||
Consolidated | $ | 119.336 | $ | 116.101 | 2.8 | % | $ | 233.503 | $ | 229.414 | 1.8 | % | |||||||||||||
The following explanations provide additional context to the above table.
-
Excluding the impact of currency exchange rate fluctuations, Walmart
International’s net sales for the quarter would have been
$34.6 billion , an increase of 5.3 percent over last year. Currency exchange rate fluctuations negatively impacted net sales by$696 million during the quarter. -
Sam’s Club net sales, excluding fuel,1 were
$13.0 billion for the quarter, an increase of 1.7 percent over last year. -
Excluding the impact of currency exchange rate fluctuations,1
consolidated net sales would have increased 3.4 percent during the
quarter to
$120.0 billion .
“We delivered net sales growth of
Segment operating income
Segment
operating income was as follows:
Three months ended | Six Months Ended | ||||||||||||||||||||||||
July 31, | July 31, | ||||||||||||||||||||||||
(dollars in billions) | 2014 | 2013 |
Percent Change |
2014 | 2013 |
Percent Change |
|||||||||||||||||||
Walmart U.S. | $ | 5.252 | $ | 5.383 | -2.4 | % | $ | 10.227 | $ | 10.580 | -3.3 | % | |||||||||||||
Walmart International | 1.489 | 1.379 | 8.0 | % | 2.691 | 2.542 | 5.9 | % | |||||||||||||||||
Sam's Club | 0.494 | 0.518 | -4.6 | % | 0.973 | 1.008 | -3.5 | % | |||||||||||||||||
Sam's Club (excluding fuel) | 0.466 | 0.519 | -10.2 | % | 0.943 | 1.003 | -6.0 | % | |||||||||||||||||
“We remain focused on price investment across all our markets and expect
to continue driving improved comp performance,” said
1 See additional information at the end of this release regarding non-GAAP financial measures.
U.S. comparable store sales review and guidance
“Neighborhood
Markets continued to perform well and delivered an approximate 5.6
percent sales comp for the period,” added Foran. “Comp store traffic
grew 4.1 percent. During the second quarter, we opened 22 Neighborhood
Markets and remain on track to deliver 180 to 200 new units for the
year.”
For the 13-week period ending
“Our top priority at Sam’s Club remains growth -- growing our member
base and growing sales,” said
Sam’s Club expects comp sales, excluding fuel,1 for
the 13-week period ending
Walmart U.S. and Sam’s Club will report comparable sales for the 13-week
period ending
Notes
After this earnings release has
been furnished to the
Editor’s Note
High resolution photos
of Walmart U.S. and International operations are available for download
at stock.walmart.com.
1 See additional information at the end of this release regarding non-GAAP financial measures.
Forward Looking Statements
This
release contains statements as to
These statements are intended to enjoy the protection of the safe harbor
for forward-looking statements provided by that act. Those statements
can be identified by the use of the word or phrase “are expected,”
“assumes,” “expect,” “expected,” “expects,” “forecasted,” “guidance,”
“on track to deliver,” “priority,” “projected,” and “will depend,” in
the statements or relating to such statements. These forward-looking
statements are subject to risks, uncertainties and other factors,
domestically and internationally, including general economic conditions;
business trends in the company’s markets; economic conditions affecting
specific markets in which the company operates; competitive initiatives
of other retailers and competitive pressures; the amount of inflation or
deflation that occurs, both generally and in certain product categories;
consumer confidence, disposable income, credit availability, spending
levels, spending patterns and debt levels; consumer demand for certain
merchandise; customer traffic in the company’s stores and clubs and on
the company’s e-commerce websites and average ticket size; consumer
acceptance of the company’s merchandise offerings in its stores and
clubs and on the company’s e-commerce websites; consumer acceptance of
the company’s stores and merchandise in the markets in which new units
are opened; consumer shopping patterns in the markets in which the small
store expansion of the Walmart U.S. operating segment occurs; the
disruption of seasonal buying patterns in
The company discusses certain of the factors described above more fully
in certain of its filings with the
Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Income (Unaudited) |
|||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
SUBJECT TO RECLASSIFICATION | July 31, | July 31, | |||||||||||||||||||||||||||
(Dollars in millions, except share data) | 2014 | 2013 |
Percent Change |
2014 | 2013 |
Percent Change |
|||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Net sales | $ | 119,336 | $ | 116,101 | 2.8 | % | $ | 233,503 | $ | 229,414 | 1.8 | % | |||||||||||||||||
Membership and other income | 789 | 729 | 8.2 | % | 1,582 | 1,486 | 6.5 | % | |||||||||||||||||||||
Total revenues | 120,125 | 116,830 | 2.8 | % | 235,085 | 230,900 | 1.8 | % | |||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||
Cost of sales | 90,010 | 87,420 | 3.0 | % | 176,724 | 173,411 | 1.9 | % | |||||||||||||||||||||
Operating, selling, general and administrative expenses | 23,375 | 22,633 | 3.3 | % | 45,428 | 44,274 | 2.6 | % | |||||||||||||||||||||
Operating income | 6,740 | 6,777 | (0.5 | )% | 12,933 | 13,215 | (2.1 | )% | |||||||||||||||||||||
Interest: | |||||||||||||||||||||||||||||
Debt | 509 | 522 | -2.5 | % | 1,040 | 1,029 | 1.1 | % | |||||||||||||||||||||
Capital leases | 61 | 67 | (9.0 | )% | 122 | 133 | (8.3 | )% | |||||||||||||||||||||
Interest income | (32 | ) | (37 | ) | (13.5 | )% | (56 | ) | (80 | ) | (30.0 | )% | |||||||||||||||||
Interest, net | 538 | 552 | -2.5 | % | 1,106 | 1,082 | 2.2 | % | |||||||||||||||||||||
Income from continuing operations before income taxes | 6,202 | 6,225 | (0.4 | )% | 11,827 | 12,133 | (2.5 | )% | |||||||||||||||||||||
Provision for income taxes | 2,113 | 2,020 | 4.6 | % | 4,027 | 3,996 | 0.8 | % | |||||||||||||||||||||
Income from continuing operations | 4,089 | 4,205 | (2.8 | )% | 7,800 | 8,137 | (4.1 | )% | |||||||||||||||||||||
Income from discontinued operations, net of income taxes | 270 | 10 | 2,600.0 | % | 285 | 23 | 1,139.1 | % | |||||||||||||||||||||
Consolidated net income | 4,359 | 4,215 | 3.4 | % | 8,085 | 8,160 | (0.9 | )% | |||||||||||||||||||||
Less consolidated net income attributable to noncontrolling interest | (266 | ) | (146 | ) | 82.2 | % | (399 | ) | (307 | ) | 30.0 | % | |||||||||||||||||
Consolidated net income attributable to Walmart | $ | 4,093 | $ | 4,069 | 0.6 | % | $ | 7,686 | $ | 7,853 | (2.1 | )% | |||||||||||||||||
Income from continuing operations attributable to Walmart: | |||||||||||||||||||||||||||||
Income from continuing operations | $ | 4,089 | $ | 4,205 | (2.8 | )% | $ | 7,800 | $ | 8,137 | (4.1 | )% | |||||||||||||||||
Less income from continuing operations attributable to noncontrolling interest | (166 | ) | (143 | ) | 16.1 | % | (295 | ) | (300 | ) | (1.7 | )% | |||||||||||||||||
Income from continuing operations attributable to Walmart | $ | 3,923 | $ | 4,062 | (3.4 | )% | $ | 7,505 | $ | 7,837 | (4.2 | )% | |||||||||||||||||
Basic net income per common share: | |||||||||||||||||||||||||||||
Basic income per common share from continuing operations attributable to Walmart | $ | 1.22 | $ | 1.24 | (1.6 | )% | $ | 2.32 | $ | 2.38 | (2.5 | )% | |||||||||||||||||
Basic income per common share from discontinued operations attributable to Walmart | 0.05 | 0.01 | 400.0 | % | 0.06 | 0.01 | 500.0 | % | |||||||||||||||||||||
Basic net income per common share attributable to Walmart | $ | 1.27 | $ | 1.25 | 1.6 | % | $ | 2.38 | $ | 2.39 | (0.4 | )% | |||||||||||||||||
Diluted net income per common share: | |||||||||||||||||||||||||||||
Diluted income per common share from continuing operations attributable to Walmart | $ | 1.21 | $ | 1.23 | (1.6 | )% | $ | 2.31 | $ | 2.37 | (2.5 | )% | |||||||||||||||||
Diluted income per common share from discontinued operations attributable to Walmart | 0.05 | 0.01 | 400.0 | % | 0.06 | 0.01 | 500.0 | % | |||||||||||||||||||||
Diluted net income per common share attributable to Walmart | $ | 1.26 | $ | 1.24 | 1.6 | % | $ | 2.37 | $ | 2.38 | (0.4 | )% | |||||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||
Basic | 3,230 | 3,278 | 3,231 | 3,290 | |||||||||||||||||||||||||
Diluted | 3,241 | 3,291 | 3,244 | 3,305 | |||||||||||||||||||||||||
Dividends declared per common share | $ | 1.92 | $ | 1.88 |
Wal-Mart Stores, Inc.
Condensed Consolidated Balance Sheets (Unaudited) |
||||||||||||||||
SUBJECT TO RECLASSIFICATION | ||||||||||||||||
(Dollars in millions) | July 31, | January 31, | July 31, | |||||||||||||
ASSETS | 2014 | 2014 | 2013 | |||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 6,184 | $ | 7,281 | $ | 9,016 | ||||||||||
Receivables, net | 6,146 | 6,677 | 5,996 | |||||||||||||
Inventories | 45,451 | 44,858 | 42,793 | |||||||||||||
Prepaid expenses and other | 1,851 | 1,909 | 2,197 | |||||||||||||
Current assets of discontinued operations | — | 460 | — | |||||||||||||
Total current assets | 59,632 | 61,185 | 60,002 | |||||||||||||
Property and equipment: | ||||||||||||||||
Property and equipment | 177,975 | 173,089 | 168,086 | |||||||||||||
Less accumulated depreciation | (61,709 | ) | (57,725 | ) | (54,724 | ) | ||||||||||
Property and equipment, net | 116,266 | 115,364 | 113,362 | |||||||||||||
Property under capital leases: | ||||||||||||||||
Property under capital leases | 5,549 | 5,589 | 5,763 | |||||||||||||
Less accumulated amortization | (3,092 | ) | (3,046 | ) | (3,131 | ) | ||||||||||
Property under capital leases, net | 2,457 | 2,543 | 2,632 | |||||||||||||
Goodwill | 19,758 | 19,510 | 19,280 | |||||||||||||
Other assets and deferred charges | 5,872 | 6,149 | 5,693 | |||||||||||||
Total assets | $ | 203,985 | $ | 204,751 | $ | 200,969 | ||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term borrowings | $ | 3,516 | $ | 7,670 | $ | 8,639 | ||||||||||
Accounts payable | 36,828 | 37,415 | 36,701 | |||||||||||||
Dividends payable | 3,100 | — | 3,141 | |||||||||||||
Accrued liabilities | 18,237 | 18,793 | 18,616 | |||||||||||||
Accrued income taxes | 511 | 966 | 116 | |||||||||||||
Long-term debt due within one year | 4,659 | 4,103 | 4,692 | |||||||||||||
Obligations under capital leases due within one year | 301 | 309 | 309 | |||||||||||||
Current liabilities of discontinued operations | — | 89 | — | |||||||||||||
Total current liabilities | 67,152 | 69,345 | 72,214 | |||||||||||||
Long-term debt | 43,004 | 41,771 | 40,678 | |||||||||||||
Long-term obligations under capital leases | 2,695 | 2,788 | 2,907 | |||||||||||||
Deferred income taxes and other | 8,311 | 8,017 | 7,989 | |||||||||||||
Redeemable noncontrolling interest | — | 1,491 | 495 | |||||||||||||
Commitments and contingencies | ||||||||||||||||
Equity: | ||||||||||||||||
Common stock | 323 | 323 | 327 | |||||||||||||
Capital in excess of par value | 2,208 | 2,362 | 3,432 | |||||||||||||
Retained earnings | 77,172 | 76,566 | 70,791 | |||||||||||||
Accumulated other comprehensive income (loss) | (1,957 | ) | (2,996 | ) | (2,889 | ) | ||||||||||
Total Walmart shareholders’ equity | 77,746 | 76,255 | 71,661 | |||||||||||||
Nonredeemable noncontrolling interest | 5,077 | 5,084 | 5,025 | |||||||||||||
Total equity | 82,823 | 81,339 | 76,686 | |||||||||||||
Total liabilities and equity | $ | 203,985 | $ | 204,751 | $ | 200,969 |
Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||||||
Six Months Ended | |||||||||||
SUBJECT TO RECLASSIFICATION | July 31, | ||||||||||
(Dollars in millions) | 2014 | 2013 | |||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net income | $ | 8,085 | $ | 8,160 | |||||||
(Income) loss from discontinued operations, net of income taxes | (285 | ) | (23 | ) | |||||||
Income from continuing operations | 7,800 | 8,137 | |||||||||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 4,527 | 4,402 | |||||||||
Deferred income taxes | 79 | 475 | |||||||||
Other operating activities | 667 | (166 | ) | ||||||||
Changes in certain assets and liabilities: | |||||||||||
Receivables, net | 704 | 445 | |||||||||
Inventories | (403 | ) | 569 | ||||||||
Accounts payable | (420 | ) | (324 | ) | |||||||
Accrued liabilities | (596 | ) | (209 | ) | |||||||
Accrued income taxes | (458 | ) | (2,078 | ) | |||||||
Net cash provided by operating activities | 11,900 | 11,251 | |||||||||
Cash flows from investing activities: | |||||||||||
Payments for property and equipment | (5,113 | ) | (6,066 | ) | |||||||
Proceeds from the disposal of property and equipment | 90 | 112 | |||||||||
Proceeds from disposal of certain operations | 671 | — | |||||||||
Other investing activities | 12 | (83 | ) | ||||||||
Net cash used in investing activities | (4,340 | ) | (6,037 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Net change in short-term borrowings | (4,130 | ) | 1,869 | ||||||||
Proceeds from issuance of long-term debt | 4,565 | 5,326 | |||||||||
Payments of long-term debt | (2,868 | ) | (3,386 | ) | |||||||
Dividends paid | (3,094 | ) | (3,092 | ) | |||||||
Purchase of Company stock | (933 | ) | (4,096 | ) | |||||||
Dividends paid to noncontrolling interest | (339 | ) | (358 | ) | |||||||
Purchase of noncontrolling interest | (1,720 | ) | (152 | ) | |||||||
Other financing activities | (236 | ) | 13 | ||||||||
Net cash used in financing activities | (8,755 | ) | (3,876 | ) | |||||||
Effect of exchange rates on cash and cash equivalents | 98 | (103 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | (1,097 | ) | 1,235 | ||||||||
Cash and cash equivalents at beginning of year | 7,281 | 7,781 | |||||||||
Cash and cash equivalents at end of period | $ | 6,184 | $ | 9,016 | |||||||
Reconciliations of and Other
Information Regarding Non-GAAP Financial Measures
(Unaudited)
(In
millions, except per share data)
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 possible short-term impacts.
ROI was 16.6 percent and 17.9 percent for the trailing 12 months ended July 31, 2014 and 2013, respectively. The decline in ROI was primarily due to the decrease in operating income, as well as our continued capital investment in store growth and e-commerce.
We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing 12 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, 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 12 months multiplied by a factor of eight. When we have discontinued operations, we exclude the impact of the discontinued operations.
Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. In addition, we include a factor of eight for rent expense that estimates the hypothetical capitalization of our operating leases. We consider return on assets (“ROA”) to be the financial measure computed in accordance with generally accepted accounting principles (“GAAP”) that is the most directly comparable financial measure to our calculation of ROI. ROI differs from ROA (which is consolidated income from continuing operations for the period 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 of 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 our ROI may differ from the methods used by other companies 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 measure, is as follows:
Wal-Mart Stores, Inc. | |||||||||||||||
Return on Investment and Return on Assets | |||||||||||||||
Trailing Twelve Months Ended | |||||||||||||||
July 31, | |||||||||||||||
(Dollars in millions) | 2014 | 2013 | |||||||||||||
CALCULATION OF RETURN ON INVESTMENT | |||||||||||||||
Numerator | |||||||||||||||
Operating income | $ | 26,590 | $ | 27,888 | |||||||||||
+ Interest income | 95 | 177 | |||||||||||||
+ Depreciation and amortization | 8,995 | 8,659 | |||||||||||||
+ Rent | 2,896 | 2,642 | |||||||||||||
Adjusted operating income | $ | 38,576 | $ | 39,366 | |||||||||||
Denominator | |||||||||||||||
Average total assets of continuing operations1 | $ | 202,477 | $ | 198,315 | |||||||||||
+ Average accumulated depreciation and amortization1 |
61,328 | 54,993 | |||||||||||||
- Average accounts payable1 | 36,765 | 36,384 | |||||||||||||
- Average accrued liabilities1 | 18,427 | 18,197 | |||||||||||||
+ Rent x 8 | 23,168 | 21,136 | |||||||||||||
Average invested capital | $ | 231,781 | $ | 219,863 | |||||||||||
Return on investment (ROI) | 16.6 | % | 17.9 | % | |||||||||||
CALCULATION OF RETURN ON ASSETS | |||||||||||||||
Numerator | |||||||||||||||
Income from continuing operations | $ | 16,214 | $ | 17,809 | |||||||||||
Denominator | |||||||||||||||
Average total assets of continuing operations1 | $ | 202,477 | $ | 198,315 | |||||||||||
Return on assets (ROA) | 8.0 | % | 9.0 | % | |||||||||||
As of July 31, | |||||||||||||||
Certain Balance Sheet Data | 2014 | 2013 | 2012 | ||||||||||||
Total assets of continuing operations | $ | 203,985 | $ | 200,969 | $ | 195,661 | |||||||||
Accumulated depreciation and amortization | 64,801 | 57,855 | 52,131 | ||||||||||||
Accounts payable | 36,828 | 36,701 | 36,067 | ||||||||||||
Accrued liabilities | 18,237 | 18,616 | 17,777 | ||||||||||||
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. |
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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, consolidated income from continuing operations as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
Additionally, Walmart’s 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 Condensed Consolidated 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 Walmart’s management to calculate our free cash flow may differ from the methods used by other companies 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 used in financing activities.
Six Months Ended | |||||||||||
July 31, | |||||||||||
(Dollars in millions) | 2014 | 2013 | |||||||||
Net cash provided by operating activities | $ | 11,900 | $ | 11,251 | |||||||
Payments for property and equipment | (5,113 | ) | (6,066 | ) | |||||||
Free cash flow | $ | 6,787 | $ | 5,185 | |||||||
Net cash used in investing activities1 | $ | (4,340 | ) | $ | (6,037 | ) | |||||
Net cash used in financing activities | $ | (8,755 | ) | $ | (3,876 | ) | |||||
1 "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow. | |||||||||||
Constant Currency
In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar. 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 year period’s currency exchange rates. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. When we refer to constant currency operating results, this means operating results without the impact of the currency exchange rate fluctuations and without the impact of acquisitions, if any, until the acquisitions are included in both comparable periods. The disclosure of constant currency amounts or results permits investors to understand better Walmart’s underlying performance without the effects of currency exchange rate fluctuations or acquisitions.
The table below reflects the calculation of constant currency for net sales and operating income for the three and six months ended July 31, 2014.
Three Months Ended July 31, 2014 | Six Months Ended July 31, 2014 | ||||||||||||||||||||||||||||||||
International | Consolidated | International | Consolidated | ||||||||||||||||||||||||||||||
(Dollars in millions) | 2014 |
Percent Change |
2014 |
Percent Change |
2014 |
Percent Change |
2014 |
Percent Change |
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Net sales: | |||||||||||||||||||||||||||||||||
As reported | $ | 33,872 | 3.1 | % | $ | 119,336 | 2.8 | % | $ | 66,296 | 0.9 | % | $ | 233,503 | 1.8 | % | |||||||||||||||||
Currency exchange rate fluctuations1 | 696 | 696 | 2,272 | 2,272 | |||||||||||||||||||||||||||||
34,568 | 120,032 | 68,568 | 235,775 | ||||||||||||||||||||||||||||||
Net sales from acquisitions | — | — | — | — | |||||||||||||||||||||||||||||
Constant currency net sales | $ | 34,568 | 5.3 | % | $ | 120,032 | 3.4 | % | $ | 68,568 | 4.3 | % | $ | 235,775 | 2.8 | % | |||||||||||||||||
Operating income: | |||||||||||||||||||||||||||||||||
As reported | $ | 1,489 | 8.0 | % | $ | 6,740 | (0.5 | )% | $ | 2,691 | 5.9 | % | $ | 12,933 | (2.1 | )% | |||||||||||||||||
Currency exchange rate fluctuations1 | 18 | 18 | 41 | 41 | |||||||||||||||||||||||||||||
1,507 | 6,758 | 2,732 | 12,974 | ||||||||||||||||||||||||||||||
Operating income (loss) from acquisitions | — | — | — | — | |||||||||||||||||||||||||||||
Constant currency operating income | $ | 1,507 | 9.3 | % | $ | 6,758 | (0.3 | )% | $ | 2,732 | 7.5 | % | $ | 12,974 | (1.8 | )% | |||||||||||||||||
1 Excludes currency exchange rate fluctuations related to acquisitions until the acquisitions are included in both comparable periods. |
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Comparable Sales Measures and Sam’s Club Measures
The following financial measures presented in the press release to which this reconciliation is attached are non-GAAP financial measures as defined by the SEC’s rules:
-
the comparable club sales of the company’s Sam’s Club operating
segment (“Sam’s Club”) for the 13-week and 26-week periods ended
Aug. 1, 2014 andJul. 26, 2013 , the projected comparable club sales of Sam’s Club for the 13 weeks endingOct. 31, 2014 and the comparable club sales of Sam’s Club for the 13 weeks endedOct. 25, 2013 , in each case calculated by excluding Sam’s Club’s fuel sales for such periods (the “Sam’s Club Comparable Sales Measures”); -
the net sales of Sam’s Club for the three months ended
Jul. 31, 2014 and the percentage increase in the net sales of Sam’s Club for the three months endedJul. 31, 2014 over the net sales of Sam’s Club for the three months endedJul. 31, 2013 in each case calculated by excluding Sam’s Club’s fuel sales for the relevant period; and -
the segment operating income of Sam’s Club for the three and six
months ended
Jul. 31, 2014 and 2013 and the percentage decrease in the segment operating income of Sam’s Club for the three and six months endedJul. 31, 2014 over the segment operating income of Sam’s Club for the three and six months endedJul. 31, 2013 , in each case calculated by excluding Sam’s Club’s fuel sales for the relevant period (collectively with the financial measures described in the immediately preceding bullet point, the “Sam’s Club Measures”).
We believe the Sam’s Club comparable club sales for the historical
periods for which the corresponding Sam’s Club Comparable Sales Measures
are presented calculated by including fuel sales are the financial
measures computed in accordance with GAAP most directly comparable to
the respective Sam’s Club Comparable Sales Measures. We believe Sam’s
Club’s projected comparable club sales for the 13-week period ending
We believe that the presentation of the Sam’s Club Comparable Sales Measures and the Sam’s Club Measures provides useful information to investors regarding the company’s financial condition and results of operations because that information permits investors to understand the effect of the fuel sales of Sam’s Club, which are affected by the volatility of fuel prices, on Sam’s Club’s comparable club sales and on Sam’s Club’s net sales and operating income for the periods presented.
Source:
Wal-Mart Stores, Inc.
Media Relations:
Randy
Hargrove, 800-331-0085
or
Investor Relations:
Carol
Schumacher, 479-277-1498
or
Pre-recorded management call:
877-523-5612
(U.S. and Canada)
201-689-8483 (other countries)
Passcode:
9256278 (Walmart)
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