-
Wal-Mart Stores, Inc. (Walmart) reported third quarter diluted earnings per share from continuing operations (EPS) of$1.15 , within guidance of$1.10 to $1.20 . This compared to last year's$1.14 . -
Walmart U.S. comp sales increased 0.5 percent for the 13-week
period ended
Oct. 31, 2014 . Comp sales for the Neighborhood Market format increased approximately 5.5 percent. Walmart U.S. net sales increased$2.3 billion , or 3.4 percent, to approximately$70.0 billion . -
Consolidated net sales increased
$3.2 billion , or 2.8 percent, to$118.1 billion . -
Walmart updated its full year EPS guidance to a range of
$4.92 to$5.02 , which includes an estimated negative impact of approximately$0.03 per share related to the future closure of underperforming stores in Walmart Japan. The company's previous guidance was$4.90 to$5.15 . Last year, Walmart reported full year EPS of$4.85 , which included approximately$0.26 in certain discrete items that impacted the fourth quarter. Last year's underlying1 EPS was$5.11 . -
Walmart forecasts fourth quarter EPS between
$1.46 and $1.56 , which includes an estimated negative impact of approximately$0.03 per share related to the future closure of underperforming stores in WalmartJapan . Last year, Walmart reported fourth quarter EPS of$1.34 , which included approximately$0.26 in discrete items. Last year's underlying1 EPS was$1.60 . -
Walmart International grew net sales 1.7 percent to$33.7 billion . On a constant currency basis,1 net sales would have increased 2.9 percent to$34.1 billion . -
Sam's Club comp sales, without fuel,1 increased 0.4 percent for the 13-week period endedOct. 31 .Sam's Club increased membership income 10.1 percent for the quarter, and grew operating income more than twice the rate of sales growth. - E-commerce sales globally increased approximately 21 percent on a constant currency basis.
1 See additional information at the end of this release regarding non-GAAP financial measures.
Consolidated net income attributable to Walmart was
Solid EPS performance |
"Walmart reported solid earnings per share of
McMillon stressed the need to strengthen Walmart's sales growth and improve the customer experience, both in stores and online.
"We're investing in key areas of our business, including wages in our U.S. stores and in e-commerce and mobile capabilities. We continue to see opportunities to improve our business," he added. "Being the price leader is an ongoing priority for us and a commitment to customers. As with every year, that is even more important during the holiday season. We have some things in our favor this fourth quarter, including lower fuel prices in the U.S. and other key markets, and we're set to deliver for customers during this time."
Guidance |
"Our earnings per share guidance assumes several important factors,
including the economic conditions in several of our largest markets, and
a highly promotional holiday season," said
1 See additional information at the end of this release regarding non-GAAP financial measures.
"While historically our tax rate tends to moderate toward the end of the
fiscal year, it is important to remember that assessments of certain tax
contingencies, valuation allowances, changes in tax law, outcomes of
administrative audits and the impact of discrete items could affect our
rate," added Holley. "We are monitoring progress in
"Taking all of these factors into account, we are forecasting EPS for
the fourth quarter between
Returns |
The company paid
Return on investment1 (ROI) for the trailing 12-months ended Oct. 31, 2014 was 16.4 percent, compared to 17.5 percent for the prior comparable period. The decrease in ROI was primarily due to lower operating income, as well as ongoing capital investment in store growth and e-commerce initiatives.
Free cash flow1 was
U.S. comparable store sales results |
The company reported U.S. comparable store sales based on its 13-week
and 39-week retail calendar for the periods ended
Without Fuel | With Fuel | Fuel Impact | ||||||||||||||||
13 Weeks Ended | 13 Weeks Ended | 13 Weeks Ended | ||||||||||||||||
10/31/2014 | 10/25/2013 | 10/31/2014 | 10/25/2013 | 10/31/2014 | 10/25/2013 | |||||||||||||
Walmart U.S. | 0.5% | -0.3% | 0.5% | -0.3% | 0.0% | 0.0% | ||||||||||||
Sam's Club | 0.4% | 1.1% | 0.3% | 0.1% | -0.1% | -1.0% | ||||||||||||
Total U.S. | 0.5% | -0.1% | 0.5% | -0.2% | 0.0% | -0.1% | ||||||||||||
Without Fuel | With Fuel | Fuel Impact | ||||||||||||||||
39 Weeks Ended | 39 Weeks Ended | 39 Weeks Ended | ||||||||||||||||
10/31/2014 | 10/25/2013 | 10/31/2014 | 10/25/2013 | 10/31/2014 | 10/25/2013 | |||||||||||||
Walmart U.S. | 0.1% | -0.7% | 0.1% | -0.7% | 0.0% | 0.0% | ||||||||||||
Sam's Club | 0.0% | 1.0% | 0.0% | 0.5% | 0.0% | -0.5% | ||||||||||||
Total U.S. | 0.1% | -0.4% | 0.1% | -0.5% | 0.0% | -0.1% | ||||||||||||
1 See additional information at the end of this release regarding non-GAAP financial measures.
During the 13-week period, Walmart U.S. comp traffic decreased 0.7 percent, while average ticket increased 1.2 percent.
Excluding fuel,1
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. E-commerce sales positively impacted comp sales in Walmart U.S.
by approximately 20 basis points, and positively impacted
Net sales results |
Net sales, including fuel, were as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
October 31, | October 31, | |||||||||||||||||||||||
(dollars in billions) | 2014 | 2013 | Percent Change | 2014 | 2013 | Percent Change | ||||||||||||||||||
Walmart U.S. | $ | 70.025 | $ | 67.692 | 3.4 | % | $ | 208.478 | $ | 202.973 | 2.7 | % | ||||||||||||
Walmart International | 33.659 | 33.109 | 1.7 | % | 99.955 | 98.839 | 1.1 | % | ||||||||||||||||
Sam's Club | 14.392 | 14.075 | 2.3 | % | 43.146 | 42.478 | 1.6 | % | ||||||||||||||||
Consolidated | $ | 118.076 | $ | 114.876 | 2.8 | % | $ | 351.579 | $ | 344.290 | 2.1 | % | ||||||||||||
The following explanations provide additional context to the above table.
-
On a constant currency basis,1
Walmart International's net sales for the quarter would have been$34.1 billion , an increase of 2.9 percent over last year. Currency exchange rate fluctuations negatively impacted net sales by$396 million . -
Sam's Club net sales, excluding fuel,1 were$12.7 billion , an increase of 2.3 percent over last year. -
On a constant currency basis,1 consolidated net
sales would have increased 3.1 percent to
$118.5 billion .
"We had several merchandise categories driving top-line growth," said
1 See additional information at the end of this release regarding non-GAAP financial measures.
Segment operating income |
Segment operating income was as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
October 31, | October 31, | |||||||||||||||||||||||
(dollars in billions) | 2014 | 2013 | Percent Change | 2014 | 2013 | Percent Change | ||||||||||||||||||
Walmart U.S. | $ | 4.932 | $ | 4.991 | -1.2 | % | $ | 15.159 | $ | 15.571 | -2.6 | % | ||||||||||||
Walmart International | 1.430 | 1.379 | 3.7 | % | 4.121 | 3.921 | 5.1 | % | ||||||||||||||||
Sam's Club | 0.493 | 0.440 | 12.0 | % | 1.466 | 1.448 | 1.2 | % | ||||||||||||||||
Sam's Club (excluding fuel) | 0.455 | 0.432 | 5.3 | % | 1.398 | 1.435 | -2.6 | % | ||||||||||||||||
"We're being purposeful to have the right balance of wages to serve customers. We're focused on improving customer service, particularly for the holiday season," said Foran. "Overall, operating expenses deleveraged 10 basis points, and coupled with the decline in gross margin rate, led to a 1.2 percent decrease in operating income."
"We had a solid third quarter, once again growing operating income
faster than sales, and we gained share in most of our largest markets,"
said
"Although we lapped the fee increase from last year, our membership
income growth remained strong at 10.1 percent," said
U.S. comparable store sales review and guidance |
"Our 0.5 percent comp was the first positive comp in seven quarters. Our overall grocery comp, which includes food and consumables, was relatively flat," Foran said. "Comp sales were positively impacted by net inflation, but were negatively affected by SNAP-related headwinds.
"I'm pleased by our Neighborhood Market performance, which reported an approximately 5.5 percent comp for the quarter," explained Foran. "We continued to see sales increases in Neighborhood Market pharmacy and strong growth in consumables, as we focused on in-stock and optimizing the store with relevant offerings for the customer."
For the 13-week period ending
"In the third quarter, comps increased 0.4 percent, driven by relatively balanced growth in traffic and ticket," said Brewer. "We were pleased to see a cumulative comp improvement of 90 basis points over the 39-week period, and we are working even faster to infuse newness in our business to drive membership value."
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
Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Income (Unaudited) |
|||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
SUBJECT TO RECLASSIFICATION | October 31, | October 31, | |||||||||||||||||||||||||||
(Dollars in millions, except share data) | 2014 | 2013 | Percent Change | 2014 | 2013 | Percent Change | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Net sales | $ | 118,076 | $ | 114,876 | 2.8 | % | $ | 351,579 | $ | 344,290 | 2.1 | % | |||||||||||||||||
Membership and other income | 925 | 812 | 13.9 | % | 2,507 | 2,298 | 9.1 | % | |||||||||||||||||||||
Total revenues | 119,001 | 115,688 | 2.9 | % | 354,086 | 346,588 | 2.2 | % | |||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||
Cost of sales | 89,247 | 86,687 | 3.0 | % | 265,971 | 260,098 | 2.3 | % | |||||||||||||||||||||
Operating, selling, general and administrative expenses | 23,489 | 22,691 | 3.5 | % | 68,917 | 66,965 | 2.9 | % | |||||||||||||||||||||
Operating income | 6,265 | 6,310 | (0.7 | )% | 19,198 | 19,525 | (1.7 | )% | |||||||||||||||||||||
Interest: | |||||||||||||||||||||||||||||
Debt | 561 | 527 | 6.5 | % | 1,601 | 1,556 | 2.9 | % | |||||||||||||||||||||
Capital leases | 115 | 65 | 76.9 | % | 237 | 198 | 19.7 | % | |||||||||||||||||||||
Interest income | (20 | ) | (12 | ) | 66.7 | % | (76 | ) | (92 | ) | (17.4 | )% | |||||||||||||||||
Interest, net | 656 | 580 | 13.1 | % | 1,762 | 1,662 | 6.0 | % | |||||||||||||||||||||
Income from continuing operations before income taxes | 5,609 | 5,730 | (2.1 | )% | 17,436 | 17,863 | (2.4 | )% | |||||||||||||||||||||
Provision for income taxes | 1,783 | 1,860 | (4.1 | )% | 5,810 | 5,856 | (0.8 | )% | |||||||||||||||||||||
Income from continuing operations | 3,826 | 3,870 | (1.1 | )% | 11,626 | 12,007 | (3.2 | )% | |||||||||||||||||||||
Income from discontinued operations, net of income taxes | — | 15 | (100.0 | )% | 285 | 38 | 650.0 | % | |||||||||||||||||||||
Consolidated net income | 3,826 | 3,885 | (1.5 | )% | 11,911 | 12,045 | (1.1 | )% | |||||||||||||||||||||
Less consolidated net income attributable to noncontrolling interest | (115 | ) | (147 | ) | (21.8 | )% | (514 | ) | (454 | ) | 13.2 | % | |||||||||||||||||
Consolidated net income attributable to Walmart | $ | 3,711 | $ | 3,738 | (0.7 | )% | $ | 11,397 | $ | 11,591 | (1.7 | )% | |||||||||||||||||
Income from continuing operations attributable to Walmart: | |||||||||||||||||||||||||||||
Income from continuing operations | $ | 3,826 | $ | 3,870 | (1.1 | )% | $ | 11,626 | $ | 12,007 | (3.2 | )% | |||||||||||||||||
Less income from continuing operations attributable to noncontrolling interest | (115 | ) | (143 | ) | (19.6 | )% | (410 | ) | (443 | ) | (7.4 | )% | |||||||||||||||||
Income from continuing operations attributable to Walmart | $ | 3,711 | $ | 3,727 | (0.4 | )% | $ | 11,216 | $ | 11,564 | (3.0 | )% | |||||||||||||||||
Basic net income per common share: | |||||||||||||||||||||||||||||
Basic income per common share from continuing operations attributable to Walmart | $ | 1.15 | $ | 1.14 | 0.9 | % | $ | 3.47 | $ | 3.53 | (1.7 | )% | |||||||||||||||||
Basic income per common share from discontinued operations attributable to Walmart | — | 0.01 | (100.0 | )% | 0.06 | — | 100.0 | % | |||||||||||||||||||||
Basic net income per common share attributable to Walmart | $ | 1.15 | $ | 1.15 | — | % | $ | 3.53 | $ | 3.53 | — | % | |||||||||||||||||
Diluted net income per common share: | |||||||||||||||||||||||||||||
Diluted income per common share from continuing operations attributable to Walmart | $ | 1.15 | $ | 1.14 | 0.9 | % | $ | 3.46 | $ | 3.51 | (1.4 | )% | |||||||||||||||||
Diluted income per common share from discontinued operations attributable to Walmart | — | — | — | % | 0.05 | 0.01 | 400.0 | % | |||||||||||||||||||||
Diluted net income per common share attributable to Walmart | $ | 1.15 | $ | 1.14 | 0.9 | % | $ | 3.51 | $ | 3.52 | (0.3 | )% | |||||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||
Basic | 3,229 | 3,257 | 3,231 | 3,279 | |||||||||||||||||||||||||
Diluted | 3,240 | 3,271 | 3,243 | 3,293 | |||||||||||||||||||||||||
Dividends declared per common share | $ | 1.92 | $ | 1.88 | |||||||||||||||||||||||||
Wal-Mart Stores, Inc. Condensed Consolidated Balance Sheets (Unaudited) |
||||||||||||||||
SUBJECT TO RECLASSIFICATION | ||||||||||||||||
(Dollars in millions) | October 31, | January 31, | October 31, | |||||||||||||
ASSETS | 2014 | 2014 | 2013 | |||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 6,718 | $ | 7,281 | $ | 8,736 | ||||||||||
Receivables, net | 6,091 | 6,677 | 6,206 | |||||||||||||
Inventories | 51,501 | 44,858 | 49,673 | |||||||||||||
Prepaid expenses and other | 1,531 | 1,909 | 2,160 | |||||||||||||
Current assets of discontinued operations | — | 460 | 367 | |||||||||||||
Total current assets | 65,841 | 61,185 | 67,142 | |||||||||||||
Property and equipment: | ||||||||||||||||
Property and equipment | 177,494 | 173,089 | 170,967 | |||||||||||||
Less accumulated depreciation | (62,519 | ) | (57,725 | ) | (56,313 | ) | ||||||||||
Property and equipment, net | 114,975 | 115,364 | 114,654 | |||||||||||||
Property under capital leases: | ||||||||||||||||
Property under capital leases | 5,632 | 5,589 | 5,668 | |||||||||||||
Less accumulated amortization | (3,115 | ) | (3,046 | ) | (3,095 | ) | ||||||||||
Property under capital leases, net | 2,517 | 2,543 | 2,573 | |||||||||||||
Goodwill | 18,888 | 19,510 | 19,729 | |||||||||||||
Other assets and deferred charges | 5,668 | 6,149 | 5,778 | |||||||||||||
Total assets | $ | 207,889 | $ | 204,751 | $ | 209,876 | ||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term borrowings | $ | 6,019 | $ | 7,670 | $ | 12,817 | ||||||||||
Accounts payable | 39,656 | 37,415 | 39,221 | |||||||||||||
Dividends payable | 1,553 | — | 1,573 | |||||||||||||
Accrued liabilities | 18,773 | 18,793 | 18,606 | |||||||||||||
Accrued income taxes | 383 | 966 | 255 | |||||||||||||
Long-term debt due within one year | 4,874 | 4,103 | 4,147 | |||||||||||||
Obligations under capital leases due within one year | 302 | 309 | 315 | |||||||||||||
Current liabilities of discontinued operations | — | 89 | 87 | |||||||||||||
Total current liabilities | 71,560 | 69,345 | 77,021 | |||||||||||||
Long-term debt | 41,720 | 41,771 | 41,702 | |||||||||||||
Long-term obligations under capital leases | 2,767 | 2,788 | 2,841 | |||||||||||||
Deferred income taxes and other | 7,789 | 8,017 | 8,298 | |||||||||||||
Redeemable noncontrolling interest | — | 1,491 | 1,492 | |||||||||||||
Commitments and contingencies | ||||||||||||||||
Equity: | ||||||||||||||||
Common stock | 323 | 323 | 324 | |||||||||||||
Capital in excess of par value | 2,223 | 2,362 | 2,364 | |||||||||||||
Retained earnings | 80,814 | 76,566 | 72,888 | |||||||||||||
Accumulated other comprehensive income (loss) | (4,251 | ) | (2,996 | ) | (2,183 | ) | ||||||||||
Total Walmart shareholders’ equity | 79,109 | 76,255 | 73,393 | |||||||||||||
Nonredeemable noncontrolling interest | 4,944 | 5,084 | 5,129 | |||||||||||||
Total equity | 84,053 | 81,339 | 78,522 | |||||||||||||
Total liabilities and equity | $ | 207,889 | $ | 204,751 | $ | 209,876 |
Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||||||
Nine Months Ended | |||||||||||
SUBJECT TO RECLASSIFICATION | October 31, | ||||||||||
(Dollars in millions) | 2014 | 2013 | |||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net income | $ | 11,911 | $ | 12,045 | |||||||
(Income) loss from discontinued operations, net of income taxes | (285 | ) | (38 | ) | |||||||
Income from continuing operations | 11,626 | 12,007 | |||||||||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 6,881 | 6,600 | |||||||||
Deferred income taxes | (233 | ) | 594 | ||||||||
Other operating activities | 592 | 465 | |||||||||
Changes in certain assets and liabilities: | |||||||||||
Receivables, net | 459 | 191 | |||||||||
Inventories | (6,929 | ) | (6,230 | ) | |||||||
Accounts payable | 3,068 | 2,089 | |||||||||
Accrued liabilities | 583 | (95 | ) | ||||||||
Accrued income taxes | (577 | ) | (2,301 | ) | |||||||
Net cash provided by operating activities | 15,470 | 13,320 | |||||||||
Cash flows from investing activities: | |||||||||||
Payments for property and equipment | (8,243 | ) | (9,506 | ) | |||||||
Proceeds from the disposal of property and equipment | 459 | 521 | |||||||||
Proceeds from disposal of certain operations | 671 | — | |||||||||
Other investing activities | (44 | ) | (156 | ) | |||||||
Net cash used in investing activities | (7,157 | ) | (9,141 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Net change in short-term borrowings | (1,843 | ) | 6,046 | ||||||||
Proceeds from issuance of long-term debt | 5,120 | 7,053 | |||||||||
Payments of long-term debt | (3,883 | ) | (4,943 | ) | |||||||
Dividends paid | (4,639 | ) | (4,625 | ) | |||||||
Purchase of Company stock | (1,015 | ) | (5,806 | ) | |||||||
Dividends paid to noncontrolling interest | (401 | ) | (365 | ) | |||||||
Purchase of noncontrolling interest | (1,804 | ) | (247 | ) | |||||||
Other financing activities | (393 | ) | (149 | ) | |||||||
Net cash used in financing activities | (8,858 | ) | (3,036 | ) | |||||||
Effect of exchange rates on cash and cash equivalents | (18 | ) | (188 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | (563 | ) | 955 | ||||||||
Cash and cash equivalents at beginning of year | 7,281 | 7,781 | |||||||||
Cash and cash equivalents at end of period | $ | 6,718 | $ | 8,736 |
Wal-Mart Stores, Inc. |
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 directly 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.
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 16.4 percent and 17.5 percent for the trailing 12 months ended October 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 |
|||||||||||||||
October 31, | |||||||||||||||
(Dollars in millions) | 2014 | 2013 | |||||||||||||
CALCULATION OF RETURN ON INVESTMENT | |||||||||||||||
Numerator | |||||||||||||||
Operating income | $ | 26,545 | $ | 28,105 | |||||||||||
+ Interest income | 103 | 146 | |||||||||||||
+ Depreciation and amortization | 9,151 | 8,775 | |||||||||||||
+ Rent | 2,898 | 2,667 | |||||||||||||
Adjusted operating income | $ | 38,697 | $ | 39,693 | |||||||||||
Denominator | |||||||||||||||
Average total assets of continuing operations1 |
$ | 208,699 | $ | 207,624 | |||||||||||
+Average accumulated depreciation and amortization1 | 62,521 | 56,533 | |||||||||||||
- Average accounts payable1 | 39,439 | 39,747 | |||||||||||||
- Average accrued liabilities1 | 18,690 | 18,571 | |||||||||||||
+ Rent x 8 | 23,184 | 21,336 | |||||||||||||
Average invested capital | $ | 236,275 | $ | 227,175 | |||||||||||
Return on investment (ROI) | 16.4 | % | 17.5 | % | |||||||||||
CALCULATION OF RETURN ON ASSETS | |||||||||||||||
Numerator | |||||||||||||||
Income from continuing operations | $ | 16,170 | $ | 17,870 | |||||||||||
Denominator | |||||||||||||||
Average total assets of continuing operations1 | $ | 208,699 | $ | 207,624 | |||||||||||
Return on assets (ROA) | 7.7 | % | 8.6 | % | |||||||||||
As of October 31, | |||||||||||||||
Certain Balance Sheet Data | 2014 | 2013 | 2012 | ||||||||||||
Total assets of continuing operations | $ | 207,889 | $ | 209,509 | $ | 205,738 | |||||||||
Accumulated depreciation and amortization | 65,634 | 59,408 | 53,658 | ||||||||||||
Accounts payable | 39,656 | 39,221 | 40,272 | ||||||||||||
Accrued liabilities | 18,773 | 18,606 | 18,536 | ||||||||||||
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.
Nine Months Ended | |||||||||||
October 31, | |||||||||||
(Dollars in millions) | 2014 | 2013 | |||||||||
Net cash provided by operating activities | $ | 15,470 | $ | 13,320 | |||||||
Payments for property and equipment | (8,243 | ) | (9,506 | ) | |||||||
Free cash flow | $ | 7,227 | $ | 3,814 | |||||||
Net cash used in investing activities1 | $ | (7,157 | ) | $ | (9,141 | ) | |||||
Net cash used in financing activities | $ | (8,858 | ) | $ | (3,036 | ) | |||||
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 nine months ended October 31, 2014.
Three Months Ended October 31, 2014 | Nine Months Ended October 31, 2014 | |||||||||||||||||||||||||||||||||
International | Consolidated | International | Consolidated | |||||||||||||||||||||||||||||||
(Dollars in millions) | 2014 | Percent Change | 2014 | Percent Change | 2014 | Percent Change | 2014 | Percent Change | ||||||||||||||||||||||||||
Net sales: | ||||||||||||||||||||||||||||||||||
As reported | $ | 33,659 | 1.7 | % | $ | 118,076 | 2.8 | % | $ | 99,955 | 1.1 | % | $ | 351,579 | 2.1 | % | ||||||||||||||||||
Currency exchange rate fluctuations1 | 396 | 396 | 2,668 | 2,668 | ||||||||||||||||||||||||||||||
34,055 | 118,472 | 102,623 | 354,247 | |||||||||||||||||||||||||||||||
Net sales from acquisitions | — | — | — | — | ||||||||||||||||||||||||||||||
Constant currency net sales | $ | 34,055 | 2.9 | % | $ | 118,472 | 3.1 | % | $ | 102,623 | 3.8 | % | $ | 354,247 | 2.9 | % | ||||||||||||||||||
Operating income: | ||||||||||||||||||||||||||||||||||
As reported | $ | 1,430 | 3.7 | % | $ | 6,265 | (0.7 | )% | $ | 4,121 | 5.1 | % | $ | 19,198 | (1.7 | )% | ||||||||||||||||||
Currency exchange rate fluctuations1 | 21 | 21 | 62 | 62 | ||||||||||||||||||||||||||||||
1,451 | 6,286 | 4,183 | 19,260 | |||||||||||||||||||||||||||||||
Operating income (loss) from acquisitions | — | — | — | — | ||||||||||||||||||||||||||||||
Constant currency operating income | $ | 1,451 | 5.2 | % | $ | 6,286 | (0.4 | )% | $ | 4,183 | 6.7 | % | $ | 19,260 | (1.4 | )% | ||||||||||||||||||
1 Excludes currency exchange rate fluctuations related to acquisitions until the acquisitions are included in both comparable periods. |
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Underlying EPS
The underlying diluted earnings per share from continuing operations
attributable to Walmart ("Underlying EPS") for the three months and the
fiscal year ended
We have calculated the Underlying EPS for the three months and the
fiscal year ended
Underlying EPS for the three months and the fiscal year ended
Underlying EPS | ||||||||||
Three Months Ended January 31, 2014 |
Fiscal Year Ended January 31, 2014 |
|||||||||
Diluted net income per common share: | ||||||||||
Underlying EPS | $ 1.60 | $ 5.11 | ||||||||
Adjustments to Underlying EPS | ||||||||||
Brazil Taxes | (0.06) | (0.06) | ||||||||
Brazil Employment Matters | (0.05) | (0.05) | ||||||||
Store Closures | (0.06) | (0.06) | ||||||||
Lease Matters | (0.03) | (0.03) | ||||||||
India Transaction | (0.05) | (0.05) | ||||||||
Sam's Restructuring | (0.01) | (0.01) | ||||||||
EPS | $1.34 | $ 4.85 | ||||||||
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
-
the comparable club sales of the company's
Sam's Club operating segment ("Sam's Club ") for the 13-week and 39-week periods endedOct. 31, 2014 andOct. 25, 2013 , the projected comparable club sales ofSam's Club for the 13 weeks endingJan. 30, 2015 and the comparable club sales ofSam's Club for the 13 weeks endedJan. 31, 2014 , in each case calculated by excludingSam'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 endedOct. 31, 2014 and the percentage increase in the net sales ofSam's Club for the three months endedOct. 31, 2014 over the net sales ofSam's Club for the three months endedOct. 31, 2013 in each case calculated by excludingSam's Club's fuel sales for the relevant period; and -
the segment operating income of
Sam's Club for the three and nine months endedOct. 31, 2014 and 2013, the percentage increase in the segment operating income ofSam's Club for the three months endedOct. 31, 2014 over the segment operating income ofSam's Club for the three months endedOct. 31, 2013 , and the percentage decrease in the segment operating income ofSam's Club for the nine months endedOct. 31, 2014 over the segment operating income ofSam's Club for the nine months endedOct. 31, 2013 , in each case calculated by excludingSam'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
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
Source:
Wal-Mart Stores, Inc.
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