How fast is Wal-Mart growing, and what is driving it?

Net sales grew 16% to $191.3 billion in fiscal 2001. Roughly 5 points came from a domestic comparative store sales increase, and the rest came from new units, with 167 Supercenters and 41 Wal-Mart stores opened domestically and 77 international units added. International growth was also boosted by the full-year effect of the ASDA acquisition, which was completed in fiscal 2000.

Is profitability improving?

Yes. Net income increased 17% to $6.3 billion, and diluted EPS rose to $1.40 from $1.20. Gross margin improved slightly, by about 0.05%, helped by a $176 million LIFO inventory benefit. Management warns, however, that margins are likely to narrow as food, which carries lower margins, becomes a larger share of sales.

How strong is the balance sheet and how is the company financed?

Total assets reached $78.1 billion and shareholders' equity $31.3 billion. Long-term debt declined to $12.5 billion, and the debt-to-capitalization ratio of 41.6% is near the company's ~40% target. Current liabilities ($28.9 billion) exceed current assets ($26.6 billion), a structure common to high-turnover retailers that rely on commercial paper and $5 billion of committed credit lines. The company holds an excellent credit rating.

What are the main risks flagged in the filing?

Key risks include foreign currency fluctuations across its international operations, margin pressure from a mix shift toward food and international sales, competitive pricing pressure from ongoing price rollbacks, and rising distribution costs from higher fuel and payroll expenses. The filing also discloses environmental matters, including a potential EPA penalty of about $5.6 million related to storm water permits and a Connecticut state suit. The company states that it is not party to any material pending legal proceedings.

What is the outlook for fiscal 2002?

Management plans to open about 40 Wal-Mart stores, 170 to 180 Supercenters, 15 to 20 Neighborhood Markets, 40 to 50 SAM'S Clubs and 100 to 110 international units, adding roughly 40 million square feet of net retail space. Planned capital expenditures are about $9 billion, financed mainly through operating cash flow and commercial paper. The dividend was raised 17% to $0.28 per share.

WMT 10-K FY2001 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed April 10, 2001. Cited figures are marked; the original filing is the authoritative source.

Wal-Mart Stores, Inc. (WMT) reported fiscal 2001 (year ended January 31, 2001) net sales of $191.3 billion^a, up 16% from $165.0 billion in fiscal 2000, with a domestic comparative store sales increase of 5%.

Net income rose 17% to $6.295 billion^b, and diluted EPS reached $1.40 versus $1.20 in fiscal 2000. Growth was driven by domestic expansion (167 new Supercenters, 41 Wal-Mart stores, 12 Neighborhood Markets) and the first full year of international operations, including the ASDA acquisition in the UK. The Wal-Mart Stores segment remained the core profit engine, with operating income up 11.5% to $9.7 billion at an unchanged 8.0% margin.

The balance sheet expanded materially. Total assets grew to $78.1 billion^c from $70.3 billion, and shareholders' equity rose to $31.3 billion from $25.8 billion. Long-term debt declined to $12.5 billion from $13.7 billion, and the debt-to-total-capitalization ratio stood at 41.6% against a management target of about 40%.

Operating cash flow increased to $9.6 billion^d, comfortably funding $8.0 billion of capital expenditures and $1.07 billion of dividends. Return on shareholders' equity was 22.0%. Current liabilities exceeded current assets, producing a current ratio of 0.9, which is typical for a high-turnover retailer that relies on commercial paper.

Key risks include margin pressure from a rising mix of lower-margin food and international sales, management's expectation that gross margins will narrow, foreign currency exposure from its UK, German, Canadian and Mexican operations, and several environmental and regulatory matters, including a pending EPA penalty claim of about $5.6 million and a Connecticut state suit. For fiscal 2002, management plans roughly 40 new Wal-Mart stores, 170 to 180 Supercenters, 100 to 110 international units, and about $9 billion in capital expenditures, and it raised the dividend 17% to $0.28 per share.

02—Key points

Key Highlights

Net sales of $191.3 billion, up 16% year over year, supported by a 5% domestic comparative store sales increase and international expansion.
Net income of $6.295 billion, up 17% from $5.377 billion; diluted EPS of $1.40 versus $1.20 in fiscal 2000.
Wal-Mart Stores segment operating income rose 11.5% to $9.7 billion, with the segment operating margin holding at 8.0%.
International sales reached $32.1 billion (about 17% of total), driven largely by the ASDA acquisition, whose UK sales were $14.5 billion.
Operating cash flow of $9.6 billion funded $8.0 billion of capital expenditures and $1.07 billion of dividends, with $193 million spent on share repurchases.
Debt-to-total-capitalization ratio of 41.6%, slightly above the ~40% target; long-term debt fell to $12.5 billion from $13.7 billion.
Management expects gross margins to narrow as food's share of sales grows; fiscal 2002 plans call for about $9 billion of capex and a 17% dividend increase to $0.28 per share.

03—Questions

Frequently Asked Questions

How fast is Wal-Mart growing, and what is driving it?
Net sales grew 16% to $191.3 billion in fiscal 2001. Roughly 5 points came from a domestic comparative store sales increase, and the rest came from new units, with 167 Supercenters and 41 Wal-Mart stores opened domestically and 77 international units added. International growth was also boosted by the full-year effect of the ASDA acquisition, which was completed in fiscal 2000.
Is profitability improving?
Yes. Net income increased 17% to $6.3 billion, and diluted EPS rose to $1.40 from $1.20. Gross margin improved slightly, by about 0.05%, helped by a $176 million LIFO inventory benefit. Management warns, however, that margins are likely to narrow as food, which carries lower margins, becomes a larger share of sales.
How strong is the balance sheet and how is the company financed?
Total assets reached $78.1 billion and shareholders' equity $31.3 billion. Long-term debt declined to $12.5 billion, and the debt-to-capitalization ratio of 41.6% is near the company's ~40% target. Current liabilities ($28.9 billion) exceed current assets ($26.6 billion), a structure common to high-turnover retailers that rely on commercial paper and $5 billion of committed credit lines. The company holds an excellent credit rating.
What are the main risks flagged in the filing?
Key risks include foreign currency fluctuations across its international operations, margin pressure from a mix shift toward food and international sales, competitive pricing pressure from ongoing price rollbacks, and rising distribution costs from higher fuel and payroll expenses. The filing also discloses environmental matters, including a potential EPA penalty of about $5.6 million related to storm water permits and a Connecticut state suit. The company states that it is not party to any material pending legal proceedings.
What is the outlook for fiscal 2002?
Management plans to open about 40 Wal-Mart stores, 170 to 180 Supercenters, 15 to 20 Neighborhood Markets, 40 to 50 SAM'S Clubs and 100 to 110 international units, adding roughly 40 million square feet of net retail space. Planned capital expenditures are about $9 billion, financed mainly through operating cash flow and commercial paper. The dividend was raised 17% to $0.28 per share.

04—Continue

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