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Walmart Inc. Annual Report, Year Ended Jan 31, 2002

Filing Date
Filed April 15, 2002
Period End
January 31, 2002
Security
WMT
In the record · 2016–202610-K1110-Q328-K158

WMT filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 158 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 10-K filed April 15, 2002. Cited figures are marked; the original filing is the authoritative source.

Walmart closed fiscal 2002 (year ended January 31, 2002) with net sales of $217.8 billiona, up 14% from $191.3 billion, and net income of $6.671 billion, up 6.0% from $6.295 billion.

Diluted EPS was $1.49b, up from $1.40. Domestic comparative store sales rose 6%, driven by store expansion and a growing Supercenter base, which added 178 units in the year and brought the U.S. total to 1,066. Growth is increasingly driven by food, which carries lower margins: gross margin fell to 21.23% from 21.47%, and management expects further pressure as food's share of sales rises.

Operating, selling, general and administrative expenses rose to 16.61% of sales from 16.49%, reflecting higher utility, insurance, and associate costs. Operating income grew about 5% to $12.1 billionc, and the International segment, which includes ASDA, delivered the strongest segment operating profit growth of 31%. Balance sheet and cash flow remained solid.

Operating cash flow reached $10.3 billiond, against $8.4 billion in capital expenditures. The company issued $4.6 billion in long-term debt, repaid $3.5 billion, and repurchased $1.2 billion of stock while paying $1.2 billion in dividends. Debt to total capitalization was 38.4%, near management's roughly 40% target.

Return on shareholders' equity declined to 20.1% from 22.0%, largely because equity grew faster than earnings, and total assets rose to $83.5 billion. Foreign currency translation was a $472 million drag on equity, and the company terminated $6.7 billion of net investment hedges for $1.1 billion in cash. Looking ahead, Walmart plans about $10.2 billion in fiscal 2003 capital expenditures, including roughly 180 to 185 new Supercenters and 120 to 130 international units.

It also agreed to acquire 6.1% of Japan's Seiyu, with the option to reach 66.7%, and 35 Supermercado Amigo stores in Puerto Rico. Investors should watch margin compression from the food mix shift, rising insurance and utility costs, currency exposure in Mexico and Argentina, and the pending accounting change under SFAS 142, which is expected to add about $250 million to net income by no longer amortizing goodwill.

02—Key points

Key Highlights

  1. Net sales rose 14% to $217.8 billion, with domestic comparative store sales up 6%.
  2. Net income grew 6.0% to $6.671 billion; diluted EPS was $1.49 versus $1.40 in fiscal 2001.
  3. Gross margin declined to 21.23% from 21.47%, driven by a shift toward lower-margin food sales.
  4. The International segment posted the fastest operating income growth, up 31.1% to $1.46 billion, while Wal-Mart Stores segment operating income rose 6.0% to $10.3 billion.
  5. Operating cash flow was $10.3 billion, funding $8.4 billion of capital expenditures and $2.5 billion in dividends and buybacks.
  6. Store expansion continued: 178 new Supercenters, 33 Wal-Mart discount stores and 25 SAM'S Clubs were added, and the company plans about $10.2 billion in fiscal 2003 capex.
  7. Dividend increased 7% to $0.30 per share for fiscal 2003, extending a streak of annual increases since 1974.

03—Questions

Frequently Asked Questions

  1. Why did net income grow more slowly than sales in fiscal 2002?

    Sales grew 14%, but net income grew only 6.0%. Gross margin fell 0.24 percentage points as lower-margin food and grocery sales rose as a share of revenue and customers shifted to lower-margin products. Operating, selling, general and administrative expenses also rose to 16.61% of sales, driven by utility, insurance, and associate wage costs. Management expects gross margin pressure to continue as food's share of sales increases.

  2. How healthy is Walmart's balance sheet and liquidity?

    Liquidity is adequate. Operating cash flow of $10.3 billion covered capital spending and shareholder returns. Debt to total capitalization was 38.4%, close to the company's approximately 40% target. The company issued $4.6 billion of long-term debt during the year and holds committed credit lines of $3.8 billion. The current ratio was 1.0, which is typical for a retailer that relies on supplier financing through accounts payable.

  3. What is the outlook for international expansion?

    International is the fastest-growing segment, with operating income up 31.1% and sales up 10.5% to $35.5 billion, though currency translation reduced sales by $1.1 billion. The company plans 120 to 130 new international units in fiscal 2003 and intends to acquire 6.1% of Seiyu, Japan's retail chain, with an option to reach 66.7%. It also plans to buy 35 Supermercado Amigo stores in Puerto Rico. Risks include currency swings, weak economies such as Argentina's, and the cost of these acquisitions.

  4. Are there material legal or regulatory risks disclosed?

    The company says it is not party to any material pending litigation beyond routine matters. Two environmental matters are disclosed: a Connecticut suit alleging stormwater permit violations at 12 stores, which the company intends to vigorously defend, and a proposed settlement of about $200,000 with the U.S. Army Corps of Engineers over wetlands fill at a Pennsylvania Supercenter. Neither appears financially material relative to net income of $6.7 billion.

04—Continue

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