01—Abstract
Summary
Summary of the 10-K filed April 1, 2009. Cited figures are marked; the original filing is the authoritative source.
Wal-Mart Stores, Inc. (WMT) reported fiscal 2009 (year ended January 31, 2009) net sales of $401.2 billiona, up 7.2% year over year, with net income of $13.4 billion and diluted EPS of $3.39 (diluted EPS from continuing operations of $3.35).
Growth came from store expansion, a 3.5% increase in U.S. comparable store sales, and acquisitions, partly offset by a $2.3 billionb unfavorable foreign currency impact on the International segment. Walmart U.S. remains the core earnings engine, generating 63.7% of net sales and 82.3% of segment operating income. Consolidated operating income rose only 3.9%, lagging sales growth, because of higher utility and health benefit costs, a roughly $352 million pre-tax charge for settling 63 wage-and-hour class actions, and rising corporate transformation spending.
Management pointed to a gross margin improvement to 23.7% from lower shrink and markdowns. Cash generation was strong. Operating cash flow from continuing operations rose to $23.1 billion and free cash flow to $11.6 billionc, helped by lower capital expenditures as U.S. store openings slowed.
Management used the cash mainly for dividends ($3.7 billiond) and buybacks ($3.5 billion), and it raised the fiscal 2010 dividend 15% to $1.09 per share. The company suspended repurchases in October 2008 and resumed them in February 2009, with about $5.0 billion left on its $15.0 billion authorization. Long-term debt stood at $37.2 billion, the debt-to-capitalization ratio fell to 39.3%, and the company carries AA long-term and A-1+ commercial paper ratings from S&P.
Key risks for investors include the Dukes gender discrimination class action, pending wage-and-hour litigation, a federal and state criminal hazardous-waste investigation, currency and emerging-market exposure, and the acquisition of Chile's D&S, which adds goodwill and future put-option obligations. Management expects continued expansion internationally, with 550 to 600 new international units planned for fiscal 2010, and projects capital expenditures of $12.5 to $13.5 billion.
02—Key points
Key Highlights
- Net sales of $401.2 billion (up 7.2%); Walmart U.S. contributed $255.7 billion (63.7%), International $98.6 billion (24.6%), and Sam's Club $46.9 billion (11.7%).
- U.S. comparable store sales rose 3.5%, driven by higher customer traffic and larger average transactions; Walmart U.S. comps were up 3.2%.
- Operating income grew only 3.9% to $22.8 billion, lagging sales growth, due to utilities, health benefits, a $352 million wage-and-hour settlement charge, and transformation spending.
- Net income of $13.4 billion; diluted EPS of $3.39 (continuing operations $3.35), up from $3.13 in fiscal 2008.
- Free cash flow rose to $11.6 billion from $5.7 billion as capital expenditures fell to $11.5 billion from $14.9 billion.
- Dividend raised to $1.09 per share for fiscal 2010, a 15% increase; the company has raised its dividend every year since 1974.
- Share repurchases were suspended in October 2008 and resumed in February 2009, with approximately $5.0 billion remaining under the $15.0 billion program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Walmart Inc. kept $0.03.
- Revenue$404.25B100.0%
- Cost of revenue−$303.94B75.2%
- Gross profit$100.31B24.8%
- Operating costs−$77.55B19.2%
- Operating income$22.77B5.6%
- Interest, other & tax−$9.39B2.3%
- Net income$13.38B3.3%
Where FY2009 revenue went
$404.25B- Cost of revenue: $303.94B, 75% of revenue
- SG&A: $77.55B, 19% of revenue
- Net income: $13.38B, 3.3% of revenue
- Interest, other & tax: $9.39B, 2.3% of revenue
Kept 3.3% as net incomeNet income $13.38B · 3.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed April 1, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $404.25B$377.02B | +7.2% |
| Cost of Revenue | $303.94B$284.14B | +7.0% |
| Gross Profit | $100.31B$92.89B | +8.0% |
| SG&A Expenses | $77.55B$70.93B | +9.3% |
| Operating Income | $22.77B$21.95B | +3.7% |
| Interest Expense | $1.90B$1.86B | +1.8% |
| Net Income | $13.38B$12.73B | +5.1% |
| EPS (Basic) | $1.13$1.04 | +8.6% |
| EPS (Diluted) | $1.13$1.04 | +8.3% |
| Shares Outstanding (Basic) | 11.82B12.20B | −3.1% |
| Shares Outstanding (Diluted) | 11.85B12.22B | −3.0% |
05—Questions
Frequently Asked Questions
How did Walmart perform financially in fiscal 2009?
Net sales rose 7.2% to $401.2 billion and net income reached $13.4 billion, or $3.39 per diluted share. Operating income grew more slowly, up 3.9% to $22.8 billion, because of higher operating expenses, including a $352 million legal settlement charge. Gross margin improved to 23.7% from 23.5%, reflecting lower shrink and markdowns in the U.S.
Is Walmart's dividend safe, and how is it being funded?
The dividend appears well covered. Operating cash flow from continuing operations was $23.1 billion against dividends paid of $3.7 billion, and free cash flow was $11.6 billion. The board raised the fiscal 2010 annual dividend to $1.09 per share, and management plans to fund it primarily from operating cash flow.
What are the biggest legal and regulatory risks?
The most significant is Dukes v. Wal-Mart, a gender discrimination class action covering all past and present female U.S. employees; plaintiffs seek injunctive relief, back pay, and punitive damages, and the Ninth Circuit granted rehearing en banc in February 2009. The company also faces numerous wage-and-hour class actions, and a federal grand jury and several state and local authorities are investigating its handling of hazardous materials and waste. Management does not currently expect the environmental matters to have a material effect.
How is Walmart's international business performing, and what are the risks?
International sales grew 9.1% to $98.6 billion, but the segment's operating margin slipped to 5.0% from 5.2%. Foreign currency movements reduced International sales by $2.3 billion and operating income by $266 million. Expansion continued with the acquisition of a 74.6% stake in Chile's D&S and plans for 550 to 600 new international units in fiscal 2010, though that growth carries political, currency, and inflation risk in emerging markets.
Why is Walmart reducing U.S. store growth, and what does it mean for future results?
The company is deliberately slowing U.S. store openings, which lowered capital expenditures and boosted free cash flow in fiscal 2009. It opened 165 supercenters and 23 Neighborhood Markets, while converting 78 discount stores. Management expects new stores to reduce comparable sales by about 1.1% in fiscal 2009, with that drag declining over time as openings slow. Investors should watch whether lower expansion pressure is offset by stronger comps and margins.
06—Continue