01—Abstract
Summary
Summary of the 10-K filed March 30, 2010. Cited figures are marked; the original filing is the authoritative source.
Walmart's fiscal 2010 10-K (fiscal year ended January 31, 2010) shows a company that grew operating income faster than sales in a difficult year.
Net sales rose 1.0% to $405.0 billiona, held back by a $9.8 billion unfavorable currency impact in the International segment and price deflation in Walmart U.S. Operating income increased 5.1% to $23.95 billion, and diluted EPS from continuing operations rose to $3.72 from $3.35. Management's stated objective of growing operating income faster than sales was met at the consolidated level, though Sam's Club fell short, largely due to a $174 million restructuring charge tied to closing 10 clubs. U.S. comparable store sales declined 0.8%, with management attributing the drop to deflation in certain merchandise categories and lower fuel prices, even though customer traffic increased.
Cash generation was strong: operating cash flow reached $26.2 billionb and free cash flow was $14.1 billion, up from $11.6 billion. Management used that cash for $7.3 billion of share repurchases, $4.2 billion of dividends (a $1.09 per share payout), and roughly $12.2 billion of capital expenditures. The board also approved a fiscal 2011 dividend increase to $1.21 per share, an 11% rise.
Return on investment held at 19.3%c. For investors, the key items to watch are the risk factors and disclosures around litigation and the debt profile. The filing flags the Dukes gender discrimination class action, wage-and-hour class actions, and a federal hazardous-materials criminal investigation.
Management says none of the environmental matters is expected to have a material effect, but it cannot estimate the Dukes exposure. Total long-term debt was $37.3 billiond, and the company holds AA long-term credit ratings from S&P, Fitch and DBRS (Aa2 from Moody's). Guidance for fiscal 2011 calls for $13–15 billion in capital expenditures and 150–170 new U.S. units, plus more than 600 new International units.
02—Key points
Key Highlights
- Net sales rose 1.0% to $405.0 billion, with International contributing 24.7% and Walmart U.S. 63.8% of the total
- Operating income grew 5.1% to $23.95 billion, meeting the company's goal of growing operating income faster than net sales
- Diluted EPS from continuing operations was $3.72, up from $3.35 in fiscal 2009
- Free cash flow reached $14.1 billion, up from $11.6 billion, supported by $26.2 billion in operating cash flow
- U.S. comparable store sales fell 0.8%, driven by merchandise deflation and lower fuel prices despite higher customer traffic
- Returned capital through $7.3 billion in share repurchases and $4.2 billion in dividends; the fiscal 2011 dividend was raised 11% to $1.21 per share
- Long-term debt of $37.3 billion carries AA-level ratings from major agencies, and the debt-to-capitalization ratio improved to 36.9%
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Walmart Inc. kept $0.04.
- Revenue$405.13B100.0%
- Cost of revenue−$304.11B75.1%
- Gross profit$101.03B24.9%
- Operating costs−$77.02B19.0%
- Operating income$24.00B5.9%
- Interest, other & tax−$9.63B2.4%
- Net income$14.37B3.5%
Where FY2010 revenue went
$405.13B- Cost of revenue: $304.11B, 75% of revenue
- SG&A: $79.98B, 20% of revenue
- Net income: $14.37B, 3.5% of revenue
- Interest, other & tax: $9.63B, 2.4% of revenue
Kept 3.5% as net incomeNet income $14.37B · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed March 30, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $405.13B$404.25B | +0.2% |
| Cost of Revenue | $304.11B$303.94B | +0.1% |
| Gross Profit | $101.03B$100.31B | +0.7% |
| SG&A Expenses | $79.98B$77.55B | +3.1% |
| Operating Income | $24.00B$22.77B | +5.4% |
| Interest Expense | $1.79B$1.90B | −5.7% |
| Net Income | $14.37B$13.38B | +7.4% |
| EPS (Basic) | $1.24$1.13 | +9.4% |
| EPS (Diluted) | $1.24$1.13 | +9.4% |
| Shares Outstanding (Basic) | 11.60B11.82B | −1.9% |
| Shares Outstanding (Diluted) | 11.63B11.85B | −1.9% |
05—Questions
Frequently Asked Questions
How did Walmart perform in fiscal 2010 compared with fiscal 2009?
Net sales increased 1.0% to $405.0 billion and operating income increased 5.1% to $23.95 billion. Diluted EPS from continuing operations rose to $3.72 from $3.35. Results were supported by higher customer traffic and the January 2009 acquisition of D&S in Chile, partly offset by a $9.8 billion currency headwind in the International segment.
Why did U.S. comparable store sales decline in fiscal 2010?
U.S. comparable store sales fell 0.8%. Management attributed the decline to price deflation in certain merchandise categories and lower fuel prices, which reduced average transaction size. Customer traffic actually increased, and management estimated that new store openings reduced comparable sales by about 0.6%.
What are the most significant legal and regulatory risks disclosed?
The most prominent risk is the Dukes class action alleging gender discrimination in pay and promotions, which could result in material liability, and the company cannot estimate the possible loss. Other exposures include wage-and-hour class actions and a federal criminal investigation under RCRA and related statutes into hazardous-materials handling. Management does not expect the environmental matters to have a material effect on financial condition or results of operations.
How strong is Walmart's balance sheet and liquidity position?
The company held $7.9 billion in cash and had long-term debt of $37.3 billion, with a weighted average interest rate of about 4.5%. Its debt-to-total-capitalization ratio fell to 36.9% from 39.3%. It had roughly $11.2 billion in undrawn credit lines and letters of credit, and it reported a working capital deficit of $7.2 billion, which management describes as a normal result of its efficient cash use.
What is the outlook for fiscal 2011 capital spending and shareholder returns?
Capital expenditures are projected at $13.0 to $15.0 billion, mainly funded from operating cash flow. The plan includes 150 to 170 new U.S. units and more than 600 International units. The board raised the fiscal 2011 dividend to $1.21 per share, and the company still has about $9.2 billion remaining under its $15.0 billion share repurchase authorization.
06—Continue