01—Abstract
Summary
Summary of the 10-K filed March 30, 2011. Cited figures are marked; the original filing is the authoritative source.
Walmart's fiscal 2011 (year ended January 31, 2011) showed steady top-line growth with net sales rising 3.4% to $419.0 billiona, helped by $4.5 billion of favorable currency effects and 3.4% growth in retail square footage.
Profitability improved faster than sales: operating income grew 6.4% to $25.5 billionb, operating expenses grew only 1.7%, and diluted EPS from continuing operations reached $4.18, up from $3.73. The core U.S. business was the soft spot. Walmart U.S. comparable store sales fell 1.5% on weaker customer traffic, and total U.S. comparable sales declined 0.6%.
Growth came mainly from Walmart International, where net sales rose 12.1% to $109.2 billionc and operating income rose 14.4%, and from Sam's Club, where comparable club sales grew 3.9%. Capital allocation was aggressive. Management repurchased $14.8 billion of stock and paid $4.4 billion in dividends, with the board approving a 21% dividend increase to $1.46 per share for fiscal 2012.
Free cash flow fell to $10.9 billiond from $14.1 billion because of heavy inventory investment, and the debt-to-total-capitalization ratio rose to 42.1% from 37.0%. Walmart still holds AA-range ratings from S&P, Fitch and DBRS and Aa2 from Moody's. Forward-looking items include a fiscal 2012 capex plan of $12.5–13.5 billion, pending acquisitions of Netto and a 51% stake in Massmart, and a $1.2 billion charge expected in fiscal 2012 relating to ASDA's pension plan.
The main investor risks are the U.S. traffic decline, ongoing litigation (notably the Dukes gender discrimination class action, which the Supreme Court agreed to hear and heard argument on March 29, 2011, and which the company says it cannot reasonably estimate), currency exposure, and rising leverage funding buybacks. The filing also discloses a criminal investigation under hazardous materials law that management does not expect to be material, and the March 11, 2011 Japan earthquake, whose damage management could not yet estimate.
02—Key points
Key Highlights
- Net sales rose 3.4% to $418.95 billion; operating income rose 6.4% to $25.5 billion, so profit grew faster than sales.
- Walmart U.S. comparable store sales fell 1.5% and total U.S. comparable sales fell 0.6%, driven by lower customer traffic, while Walmart U.S. net sales were essentially flat at $260.3 billion.
- Walmart International was the growth engine: net sales up 12.1% to $109.2 billion, operating income up 14.4% to $5.6 billion, with a $4.5 billion currency tailwind.
- Diluted EPS from continuing operations was $4.18 versus $3.73 a year earlier; ROI was 19.2%, and ROA was 9.1%.
- Share repurchases of $14.8 billion and dividends of $4.4 billion absorbed most of the $10.9 billion free cash flow; the board approved a $15 billion buyback program and a 21% dividend increase to $1.46 for fiscal 2012.
- Long-term debt rose to $40.7 billion (total debt $45.1 billion), pushing the debt-to-capitalization ratio to 42.1% from 37.0%, while ratings remained AA-range at S&P, Fitch and DBRS and Aa2 at Moody's.
- Key legal risk: the Dukes gender discrimination class action is before the U.S. Supreme Court (argued March 29, 2011), and the company says it cannot estimate a possible loss.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Walmart Inc. kept $0.04.
- Revenue$418.95B100.0%
- Cost of revenue−$314.95B75.2%
- Gross profit$104.01B24.8%
- Operating costs−$78.46B18.7%
- Operating income$25.54B6.1%
- Interest, other & tax−$9.15B2.2%
- Net income$16.39B3.9%
Where FY2011 revenue went
$418.95B- Cost of revenue: $314.95B, 75% of revenue
- SG&A: $81.36B, 19% of revenue
- Net income: $16.39B, 3.9% of revenue
- Interest, other & tax: $9.15B, 2.2% of revenue
Kept 3.9% as net incomeNet income $16.39B · 3.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed March 30, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $418.95B$405.13B | +3.4% |
| Cost of Revenue | $314.95B$304.11B | +3.6% |
| Gross Profit | $104.01B$101.03B | +2.9% |
| SG&A Expenses | $81.36B$79.98B | +1.7% |
| Operating Income | $25.54B$24.00B | +6.4% |
| Interest Expense | $1.93B$1.79B | +7.9% |
| Net Income | $16.39B$14.37B | +14.1% |
| EPS (Basic) | $1.49$1.24 | +20.4% |
| EPS (Diluted) | $1.49$1.24 | +20.5% |
| Shares Outstanding (Basic) | 10.97B11.60B | −5.4% |
| Shares Outstanding (Diluted) | 11.01B11.63B | −5.3% |
05—Questions
Frequently Asked Questions
How well did Walmart perform in fiscal 2011 overall?
Walmart grew net sales 3.4% to $419.0 billion and operating income 6.4% to $25.5 billion. Operating expenses grew more slowly than sales (1.7%), which expanded margins: operating income was 6.1% of sales, up from 5.9%. Income from continuing operations rose to $16.0 billion, and diluted EPS from continuing operations was $4.18, up 12% from $3.73.
Why did U.S. same-store sales decline, and is it a concern?
Total U.S. comparable store and club sales fell 0.6%, and Walmart U.S. comparable sales fell 1.5%, mainly because of slower customer traffic. Management estimates that opening new stores reduced comparable sales by about 0.8%. The decline matters because Walmart U.S. is 62% of net sales, so weak same-store trends weigh heavily on the consolidated growth outlook, even though new square footage continued to add sales.
How is Walmart using its cash, and does it affect the balance sheet?
Walmart spent $14.8 billion on buybacks and $4.4 billion on dividends in fiscal 2011, against $10.9 billion of free cash flow after $12.7 billion of capital expenditures. The gap was funded by new long-term debt ($11.4 billion issued). Total debt rose to $45.1 billion, and the debt-to-total-capitalization ratio increased to 42.1%. Management still rates its debt AA-range, and it plans fiscal 2012 capex of $12.5–13.5 billion and dividends of about $5.1 billion.
What are the main legal and regulatory risks disclosed?
The most significant is the Dukes v. Wal-Mart gender discrimination class action, which covers current and former female U.S. employees and seeks back pay, front pay and punitive damages; the Supreme Court heard argument on March 29, 2011. Walmart also faces wage-and-hour class actions (including a roughly $188 million Braun/Hummel judgment under appeal) and a criminal investigation into hazardous waste handling. Management does not expect the environmental matters to be material, but it says it cannot reasonably estimate the Dukes exposure.
06—Continue