01—Abstract
Summary
Summary of the 10-K filed March 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Walmart's Form 10-K for the fiscal year ended January 31, 2012 reports net sales of $443.9 billiona, up 5.9% year over year, with operating income of $26.6 billion (up 4.0%) and income from continuing operations attributable to Walmart of $15.8 billion, or $4.54 diluted EPS (vs. $4.18 in fiscal 2011).
Growth was driven by 5.3% added retail square footage, a 1.6% increase in U.S. calendar comparable sales (Walmart U.S. only +0.3%, Sam's Club +8.4%), currency translation benefits of $4.0 billionb, and $4.7 billion of sales from the Massmart and Netto acquisitions. Gross profit margin fell 33 basis points to 24.5% as the company invested in price, and return on investment declined to 18.6% from 19.2%, which management attributed to heavier capex, Global eCommerce spending, and higher inventories. Cash generation remained strong but slightly lower: operating cash flow was $24.3 billion and free cash flow was $10.7 billion, down from $10.9 billion, as capital expenditures of $13.5 billion grew faster than operating cash flow.
The company returned roughly $11.3 billionc to shareholders through $5.0 billion in dividends and $6.3 billion in buybacks, and it has $11.3 billion of remaining repurchase authorization. Total debt rose to about $46 billion and the debt-to-total-capitalization ratio increased to 42.8% from 42.1%, though the company maintained AA/Aa2 long-term ratings. Management guided to fiscal 2013 capex of $13–14 billion, an effective tax rate of 32.5%–33.5%, and a 9% dividend increase to $1.59 per share.
Investors should also note several risk items disclosed in the filing: the Dukes gender discrimination class action (following the Supreme Court's June 2011 decertification and subsequent refiling efforts), the Braun/Hummel wage-and-hour judgment (approximately $188 milliond, under appeal), an ongoing U.S. environmental criminal investigation under RCRA, and an internal FCPA investigation that the company has voluntarily disclosed to the DOJ and SEC. Management said it cannot estimate potential liability from the FCPA review but does not expect a material adverse effect.
02—Key points
Key Highlights
- Net sales rose 5.9% to $443.9 billion, led by International (+15.2% to $125.9B, including $4.7B from acquisitions and $4.0B of currency benefits) while Walmart U.S. grew only 1.5% to $264.2B.
- Operating income increased 4.0% to $26.6 billion, but gross profit margin declined 33 bps to 24.5% as the company reinvested in price across all three segments.
- U.S. calendar comparable sales grew 1.6%, but Walmart U.S. comps were only +0.3%, with growth driven by average ticket offsetting weaker traffic; Sam's Club comps rose 8.4%, helped by fuel.
- Diluted EPS from continuing operations was $4.54, up from $4.18 (+8.6%), and the Board approved a fiscal 2013 dividend of $1.59 per share, a 9% increase.
- Free cash flow fell slightly to $10.7 billion from $10.9 billion as capex rose to $13.5 billion; ROI declined to 18.6% from 19.2%.
- Shareholder returns totaled about $11.3 billion in fiscal 2012 ($5.0B dividends, $6.3B buybacks), with a new $15.0B repurchase program authorized in June 2011 and $11.3B remaining.
- Legal and regulatory exposure includes the Dukes class action, the Braun/Hummel wage judgment (~$188M under appeal), an RCRA-related criminal investigation, and a voluntarily disclosed internal FCPA investigation with no liability estimate.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Walmart Inc. kept $0.04.
- Revenue$443.42B100.0%
- Cost of revenue−$334.99B75.5%
- Gross profit$108.42B24.5%
- Operating costs−$81.93B18.5%
- Operating income$26.49B6.0%
- Interest, other & tax−$10.79B2.4%
- Net income$15.70B3.5%
Where FY2012 revenue went
$443.42B- Cost of revenue: $334.99B, 76% of revenue
- SG&A: $85.03B, 19% of revenue
- Net income: $15.70B, 3.5% of revenue
- Interest, other & tax: $10.79B, 2.4% of revenue
Kept 3.5% as net incomeNet income $15.70B · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 27, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $443.42B$418.95B | +5.8% |
| Cost of Revenue | $334.99B$314.95B | +6.4% |
| Gross Profit | $108.42B$104.01B | +4.2% |
| SG&A Expenses | $85.03B$81.36B | +4.5% |
| Operating Income | $26.49B$25.54B | +3.7% |
| Interest Expense | $2.03B$1.93B | +5.5% |
| Net Income | $15.70B$16.39B | −4.2% |
| EPS (Basic) | $1.51$1.49 | +1.3% |
| EPS (Diluted) | $1.51$1.49 | +1.1% |
| Shares Outstanding (Basic) | 10.38B10.97B | −5.4% |
| Shares Outstanding (Diluted) | 10.42B11.01B | −5.3% |
05—Questions
Frequently Asked Questions
What drove Walmart's revenue growth in fiscal 2012?
Net sales grew 5.9% to $443.9 billion. About 5.3 percentage points came from new retail square footage, including acquisitions, and roughly $4.7 billion came from the Massmart and Netto acquisitions. Currency translation added $4.0 billion, and U.S. comparable sales rose 1.6%. Walmart U.S. grew only 1.5%, while International grew 15.2%.
Is Walmart's profitability improving?
Operating income rose 4.0% to $26.6 billion, slightly slower than sales growth, and operating margin slipped to 6.0% from 6.1%. Gross margin fell 33 basis points to 24.5% because the company invested in price, and ROI declined to 18.6% from 19.2%. Management expects productivity gains to better offset price investments in future periods.
How is Walmart returning cash to shareholders, and can it afford it?
In fiscal 2012 the company paid $5.0 billion in dividends and repurchased $6.3 billion of stock, which together exceeded free cash flow of $10.7 billion. The gap was funded largely by higher short- and long-term borrowing. Debt-to-total-capitalization rose to 42.8%, but the company retained AA (S&P/Fitch) and Aa2 (Moody's) ratings, and it plans to raise the dividend to $1.59 per share in fiscal 2013.
What are the most significant legal and regulatory risks?
The Dukes gender discrimination class action was decertified by the Supreme Court in June 2011 and is being pursued in new complaints in California and Texas. The Braun/Hummel wage-and-hour case carries a judgment of roughly $188 million that the company is appealing. There is a U.S. criminal investigation into hazardous waste handling, and an internal FCPA investigation has been voluntarily disclosed to the DOJ and SEC. The company cannot estimate potential FCPA liability but does not expect a material adverse effect.
What is the outlook for fiscal 2013?
Management projects capital expenditures of $13.0–14.0 billion, including 30–33 million square feet of International growth and 15,000–16,000 thousand square feet in the U.S. It expects an effective tax rate of 32.5%–33.5% and aggregate dividend payments of about $5.4 billion. The company also aims to grow operating income faster than sales by continuing to leverage operating expenses.
06—Continue