10-QPeriod: Q2 FY2002

Walmart Inc. Quarterly Report for Q2 Ended Jul 31, 2001

Filed September 4, 2001For Securities:WMT

Summary

Walmart Inc. reported solid financial results for the quarter and six months ended July 31, 2001. Net sales demonstrated strong growth, up 14.5% for the quarter and 13.2% for the six-month period, driven by both domestic and international expansion and a comparable store sales increase of 5.7% and 4.7%, respectively. Despite this top-line growth, gross profit as a percentage of sales saw a slight decrease due to a shift towards lower-margin food items, price rollbacks, and increased competition. Operating expenses also rose slightly as a percentage of sales, influenced by higher utility, insurance, and wage costs. The company's balance sheet shows total assets growing to $81.6 billion, with a significant increase in property, plant, and equipment reflecting ongoing investments. While total liabilities also increased, working capital improved considerably from a deficit to a positive balance. Walmart continued to invest heavily in capital expenditures, totaling $3.9 billion for the six-month period, and also returned capital to shareholders through dividends and share repurchases. The company maintained a strong financial position, with its debt to total capitalization ratio slightly above its target but within comfortable limits, and expressed confidence in its ability to secure further long-term financing.

Key Highlights

  • 1Net sales increased by 14.5% year-over-year for the quarter and 13.2% for the six-month period, reaching $52.8 billion and $100.9 billion, respectively.
  • 2Comparable store sales showed healthy growth of 5.7% for the quarter and 4.7% for the six-month period.
  • 3Gross profit margin slightly decreased due to product mix changes (more food sales), price rollbacks, and competitive markdowns.
  • 4Operating expenses as a percentage of sales saw a modest increase, driven by higher utility, insurance, and associate wage costs.
  • 5Total assets grew to $81.6 billion, reflecting continued investment in property, plant, and equipment.
  • 6The company made significant capital expenditures of $3.9 billion during the first six months of the fiscal year.
  • 7Walmart issued $1.5 billion in new debt and continued its share repurchase program, indicating a commitment to returning value to shareholders while managing its capital structure.

Frequently Asked Questions

Sales growth was driven by a combination of aggressive domestic and international expansion programs and positive comparable store sales increases. The company's strategy of 'Everyday Low Prices' and efficient operations continued to attract customers.

The decline in gross profit margin was primarily attributed to a shift in consumer buying patterns towards lower-margin items, such as food. Additionally, the company's price rollback initiatives and increased competitive markdowns also contributed to the pressure on margins.

Walmart continued to invest heavily in capital expenditures, totaling $3.9 billion for the six-month period, primarily for property, plant, and equipment. The company financed these investments and other activities through a combination of operating cash flow, new long-term debt issuance ($1.5 billion in new notes), and by managing its commercial paper borrowings. They also have a substantial authorization for future share repurchases.

Walmart will adopt new accounting standards (FASB 141 and 142) for goodwill and other intangible assets starting in fiscal year 2003. This change will eliminate the amortization of goodwill and indefinite-lived intangibles, replacing it with annual impairment testing. The company anticipates this will increase net income by approximately $223 million per year, though the potential impact of impairment tests is yet to be determined.