10-QPeriod: Q2 FY2012

Walmart Inc. Quarterly Report for Q2 Ended Jul 31, 2011

Filed September 1, 2011For Securities:WMT

Summary

Walmart Inc. reported solid performance for the second quarter and first half of fiscal year 2012, demonstrating continued revenue growth driven by its international segment and Sam's Club, despite a slight dip in comparable store sales for Walmart U.S. Total revenues saw a notable increase, reflecting both organic growth and a positive currency translation benefit. The company managed its operating expenses effectively, leading to a modest increase in operating income. Profitability was further supported by a lower effective tax rate compared to the prior year. Key financial highlights include a strengthened balance sheet with increased total assets, partly due to strategic acquisitions like Massmart and Netto, which are expected to contribute to future growth. The company also continued its commitment to returning capital to shareholders through dividends and share repurchases, though the pace of repurchases moderated compared to the previous year. Management expressed confidence in its ability to fund operations and growth initiatives through a combination of operating cash flows and debt financing.

Financial Highlights

50 data points
Beta

Revenue

$108.64B

24.7% Gross Margin

Net Income

$3.80B

3.5% Net Margin

EPS (Diluted)

$0.36

Total Assets

$193.87B

Cash & Equivalents

$8.10B

Free Cash Flow

$4.45B

Financial Statements
Beta
Revenue$108.64B
Cost of Revenue$81.77B
Gross Profit$26.87B
SG&A Expenses$21.21B
Operating Income$6.38B
Interest Expense$525.00M
Net Income$3.80B
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)10.42B
Shares Outstanding (Diluted)10.46B

Key Highlights

  • 1Total revenues increased by 5.5% to $108.6 billion for the three months ended July 31, 2011, and by 4.9% to $212.1 billion for the six months ended July 31, 2011, compared to the prior year periods, driven by expansion and a favorable currency translation benefit.
  • 2Walmart International segment sales grew significantly by 16.2% (three months) and 13.9% (six months), outpacing U.S. and Sam's Club growth, and a substantial contributor to overall revenue increase.
  • 3Walmart U.S. experienced a slight increase in net sales (0.4% for three months, 0.5% for six months) but saw a decline in comparable store sales (-1.1% for three months, -1.0% for six months), indicating challenges in customer traffic.
  • 4Operating income saw a healthy increase of 3.1% for the three months and 3.0% for the six months, indicating effective cost management despite revenue growth.
  • 5The company completed significant acquisitions, including Massmart Holdings Limited (South Africa) and Netto Food Stores Limited (UK), which are expected to fuel future international growth.
  • 6Shareholders' equity increased to $72.8 billion at July 31, 2011, supported by retained earnings, although the debt-to-capitalization ratio increased slightly.
  • 7The company declared an annual dividend for fiscal 2012 of $1.46 per share, representing a 21% increase over fiscal 2011, signaling confidence and a commitment to returning value to shareholders.

Frequently Asked Questions

Walmart reported a 5.5% increase in total revenues for the three months ended July 31, 2011, reaching $108.6 billion, and a 4.9% increase for the six months ended July 31, 2011, reaching $212.1 billion. Growth was driven by continued expansion activities, a 5.6% increase in retail square footage year-over-year, and a significant currency translation benefit from its international operations, which contributed $2.3 billion to the three-month and $3.7 billion to the six-month revenue increases.

The Walmart International segment showed strong performance with net sales increasing by 16.2% (three months) and 13.9% (six months), largely due to sales growth and favorable currency translation. Sam's Club also demonstrated robust growth, with net sales up 9.5% (three months) and 9.4% (six months), benefiting from increased comparable club sales and fuel sales. In contrast, Walmart U.S. saw only a slight net sales increase (0.4% and 0.5% for the periods) and a decline in comparable store sales (-1.1% and -1.0% respectively), suggesting potential headwinds in customer traffic and sales at existing U.S. stores.

Walmart's liquidity remains strong, with cash and cash equivalents totaling $8.1 billion at July 31, 2011. Operating activities provided $9.7 billion in cash flow for the six months ended July 31, 2011. The company generated $4.0 billion in free cash flow for the same period. While the debt-to-capitalization ratio increased slightly to 45.7% from 43.2% in the prior year, largely due to increased long-term debt and shareholder returns, management expressed confidence in its ability to access debt markets and fund its operations and capital expenditures.

Walmart completed two significant acquisitions: Massmart Holdings Limited in sub-Saharan Africa and Netto Food Stores Limited in the UK. These acquisitions are expected to contribute to future growth. Regarding capital allocation, the company repurchased $3.54 billion in its stock during the first six months of fiscal 2012, a decrease from $7.11 billion in the prior year, and declared an annual dividend of $1.46 per share, a 21% increase, demonstrating a balanced approach to investing in growth and returning capital to shareholders.