10-QPeriod: Q3 FY2016

Walmart Inc. Quarterly Report for Q3 Ended Oct 31, 2015

Filed December 2, 2015For Securities:WMT

Summary

Walmart Inc. reported a decrease in net sales for the three and nine months ended October 31, 2015, compared to the prior year, largely impacted by unfavorable currency exchange rates and lower fuel prices. Despite the sales dip, the company saw an improvement in gross profit margin due to better margins in food and general merchandise in the U.S., partially offset by pharmacy reimbursement pressures. However, operating expenses increased, primarily driven by investments in associate wages and digital retail, leading to a decline in operating income and net income from continuing operations. Diluted earnings per share also saw a decrease. The company continued to invest in its strategic priorities, including capital expenditures for store expansion and technology, alongside significant investments in e-commerce and associate compensation and training.

Financial Highlights

49 data points
Beta

Revenue

$117.41B

25.5% Gross Margin

Net Income

$3.30B

2.8% Net Margin

EPS (Diluted)

$0.34

Total Assets

$205.14B

Cash & Equivalents

$6.99B

Free Cash Flow

$1.72B

Financial Statements
Beta
Revenue$117.41B
Cost of Revenue$87.45B
Gross Profit$29.96B
SG&A Expenses$24.25B
Operating Income$5.71B
Interest Expense$509.00M
Net Income$3.30B
EPS (Basic)$0.34
EPS (Diluted)$0.34
Shares Outstanding (Basic)9.63B
Shares Outstanding (Diluted)9.66B

Key Highlights

  • 1Consolidated net sales decreased by 1.3% for the three months and 0.5% for the nine months ended October 31, 2015, compared to the prior year, impacted by currency fluctuations and lower fuel prices.
  • 2Gross profit margin improved to 25.0% for the three months and 24.6% for the nine months, driven by better margins in Walmart U.S. and changes in merchandise mix internationally.
  • 3Operating income decreased by $551 million for the three months and $1.7 billion for the nine months, primarily due to increased operating expenses related to associate wages, hours, and digital retail investments.
  • 4Income from continuing operations attributable to Walmart decreased to $3.3 billion for the three months and $10.1 billion for the nine months.
  • 5Diluted EPS from continuing operations attributable to Walmart was $1.03 for the three months and $3.13 for the nine months, down from $1.15 and $3.46 respectively in the prior year.
  • 6Walmart U.S. segment showed net sales growth of 3.8% for the quarter and 4.0% for the nine months, driven by comparable store sales and square footage growth, but operating income declined.
  • 7Walmart International segment experienced an 11.4% decrease in net sales for the quarter and 9.2% for the nine months, largely due to adverse currency exchange rates.

Frequently Asked Questions

The primary drivers for the decrease in net sales were unfavorable currency exchange rate fluctuations, which negatively impacted international sales, and lower fuel prices, which reduced fuel sales across segments, particularly at Sam's Club.

Operating expenses as a percentage of net sales increased, primarily due to investments in the new associate wage structure, increased associate hours to enhance the customer experience, and continued investments in digital retail and information technology, especially within the Walmart U.S. segment.

The company is cooperating with ongoing investigations by the U.S. Department of Justice and the SEC into possible Foreign Corrupt Practices Act (FCPA) violations. The company has incurred and expects to continue to incur costs related to these investigations and related shareholder lawsuits, but cannot reasonably estimate the eventual loss or range of loss at this time.

Walmart is focused on balancing growth with returns. It continues to provide returns to shareholders through share repurchases and dividends. The company replaced its previous share repurchase program with a new $20.0 billion program and increased its annual dividend per share for fiscal year 2016.