10-QPeriod: Q2 FY2018

Walmart Inc. Quarterly Report for Q2 Ended Jul 31, 2017

Filed August 31, 2017For Securities:WMT

Summary

Walmart Inc.'s Q2 FY2018 report (ending July 30, 2017) shows a slight increase in total revenues, driven by comparable sales growth primarily in the U.S. However, net income and diluted EPS saw a decline compared to the prior year, largely influenced by a significant loss on extinguishment of debt ($0.8 billion) and increased operating expenses related to e-commerce and technology investments. While the U.S. segment demonstrated resilience with increased net sales and operating income, the International segment experienced a revenue dip, negatively impacted by currency fluctuations and divestitures. Sam's Club also saw a decline in operating income. The company continues its strategic capital allocation shift towards e-commerce and technology, while slowing new store growth.

Financial Highlights

50 data points
Beta

Revenue

$123.36B

25.8% Gross Margin

Net Income

$2.90B

2.4% Net Margin

EPS (Diluted)

$0.32

Total Assets

$201.57B

Cash & Equivalents

$6.47B

Free Cash Flow

$3.54B

Financial Statements
Beta
Revenue$123.36B
Cost of Revenue$91.52B
Gross Profit$31.83B
SG&A Expenses$25.86B
Operating Income$5.97B
Interest Expense$522.00M
Net Income$2.90B
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)9.02B
Shares Outstanding (Diluted)9.06B

Key Highlights

  • 1Total revenues increased by 2.1% to $123.4 billion for the quarter and 1.7% to $240.9 billion for the six-month period, primarily driven by net sales growth.
  • 2Diluted EPS decreased to $0.96 for the quarter and $1.96 for the six months, down from $1.21 and $2.18 respectively in the prior year.
  • 3A loss of $788 million on extinguishment of debt negatively impacted net income.
  • 4Walmart U.S. segment showed growth with net sales up 3.3% for the quarter and 1.7% comparable sales growth.
  • 5Walmart International segment net sales decreased 1.0% for the quarter, impacted by currency headwinds and business divestitures.
  • 6The company is strategically increasing investments in e-commerce and technology, which led to a rise in operating expenses as a percentage of net sales.
  • 7Free cash flow for the six-month period decreased to $6.9 billion from $10.3 billion in the prior year, attributed to increased incentive payments and timing of other payments.

Frequently Asked Questions

The decrease in net income and diluted EPS was primarily due to a $788 million loss on the extinguishment of debt, along with increased operating expenses related to ongoing investments in e-commerce and technology. Currency fluctuations and divestitures also impacted the performance of the International segment.

Walmart U.S. showed solid performance with increased net sales and operating income, driven by comparable sales growth. Walmart International experienced a decline in net sales due to adverse currency exchange rates and the divestiture of businesses. Sam's Club saw a decrease in operating income, impacted by several factors including asset impairment charges and increased operating expenses.

Walmart is shifting its capital allocation strategy, prioritizing investments in remodels, e-commerce, technology, and supply chain while reducing investment in new store and club openings. This aligns with their focus on enhancing the customer proposition in physical stores and integrating digital and physical shopping experiences.

Walmart is involved in ongoing investigations related to the Foreign Corrupt Practices Act (FCPA) with the DOJ and SEC, and faces employment claims in the UK (ASDA Equal Value Claims). While the company believes it has defenses and is cooperating with authorities, the ultimate outcome and potential financial impact remain uncertain and are being closely monitored.