10-QPeriod: Q3 FY2018

Walmart Inc. Quarterly Report for Q3 Ended Oct 31, 2017

Filed December 1, 2017For Securities:WMT

Summary

Walmart Inc.'s Q3 FY2018 (ended October 31, 2017) filing reveals a mixed financial performance. While net sales saw a 4.2% increase year-over-year to $122.1 billion for the quarter, driven by comparable sales growth and eCommerce acquisitions, overall profitability was impacted by significant one-time charges. The company reported a substantial loss on debt extinguishment amounting to $1.3 billion for the quarter and $2.1 billion for the nine months, significantly affecting net income and EPS. Additionally, operating expenses were higher due to a $283 million accrual for the ongoing FCPA investigation, along with impacts from hurricanes and an international market exit. These factors led to a decrease in operating income and net income compared to the prior year period. Despite these challenges, the company continued to invest in its strategic priorities, including eCommerce and technology, and returned capital to shareholders through dividends and share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$123.18B

25.7% Gross Margin

Net Income

$1.75B

1.4% Net Margin

EPS (Diluted)

$0.19

Total Assets

$209.41B

Cash & Equivalents

$7.03B

Free Cash Flow

$3.21B

Financial Statements
Beta
Revenue$123.18B
Cost of Revenue$91.55B
Gross Profit$31.63B
SG&A Expenses$26.87B
Operating Income$4.76B
Interest Expense$502.00M
Net Income$1.75B
EPS (Basic)$0.20
EPS (Diluted)$0.19
Shares Outstanding (Basic)8.94B
Shares Outstanding (Diluted)8.99B

Key Highlights

  • 1Net sales increased by 4.2% to $122.1 billion in the third quarter, driven by comparable sales growth (3.1% in the U.S.) and eCommerce acquisitions.
  • 2A significant loss of $1.34 billion on extinguishment of debt was recorded in the third quarter, contributing to a decline in net income.
  • 3Operating income decreased by 6.9% to $4.76 billion compared to the prior year's third quarter, impacted by a $283 million accrual for the FCPA investigation and other one-time charges.
  • 4Diluted EPS attributable to Walmart declined to $0.58 from $0.98 in the prior year's third quarter.
  • 5The company continues to strategically allocate capital, with increased spending on remodels, eCommerce, technology, and supply chain, while reducing new store openings.
  • 6Walmart returned $6.66 billion to shareholders through share repurchases and paid dividends totaling $2.04 per share annually for fiscal 2018.
  • 7The FCPA investigation has progressed, leading to a probable loss estimate and an aggregate accrual of $283 million.

Frequently Asked Questions

Walmart reported a 4.2% increase in total revenues for the three months ended October 31, 2017, reaching $123.2 billion. Net sales, which constitute the majority of total revenues, grew by 4.2% to $122.1 billion. This growth was primarily driven by comparable sales increases in the U.S. and contributions from recent eCommerce acquisitions.

Profitability was significantly impacted by several factors. A substantial loss of $1.34 billion on the extinguishment of debt was a major drag on net income. Additionally, operating expenses increased due to a $283 million accrual related to the FCPA investigation, costs associated with hurricanes, and investments in eCommerce and technology. These items led to a decrease in operating income and net income compared to the prior year's quarter.

Walmart continues to invest in its strategic priorities. Capital expenditures are being increasingly directed towards remodels, eCommerce, technology, and supply chain, while investments in new store openings are being reduced. This aligns with the company's strategy to integrate digital and physical shopping experiences and enhance its customer proposition.

The FCPA investigation has progressed, and Walmart has recorded an aggregate accrual of $283 million for an estimated probable loss. While discussions with the DOJ and SEC are ongoing, and the final resolution terms are uncertain, the company has incurred and expects to continue to incur costs related to these investigations. The company states it does not presently believe these matters will have a material adverse effect on its business, though uncertainties remain.