10-QPeriod: Q1 FY2019

Walmart Inc. Quarterly Report for Q1 Ended Apr 30, 2018

Filed June 4, 2018For Securities:WMT

Summary

Walmart Inc. reported total revenues of $122.69 billion for the first quarter of fiscal year 2019, an increase of 4.4% year-over-year, driven by strong comparable sales growth across its segments and a positive impact from currency exchange rate fluctuations. Despite top-line growth, consolidated net income saw a significant decrease of $0.9 billion to $2.28 billion, or $0.72 per diluted share, primarily due to a substantial unrealized loss of $1.8 billion related to a decline in the market value of its investment in JD.com. The company is actively managing its portfolio through strategic actions, including the announced combination of Asda with J Sainsbury plc, the acquisition of Flipkart, and the divestiture of Walmart Brazil, which will shape its future financial performance and geographic footprint. Operating income for the quarter was $5.15 billion, a slight decrease of 1.3% year-over-year, with operating income as a percentage of net sales declining to 4.2% from 4.5%. This was attributed to strategic price investments, increased investments in eCommerce and technology, and charges related to divestitures. The company's effective income tax rate significantly decreased to 19.3% from 32.6% in the prior year, largely due to the impact of the Tax Cuts and Jobs Act of 2017. Walmart continues to prioritize capital allocation towards store remodels, eCommerce, technology, and supply chain, reflecting its commitment to an omni-channel strategy.

Financial Highlights

50 data points
Beta

Revenue

$122.69B

25.3% Gross Margin

Net Income

$2.13B

1.7% Net Margin

EPS (Diluted)

$0.24

Total Assets

$204.93B

Cash & Equivalents

$8.15B

Free Cash Flow

$3.34B

Financial Statements
Beta
Revenue$122.69B
Cost of Revenue$91.71B
Gross Profit$30.98B
SG&A Expenses$25.83B
Operating Income$5.15B
Interest Expense$437.00M
Net Income$2.13B
EPS (Basic)$0.24
EPS (Diluted)$0.24
Shares Outstanding (Basic)8.85B
Shares Outstanding (Diluted)8.90B

Key Highlights

  • 1Total revenues increased by 4.4% to $122.69 billion, driven by comparable sales growth and favorable currency exchange rates.
  • 2Consolidated net income decreased by $0.9 billion to $2.28 billion, primarily due to an $1.8 billion unrealized loss on the investment in JD.com.
  • 3Diluted earnings per share declined to $0.72 from $1.00 in the prior year.
  • 4Operating income slightly decreased by 1.3% to $5.15 billion, with operating margin contracting by 30 basis points to 4.2%.
  • 5The effective income tax rate significantly decreased to 19.3% due to the Tax Cuts and Jobs Act of 2017.
  • 6Strategic portfolio actions include the announced combination of Asda with J Sainsbury, the acquisition of Flipkart, and the divestiture of Walmart Brazil.
  • 7Capital expenditures reflect a continued focus on eCommerce, technology, and supply chain investments.

Frequently Asked Questions

The primary driver for the decrease in consolidated net income was a substantial unrealized loss of $1.8 billion recognized during the quarter, stemming from a decline in the market value of Walmart's investment in JD.com. While revenues grew, this investment-related loss significantly impacted the net income.

Walmart is actively reshaping its business through significant transactions. The announced combination of its UK subsidiary Asda with J Sainsbury plc, the acquisition of Indian eCommerce giant Flipkart, and the divestiture of its Brazil operations are key strategic moves. These actions are intended to optimize its global footprint, focus on core retail capabilities, and drive long-term growth, though they also involve complex regulatory reviews and potential one-time gains or losses.

The Tax Cuts and Jobs Act of 2017 has had a material positive impact, significantly reducing Walmart's effective income tax rate for the quarter to 19.3% from 32.6% in the prior year. This was due to the tax reform and related accounting standards updates, which are expected to continue influencing the company's tax expenses.

Walmart is strategically shifting its capital allocation. While overall capital expenditures remained relatively stable, there is a clear pivot towards investments in store remodels, eCommerce capabilities, technology, and supply chain infrastructure, with a reduced emphasis on opening new stores and clubs. This aligns with the company's strategy to integrate its physical and digital shopping experiences.