10-QPeriod: Q3 FY2019

Walmart Inc. Quarterly Report for Q3 Ended Oct 31, 2018

Filed November 30, 2018For Securities:WMT

Summary

Walmart Inc. reported its financial results for the quarter and nine months ended October 31, 2018. For the third quarter, total revenues increased by 1.4% to $124.9 billion, while net income attributable to Walmart was $1.71 billion, a slight decrease from the prior year's $1.75 billion. Diluted earnings per share remained flat at $0.58. The nine-month period saw total revenues increase by 3.2% to $375.6 billion, but consolidated net income attributable to Walmart significantly decreased to $2.98 billion from $7.69 billion in the prior year, largely due to a substantial pre-tax loss of $4.8 billion from the sale of Walmart Brazil and an unrealized loss of $3.7 billion on the investment in JD.com. The company made significant strategic moves, including the acquisition of a majority stake in Flipkart for $16 billion, which is expected to impact net income in fiscal years 2019 and 2020. The proposed combination of Asda with J Sainsbury plc is progressing, subject to regulatory review. Despite a large pre-tax loss associated with the Walmart Brazil divestiture, the company maintained a strong operating performance in its core Walmart U.S. segment, which saw a 3.7% increase in net sales for the quarter. Investments in eCommerce, technology, and supply chain continue to be a focus for capital allocation.

Financial Highlights

50 data points
Beta

Revenue

$124.89B

25.4% Gross Margin

Net Income

$1.71B

1.4% Net Margin

EPS (Diluted)

$0.19

Total Assets

$226.58B

Cash & Equivalents

$9.20B

Free Cash Flow

$3.48B

Financial Statements
Beta
Revenue$124.89B
Cost of Revenue$93.12B
Gross Profit$31.78B
SG&A Expenses$26.79B
Operating Income$4.99B
Interest Expense$501.00M
Net Income$1.71B
EPS (Basic)$0.19
EPS (Diluted)$0.19
Shares Outstanding (Basic)8.77B
Shares Outstanding (Diluted)8.82B

Key Highlights

  • 1Total revenues for the three months ended October 31, 2018, rose 1.4% to $124.9 billion, while nine-month revenues increased 3.2% to $375.6 billion.
  • 2Consolidated net income attributable to Walmart for the nine months ended October 31, 2018, significantly decreased to $2.98 billion from $7.69 billion in the prior year, impacted by large divestiture and investment losses.
  • 3Diluted EPS for the quarter was flat at $0.58, but for the nine months it was $1.01, down from $2.54 in the prior year.
  • 4The company acquired approximately 77% of Flipkart for $16 billion, a significant strategic investment in e-commerce in India.
  • 5Walmart U.S. segment showed robust growth with net sales increasing 3.7% for the quarter, driven by comparable sales growth of 3.4%.
  • 6The company divested 80% of Walmart Brazil, resulting in a pre-tax net loss of approximately $4.8 billion for the nine-month period.
  • 7Capital expenditures shifted towards e-commerce, technology, and supply chain, with a reduced focus on new store openings.

Frequently Asked Questions

The substantial decrease in consolidated net income attributable to Walmart for the nine months ended October 31, 2018, was primarily due to a pre-tax net loss of approximately $4.8 billion related to the sale of a majority stake in Walmart Brazil, and an unrealized pre-tax loss of approximately $3.7 billion from the decrease in market value of the company's investment in JD.com.

The acquisition of Flipkart was completed in August 2018, and its results were not consolidated in these financial statements as of October 31, 2018. However, the transaction was financed using long-term debt, increasing the company's debt levels. Management expects the ongoing operations of Flipkart to negatively impact net income in fiscal years 2019 and 2020.

The Walmart U.S. segment demonstrated strong performance, with net sales increasing 3.7% for the quarter, driven by comparable sales growth of 3.4% from ticket and traffic growth. eCommerce sales contributed positively to comparable sales, indicating continued strength in the company's largest market.

Yes, Walmart is involved in several significant legal matters. These include the ASDA Equal Value Claims in the UK, the National Prescription Opiate Litigation in the US, and an ongoing Foreign Corrupt Practices Act (FCPA) investigation. While the company has recorded an accrual of $283 million related to the FCPA matters, the ultimate outcomes of these situations are uncertain and could potentially impact financial condition or results of operations, although management does not currently believe they will be material.