10-QPeriod: Q1 FY2020

Walmart Inc. Quarterly Report for Q1 Ended Apr 30, 2019

Filed June 7, 2019For Securities:WMT

Summary

Walmart Inc. reported its first-quarter results for the period ending April 30, 2019, showcasing a modest increase in total revenues to $123.9 billion, up 1.0% year-over-year. This growth was primarily driven by a 1.1% rise in net sales to $122.9 billion, supported by positive comparable sales across Walmart U.S. and Sam's Club segments, and the addition of Flipkart's sales. Despite topline growth, operating income saw a slight decrease to $4.9 billion from $5.2 billion in the prior year period, largely impacted by a significant increase in 'Other (gains) and losses,' which rose to a gain of $837 million compared to a loss of $1.8 billion in the prior year, mainly due to fair value changes in its investment in JD.com. Net income attributable to Walmart increased substantially to $3.8 billion, or $1.33 per diluted share, from $2.1 billion, or $0.72 per diluted share, driven by a favorable tax rate adjustment in the prior year period compared to the current period. The company also highlighted its strategic capital allocation, increasing investments in eCommerce, technology, and supply chain, while reducing new store openings.

Financial Highlights

50 data points
Beta

Revenue

$122.95B

24.3% Gross Margin

Net Income

$3.84B

3.1% Net Margin

EPS (Diluted)

$0.44

Total Assets

$234.54B

Cash & Equivalents

$9.29B

Free Cash Flow

$1.36B

Financial Statements
Beta
Revenue$122.95B
Cost of Revenue$93.03B
Gross Profit$29.91B
SG&A Expenses$25.95B
Operating Income$4.95B
Interest Expense$588.00M
Net Income$3.84B
EPS (Basic)$0.45
EPS (Diluted)$0.44
Shares Outstanding (Basic)8.61B
Shares Outstanding (Diluted)8.66B

Key Highlights

  • 1Total revenues increased by 1.0% to $123.9 billion, with net sales growing 1.1% to $122.9 billion.
  • 2Diluted net income per common share attributable to Walmart saw a significant increase to $1.33 from $0.72 in the prior year.
  • 3Walmart U.S. segment net sales grew by 3.3% to $80.3 billion, with comparable sales up 3.3%.
  • 4Walmart International segment net sales decreased by 4.9% to $28.8 billion, impacted by currency fluctuations and the sale of Walmart Brazil.
  • 5Sam's Club segment net sales increased by 1.5% to $13.8 billion, with comparable sales up 1.4%.
  • 6The company reported a substantial increase in 'Other (gains) and losses' primarily due to fair value changes in its investment in JD.com.
  • 7Capital expenditures are being increasingly allocated to eCommerce, technology, and supply chain, with a reduction in new store openings.

Frequently Asked Questions

The substantial increase in diluted net income per common share to $1.33 from $0.72 was primarily due to a year-over-year change in the effective income tax rate. While the current period's tax rate was 24.3%, the prior year period benefited from a favorable provisional amount related to the Tax Cuts and Jobs Act of 2017, leading to a lower effective tax rate of 19.3% in that period. The net income itself also saw a strong increase, partly due to the significant positive swing in 'Other (gains) and losses'.

The Walmart International segment experienced a 4.9% decrease in net sales, falling to $28.8 billion. This decline was primarily attributed to a $1.8 billion negative impact from currency exchange rate fluctuations and the sale of a majority stake in Walmart Brazil. However, the addition of Flipkart's net sales and positive comparable sales growth in most markets provided some offset.

Walmart is strategically shifting its capital expenditures. There's an increased allocation towards eCommerce, technology, and supply chain improvements, while the pace of new store and club openings is slowing down. This aligns with their focus on enhancing the in-store customer proposition and integrating digital and physical shopping experiences.

Walmart acknowledges ongoing significant legal proceedings, including the ASDA Equal Value Claims in the UK and the FCPA investigation. While the company believes it has substantial defenses and intends to defend these matters vigorously, it cautions that individual or aggregate adverse outcomes could potentially have a material impact on its financial condition or results of operations. The FCPA investigation led to an accrual of $283 million in fiscal 2018, and the company expects discussions regarding resolution to be nearing a conclusion.