10-QPeriod: Q2 FY2020

Walmart Inc. Quarterly Report for Q2 Ended Jul 31, 2019

Filed September 6, 2019For Securities:WMT

Summary

Walmart Inc. reported solid financial results for the six months ended July 31, 2019. Total revenues reached $254.3 billion, a modest increase from the prior year, driven by continued comparable sales growth in Walmart U.S. and Sam's Club, alongside the integration of Flipkart. Despite a decline in operating income due to significant one-time charges related to the sale of Walmart Brazil, the company demonstrated improved profitability on an adjusted basis. The company is strategically shifting capital towards e-commerce, technology, and supply chain improvements while moderating new store growth. Key financial metrics indicate operational resilience. While the Walmart International segment experienced a revenue dip influenced by currency fluctuations and the sale of its Brazil operations, Walmart U.S. showed robust performance with a 3.1% increase in net sales, supported by strong comparable sales growth. Sam's Club also contributed positively with an increase in net sales and operating income, benefiting from membership growth and strategic merchandise adjustments. The company maintained a strong commitment to returning capital to shareholders through dividends and share repurchases, supported by consistent free cash flow generation.

Financial Highlights

50 data points
Beta

Revenue

$129.39B

24.3% Gross Margin

Net Income

$3.61B

2.8% Net Margin

EPS (Diluted)

$0.42

Total Assets

$234.86B

Cash & Equivalents

$9.32B

Free Cash Flow

$4.96B

Financial Statements
Beta
Revenue$129.39B
Cost of Revenue$97.92B
Gross Profit$31.46B
SG&A Expenses$26.87B
Operating Income$5.58B
Interest Expense$558.00M
Net Income$3.61B
EPS (Basic)$0.42
EPS (Diluted)$0.42
Shares Outstanding (Basic)8.56B
Shares Outstanding (Diluted)8.61B

Key Highlights

  • 1Total revenues for the six months ended July 31, 2019, were $254.3 billion, a 1.4% increase compared to the prior year.
  • 2Walmart U.S. segment net sales increased by 3.1% to $165.5 billion for the six months ended July 31, 2019, driven by comparable sales growth of 2.9% and contributions from e-commerce.
  • 3The company recorded a significant pre-tax loss of $4.8 billion related to the sale of a majority stake in Walmart Brazil, impacting reported net income.
  • 4Consolidated net income attributable to Walmart for the six months ended July 31, 2019, was $7.45 billion, a substantial increase from $1.27 billion in the prior year, largely due to the absence of the prior year's large loss from the Walmart Brazil divestiture.
  • 5Capital expenditures for the six months ended July 31, 2019, totaled $4.87 billion, with a strategic focus on e-commerce, technology, supply chain, and store remodels.
  • 6Free cash flow for the six months ended July 31, 2019, was $6.3 billion, a slight decrease from $6.8 billion in the prior year, mainly due to increased capital expenditures.
  • 7The company resolved FCPA investigations with the DOJ and SEC, paying $283 million in penalties, disgorgement, and interest.

Frequently Asked Questions

For the six months ended July 31, 2019, Walmart reported a consolidated net income attributable to Walmart of $7.45 billion, a significant increase from $1.27 billion in the same period last year. This improvement was largely driven by the absence of the substantial pre-tax loss of $4.8 billion related to the sale of the majority stake in Walmart Brazil, which occurred in the prior year.

The acquisition of 81% of Flipkart in August 2018 has been integrated into Walmart's International segment. While it contributed to total revenues, the segment's gross profit rate decreased partly due to the inclusion of Flipkart, as well as strategic price investments. The acquisition significantly increased goodwill on Walmart's balance sheet.

Walmart is strategically allocating capital towards e-commerce, technology, supply chain improvements, and store remodels, while slowing down the growth of new store openings. For the six months ended July 31, 2019, capital expenditures totaled $4.87 billion, with a significant portion directed towards these growth-oriented initiatives.

Walmart is involved in several significant legal proceedings. These include ongoing 'Equal Value' claims in the UK against its subsidiary ASDA, the National Prescription Opiate Litigation in the U.S., and previously disclosed FCPA investigations that were resolved with the DOJ and SEC in June 2019 for $283 million. The company is actively defending these claims and has established accruals where appropriate.