10-QPeriod: Q2 FY2021

Walmart Inc. Quarterly Report for Q2 Ended Jul 31, 2020

Filed September 2, 2020For Securities:WMT

Summary

Walmart Inc. reported strong performance for the quarter and six months ended July 31, 2020, driven by increased consumer demand amidst the COVID-19 pandemic. Total revenues saw a significant increase, with net sales rising 5.6% for the quarter and 7.1% for the six-month period, largely fueled by robust comparable sales growth in Walmart U.S. and Sam's Club. The company also saw accelerated eCommerce sales, highlighting the success of its omni-channel initiatives. Despite increased operating expenses related to COVID-19 safety measures and associate support, the company managed to improve its gross profit margin, particularly in the second quarter. Net income attributable to Walmart showed a substantial increase, with diluted EPS rising to $2.27 for the quarter and $3.67 for the six-month period, compared to $1.26 and $2.59 in the prior year, respectively. The company also reported a significant increase in operating cash flow and free cash flow, demonstrating strong operational execution and financial flexibility in a challenging economic environment. Walmart's balance sheet remained solid, with a notable increase in cash and cash equivalents, positioning it well to navigate ongoing uncertainties.

Financial Highlights

49 data points
Beta

Revenue

$136.82B

24.9% Gross Margin

Net Income

$6.44B

4.7% Net Margin

EPS (Diluted)

$0.76

Total Assets

$237.38B

Cash & Equivalents

$16.91B

Free Cash Flow

$10.12B

Financial Statements
Beta
Revenue$136.82B
Cost of Revenue$102.69B
Gross Profit$34.13B
SG&A Expenses$28.99B
Operating Income$6.06B
Interest Expense$577.00M
Net Income$6.44B
EPS (Basic)$0.76
EPS (Diluted)$0.76
Shares Outstanding (Basic)8.50B
Shares Outstanding (Diluted)8.54B

Key Highlights

  • 1Total revenues increased by 5.6% to $137.7 billion for the three months ended July 31, 2020, and by 7.1% to $272.4 billion for the six months ended July 31, 2020, compared to the prior year periods.
  • 2Consolidated net income attributable to Walmart surged to $6.48 billion for the quarter and $10.47 billion for the six months, up from $3.61 billion and $7.45 billion in the prior year, respectively.
  • 3Diluted net income per common share attributable to Walmart was $2.27 for the three months and $3.67 for the six months ended July 31, 2020, significant increases from the prior year's $1.26 and $2.59.
  • 4Walmart U.S. segment comparable sales increased by 9.7% for the quarter and 10.1% for the six months, driven by increased demand related to the COVID-19 pandemic.
  • 5eCommerce sales showed accelerated growth, positively contributing to comparable sales in Walmart U.S. and Sam's Club.
  • 6Net cash provided by operating activities was $19.0 billion for the six months ended July 31, 2020, a substantial increase from $11.2 billion in the prior year.
  • 7Free cash flow generation was strong, with $15.4 billion for the six months ended July 31, 2020, up from $6.3 billion in the prior year, partly due to reduced capital expenditures.
  • 8The company maintained a strong liquidity position with $16.9 billion in cash and cash equivalents as of July 31, 2020.

Frequently Asked Questions

The COVID-19 pandemic significantly boosted Walmart's financial results. Increased consumer demand, particularly for essentials and general merchandise, drove substantial growth in net sales and comparable store sales, especially in the Walmart U.S. segment. The pandemic also accelerated eCommerce adoption and omni-channel initiatives. However, the company incurred significant incremental operating expenses related to associate safety, customer safety, and support measures, which impacted profitability.

Walmart U.S. was the primary growth driver, with strong comparable sales increases fueled by pandemic-related demand. Walmart International experienced a net sales decrease primarily due to unfavorable currency exchange rates, although comparable sales growth was seen in most markets. Sam's Club also showed robust comparable sales growth, benefiting from increased member transactions and average ticket.

While Walmart incurred substantial incremental costs due to the pandemic, it focused on operating discipline. The gross profit margin improved for the quarter, driven by strong sales in higher-margin general merchandise, lower markdowns, and better fuel margins. For the six-month period, the gross profit margin remained flat. Operating expenses as a percentage of net sales increased for the quarter due to pandemic-related costs and a restructuring charge but decreased for the six-month period due to strong sales growth.

Walmart maintained a strong liquidity position, with cash and cash equivalents increasing to $16.9 billion as of July 31, 2020. Net cash provided by operating activities significantly increased, and the company generated substantial free cash flow. The company also has access to committed lines of credit and maintains strong credit ratings, providing financial flexibility to meet its obligations and fund strategic initiatives.