Walmart Inc. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2023, the first quarter of Walmart’s fiscal 2024. Comparative figures are for the three months ended April 30, 2022. Amounts are in U.S. dollars.
Financial results and key metrics
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Total revenues | $152.3 billion | $141.6 billion |
| Net sales | $151.0 billion | $140.3 billion |
| Operating income | $6.2 billion | $5.3 billion |
| Consolidated net income | $1.9 billion | $2.1 billion |
| Net income attributable to Walmart | $1.7 billion | $2.1 billion |
| Diluted earnings per share | $0.62 | $0.74 |
| Gross profit as a percentage of net sales | 23.7% | 23.8% |
| Operating income as a percentage of net sales | 4.1% | 3.8% |
| Cash from operating activities | $4.6 billion | $(3.8) billion |
| Free cash flow | $0.2 billion | $(7.3) billion |
Revenue rose 7.6% year over year, while operating income increased 17.3%. Net income attributable to Walmart declined, primarily reflecting higher investment-related losses and increased income attributable to noncontrolling interests. Other losses were $3.0 billion, mainly due to fair-value declines in equity and other investments; the prior-year amount was $2.0 billion.
Operating cash flow improved by $8.4 billion, primarily from moderated inventory purchases and the timing of payments. Capital expenditures were $4.4 billion, up from $3.5 billion, leaving free cash flow of $204 million. The filing cautions that its free-cash-flow measure does not deduct debt service or other contractual obligations.
At April 30, cash and cash equivalents were $10.6 billion. Long-term debt, including amounts due within one year, was $42.1 billion, up $3.3 billion from January 31, primarily due to new debt issuance. Short-term borrowings were $1.7 billion. Walmart had $15.0 billion of undrawn U.S. committed credit facilities. Its working capital deficit was $17.0 billion; management says the company generally operates with a deficit and expects liquidity sources to remain sufficient.
Material changes and segment performance
- Walmart U.S.: Net sales rose 7.2% to $103.9 billion; comparable sales increased 7.5%. Operating income rose to $5.0 billion. Grocery sales were strong, while product mix shifts toward lower-margin categories reduced the segment’s gross profit rate.
- Walmart International: Net sales increased 12.0% to $26.6 billion, and operating income rose to $1.2 billion. Growth and operating efficiencies contributed to improved results; currency movements reduced net sales by $0.2 billion.
- Sam’s Club: Net sales increased 4.5% to $20.5 billion, including fuel; comparable sales rose 4.6%. Operating income was $458 million versus $460 million. Lower fuel sales and higher technology spending weighed on results.
- Consolidated gross margin declined 18 basis points, principally due to sales mix, partly offset by comparison with higher prior-year supply-chain costs. Operating expenses as a share of sales fell 58 basis points, helping operating margin increase 34 basis points.
Outlook, risks, contingencies, and other notable items
The filing provides no specific numerical revenue or earnings guidance. Management expects ongoing uncertainty from inflation, the challenging macroeconomic environment, geopolitical conditions, supply-chain disruptions, employment trends, and consumer confidence. Walmart continues to emphasize everyday low prices, eCommerce and omnichannel growth, productivity, and disciplined capital investment. Management states that liquidity should be adequate for operations, investment, dividends, and repurchases.
Walmart had accrued approximately $3.3 billion for the opioid settlement framework and other agreed settlements in fiscal 2023. Approximately $2.8 billion remained accrued at April 30, 2023; the framework’s effectiveness depends on participation by political subdivisions, and the ultimate loss may differ from the accrual. A separate two-county judgment of approximately $0.7 billion is under appeal, with payment stayed pending appeal and injunctive relief in effect. The filing also describes ongoing DOJ opioid litigation, securities and derivative actions, and money-transfer matters; potential losses for certain proceedings cannot be reasonably estimated.
Walmart renewed its $10.0 billion 364-day and $5.0 billion five-year U.S. credit facilities. It issued $5.0 billion of senior unsecured notes and repaid $1.75 billion of debt during the quarter. The annual dividend was raised to $2.28 per share from $2.24. The company repurchased $686 million of shares, with $18.6 billion remaining under its $20 billion authorization. A new financial system began implementation in the U.S. and Canada; management reported disclosure controls were effective and noted that the implementation affects internal-control processes.
Important facts for investors to verify
- Whether investment fair-value losses continue to materially affect reported earnings and the effective tax rate.
- Whether the opioid settlement framework meets participation conditions, and how payments or other litigation outcomes compare with accrued amounts.
- Whether operating cash flow and free cash flow remain adequate as capital expenditures, dividends, and debt obligations continue.
- Whether margin trends hold amid inflation, merchandise mix changes, labor and technology costs, and fuel-price volatility.
- How the new financial-system implementation affects internal controls, and whether the company’s liquidity and credit access remain consistent with management’s expectations.