Business context and reporting period
Walmart Inc.’s Form 10-K covers the fiscal year ended January 31, 2022 (fiscal 2022), not a standalone calendar fourth quarter. The company operates Walmart U.S., Walmart International and Sam’s Club across retail, wholesale and eCommerce channels. Annual figures below compare fiscal 2022 with fiscal 2021.
Key financial metrics
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Total revenues | $572.8 billion; +2.4% | $559.2 billion |
| Net sales | $567.8 billion; +2.3% | $555.2 billion |
| Operating income | $25.9 billion; +15.0% | $22.5 billion |
| Operating margin | 4.6% | 4.1% |
| Consolidated net income | $13.9 billion | $13.7 billion |
| Net income attributable to Walmart | $13.7 billion | $13.5 billion |
| Diluted EPS | $4.87 | $4.75 |
| Cash from operations | $24.2 billion | $36.1 billion |
| Free cash flow | $11.1 billion | $25.8 billion |
| Cash and cash equivalents | $14.8 billion | $17.7 billion |
| Long-term debt, including current maturities | $37.7 billion | $44.3 billion |
Gross profit rate was 24.4%, up 14 basis points. Operating expenses were 20.8% of net sales, down 19 basis points. The company reported a $6.3 billion working capital deficit. It had $0.4 billion of short-term borrowings and $15.0 billion of undrawn U.S. committed credit lines. Net lease obligations totaled approximately $19.2 billion.
Material changes versus the prior comparable period
- U.S. comparable sales increased 7.7%, including fuel; Walmart U.S. increased 6.4% and Sam’s Club increased 15.0%. Management cited consumer spending, some inflation and growth in transactions and average ticket.
- International net sales declined 16.8%, chiefly reflecting the first-quarter fiscal 2022 divestitures of Asda and Seiyu. Remaining markets generally recorded positive comparable sales; currency movements added $4.5 billion to reported net sales.
- Sam’s Club sales rose 15.1%; Walmart U.S. sales rose 6.3%. Operating income increased in all three segments.
- Cash from operations and free cash flow fell substantially, mainly due to higher inventory costs and purchases, comparison with fiscal 2021’s accelerated inventory sell-through, wage-payment timing and higher capital expenditures.
- Fiscal 2022 included a $2.4 billion loss on early debt extinguishment, including $2.3 billion in premiums, and $3.0 billion of other losses, primarily from fair-value changes in equity investments and divestiture-related losses. Fiscal 2021 included an $8.3 billion pretax loss on international divestitures, partly offset in other gains and losses by equity investment gains.
- Fiscal 2022 capital expenditures were $13.1 billion, up from $10.3 billion. The company repurchased $9.8 billion of shares, compared with $2.6 billion in fiscal 2021, and paid $6.2 billion in dividends.
Outlook, management commentary, risks and contingencies
Management expects fiscal 2023 capital expenditures of approximately $18 billion, focused on supply chain, automation, customer-facing initiatives and technology, and plans to spend at least $10 billion on share repurchases. The fiscal 2023 annual dividend was set at $2.24 per share, up from $2.20. Management said liquidity sources should be sufficient for operations, investment, dividends and repurchases. The filing provides no fiscal 2023 earnings or revenue guidance.
Management cited continued uncertainty from COVID-19, supply-chain disruption, inflation, labor availability and costs, consumer confidence and changing shopping patterns. It cautioned that pandemic-related revenue and eCommerce growth may not be sustained. Other material risk areas include intense retail and digital competition, cybersecurity and privacy threats, foreign exchange, regulation and litigation.
In opioid litigation, a jury found Walmart and other defendants liable in one multidistrict case; the damages/abatement phase was scheduled for May 2022, and Walmart intended to appeal. The company said it could not reasonably estimate a loss or range of loss for the opioid matters. It also disclosed DOJ litigation, securities and derivative actions, government inquiries concerning money-transfer services, a Flipkart foreign-investment notice, and California environmental litigation. Outcomes and potential financial effects are uncertain.
Most important facts for investors to verify
- Whether sales and comparable-sales momentum persists after pandemic-era demand and stimulus effects, and how inflation affects volumes, margins and pricing.
- Whether operating-income improvement translates into stronger cash generation, given the sharp year-over-year declines in operating cash flow and free cash flow.
- How inventory levels, working-capital needs and planned $18 billion fiscal 2023 capital expenditures affect liquidity and capital returns.
- The final financial and operating effects of the Asda and Seiyu divestitures, and performance in continuing international markets.
- Developments and potential exposure from opioid litigation and other legal, regulatory and compliance matters, for which some losses are not estimable.
- Volatility in equity-investment fair values and the impact of debt refinancing, interest rates and foreign exchange on reported results.