Walmart Inc. Form 10-Q Summary
Business context and reporting period
Walmart reported its fiscal 2024 third quarter, the three months ended October 31, 2023, and year-to-date results for the nine months then ended. The company operates Walmart U.S., Walmart International and Sam’s Club. Its business is seasonal, with historically highest sales in the quarter ending January 31.
Key financial metrics
| Metric | Three months ended October 31, 2023 | Nine months ended October 31, 2023 |
|---|---|---|
| Total revenue | $160.8 billion, up 5.2% year over year | $474.7 billion, up 6.1% |
| Net sales | $159.4 billion, up 5.3% | $470.7 billion, up 6.2% |
| Operating income | $6.2 billion, versus $2.7 billion | $19.8 billion, versus $14.9 billion |
| Operating margin on net sales | 3.9%, versus 1.8% | 4.2%, versus 3.4% |
| Gross profit rate | 24.0%, versus 23.7% | 23.9%, versus 23.7% |
| Net income attributable to Walmart | $453 million; diluted EPS $0.17 | $10.0 billion; diluted EPS $3.71 |
| Cash flow and capital spending | Not presented as a quarterly figure in the filing text | Operating cash flow $19.0 billion; capital expenditures $14.7 billion; free cash flow $4.3 billion |
For the quarter, consolidated net income was $643 million, compared with a $1.8 billion loss in the prior-year quarter. Other losses were $4.75 billion, primarily reflecting losses on equity and other investments; the quarter’s fair-value investment losses were $4.2 billion, versus $3.6 billion a year earlier. Net interest expense was $537 million for the quarter and $1.6 billion year to date.
At October 31, cash and cash equivalents were $12.2 billion. Short-term borrowings were $9.9 billion, and long-term debt, including current maturities, was $39.1 billion. Current liabilities exceeded current assets by $15.8 billion, compared with a $13.7 billion working capital deficit at October 31, 2022. Walmart had $15 billion of undrawn U.S. committed credit lines. These figures exclude lease obligations from the debt amounts stated above.
Material changes versus the prior comparable period
- Operating income improved substantially, largely because the prior-year quarter included $3.3 billion of opioid-related legal settlement charges. The prior-year comparison also included investment losses.
- U.S. comparable sales increased 4.6% in the quarter; Walmart U.S. rose 4.9% and Sam’s Club 2.9%. Growth was led by transactions, average ticket, grocery and health and wellness. U.S. eCommerce contributed approximately 2.8 percentage points to Walmart U.S. comparable sales.
- Walmart International net sales rose 10.8% for the quarter, including a positive $1.4 billion currency impact. Segment operating income increased to $1.1 billion from $861 million.
- Year-to-date operating cash flow increased $3.3 billion, partly due to payment timing and more moderate inventory purchases, and partly offset by payment of remaining accrued opioid charges. Free cash flow rose $0.7 billion while capital expenditures increased $2.6 billion.
- Year-to-date share repurchases were $1.3 billion, versus $8.7 billion in the prior-year period. The company also paid $3.5 billion to acquire certain Flipkart noncontrolling interests and settle a PhonePe liability.
Outlook, commentary, risks and unusual items
The filing provides no specific numerical earnings or sales guidance. Management said it expects liquidity sources to be sufficient for operations, investment, dividends and repurchases for at least the next 12 months and thereafter for the foreseeable future. Priorities include omni-channel growth, productivity and margin improvement, and disciplined investment. Management cited ongoing inflation, a challenging macroeconomic environment, geopolitical conditions, supply-chain disruption, employment trends and consumer confidence as sources of uncertainty. Inflation and pricing actions may affect gross profit.
Important contingencies include opioid-related litigation not resolved by the settlement framework; the DOJ opioid civil case; FTC litigation concerning money-transfer services; and a newly initiated Mexican antitrust administrative process involving a Walmex subsidiary. The company also disclosed U.K. Asda equal-value claims, an Indian foreign-investment notice, California environmental litigation and an EPA investigation. For several matters, Walmart said it could not reasonably estimate a loss or range of loss. The approximately $3.3 billion previously accrued for the opioid settlement framework and other settlements was substantially paid by October 31; the framework became effective September 6, 2023.
Other factors to monitor include investment fair-value volatility, foreign-exchange and interest-rate movements, fuel prices, labor and operating costs, and the potential effect of credit-rating changes on borrowing costs and market access. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter; phased implementation of a new financial system is ongoing.
Important facts for investors to verify
- Whether sales growth, comparable-sales trends and eCommerce contributions continue, and how inflation, consumer demand and category mix affect margins.
- How much reported earnings improvement reflects recurring operations versus the prior-year opioid charge and changes in investment fair values.
- Cash conversion, inventory and working-capital movements, capital spending, and the ability to fund dividends and repurchases while borrowings remain elevated.
- Developments, potential financial exposure and timing of the unresolved litigation and regulatory matters; several losses are not estimable from the filing.
- Whether management’s liquidity expectations remain supported by operating cash flow, undrawn credit facilities and continued access to capital markets.