Business context and reporting period
Walmart Inc.’s Form 10-Q covers the quarter and six months ended July 31, 2023, in fiscal 2024. Walmart operates Walmart U.S., Walmart International and Sam’s Club, across stores, clubs and eCommerce. Unless otherwise stated, amounts below are U.S. dollars.
Financial performance and key metrics
- Quarter revenue: $161.6 billion, up 5.7% year over year; net sales were $160.3 billion, up 5.9%. First-half revenue: $313.9 billion, up 6.6%; net sales were $311.3 billion, up 6.7%.
- Quarter profitability: Operating income was $7.3 billion, up 6.7%, with operating margin of 4.6% versus 4.5%. Net income attributable to Walmart was $7.9 billion versus $5.1 billion; diluted EPS was $2.92 versus $1.88. First-half diluted EPS was $3.54 versus $2.61.
- Profit comparability: Quarter net income included $3.2 billion of net gains from investment fair-value changes, primarily reflecting underlying stock-price increases. Total “other gains and losses” were a $3.9 billion gain for the quarter. These non-operating gains materially contributed to the year-over-year increase in reported earnings.
- Margins: Gross profit was 24.0% of net sales for the quarter, up 50 basis points year over year; operating expenses were 20.3%, up 33 basis points. For the first half, gross profit was 23.8%, up 17 basis points, and operating expenses were 20.3%, down 10 basis points.
- Segments, quarter: Walmart U.S. net sales increased 5.4% to $110.9 billion and operating income rose to $6.1 billion. International net sales increased 13.3% to $27.6 billion and operating income was $1.2 billion. Sam’s Club net sales were $21.8 billion, down 0.3% including fuel, while operating income increased to $521 million. Sam’s Club sales excluding fuel rose 5.3%.
- Cash flow, first half: Operating cash flow was $18.2 billion versus $9.2 billion; capital expenditures were $9.2 billion versus $7.5 billion; free cash flow, as defined by Walmart, was $9.0 billion versus $1.7 billion. The operating cash-flow increase primarily reflected moderated inventory purchases and payment timing.
- Liquidity and debt: Cash and cash equivalents were $13.9 billion at July 31. Long-term debt, including amounts due within one year, was $39.7 billion; short-term borrowings were $4.5 billion. Walmart also had $15.0 billion of committed U.S. credit lines, all undrawn. Working capital deficit was $17.2 billion, compared with $15.7 billion at July 31, 2022.
- Capital returns: The fiscal 2024 annual dividend was approved at $2.28 per share, up from $2.24. First-half share repurchases totaled $1.2 billion; $18.2 billion remained authorized under the $20 billion program.
Material changes versus the prior comparable period
- U.S. comparable sales increased 4.9% for the quarter, versus 8.7% a year earlier; Walmart U.S. comparable sales increased 5.9%. eCommerce contributed approximately 2.5 percentage points to Walmart U.S. comparable sales.
- Sam’s Club comparable sales decreased 0.2% including fuel, primarily due to fuel deflation; excluding fuel, sales increased. The prior-year comparison included much stronger fuel-related sales.
- Operating income improved in each reportable segment. Consolidated margin gains reflected lower prior-year markdowns and supply-chain costs and pricing in response to inflation, partly offset by mix shifts and higher quarter expenses.
- First-half capital expenditures increased $1.7 billion, while long-term debt increased $0.9 billion from January 31, 2023. Cash provided by operating activities rose sharply year over year, partly because of inventory and payment timing.
Outlook, management commentary, risks and contingencies
Management emphasized growth through omnichannel shopping and eCommerce, margin improvement through productivity and business mix, and returns through disciplined investment. Walmart stated that liquidity sources should be sufficient to fund operations, investment, dividends and repurchases for at least the next 12 months and the foreseeable future. The filing provides no specific quantitative earnings or sales guidance.
Management expects continued uncertainty from inflation, macroeconomic and geopolitical conditions, supply-chain disruption, employment trends and consumer confidence. Pricing and merchandising responses to inflation—including absorbing some cost increases—may affect gross profit. Other identified risks include competition, labor and goods costs, currency and fuel volatility, cybersecurity, interest rates, and legal and regulatory proceedings.
Walmart had accrued approximately $3.3 billion for opioid settlement frameworks and other agreed settlements; approximately $2.8 billion remained accrued at July 31. A sufficient number of political subdivisions had agreed to participate, and the framework was scheduled to become effective September 6, 2023. Walmart expected to pay the portion attributable to settling states during the quarter ending October 31, 2023. Other opioid litigation, including DOJ proceedings and an appealed two-county judgment, remains unresolved; Walmart has not accrued or estimated losses for certain uncovered matters. The FTC money-transfer case and other legal matters also remain pending.
Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. A staged implementation of a new financial system, including the general ledger, had begun in the U.S. and Canada.
Important facts for investors to verify
- How much of earnings and EPS growth is attributable to volatile investment fair-value gains versus recurring retail operations.
- Whether margin improvement persists as inflation, product mix, pricing and operating costs change.
- Cash-flow sustainability after inventory and payment timing effects, alongside higher capital spending.
- Timing and cash impact of the opioid settlement payments, and potential exposure from unresolved litigation and regulatory matters.
- Changes in short-term borrowings, total debt, working capital deficit and planned capital returns.