Business context and reporting period
Walmart Inc. filed this Form 10-K for the fiscal year ended January 31, 2023 (“fiscal 2023”), with comparisons to fiscal 2022 and fiscal 2021. This is an annual report, not a standalone “2022 Q4” report. Walmart operates Walmart U.S., Walmart International and Sam’s Club, combining stores, clubs and eCommerce.
Key financial results
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenue | $611.3 billion | $572.8 billion | Up 6.7% |
| Net sales | $605.9 billion | $567.8 billion | Up 6.7% |
| Operating income | $20.4 billion | $25.9 billion | Down 21.3% |
| Operating margin | 3.4% | 4.6% | Down 120 basis points |
| Gross profit rate | 23.5% | 24.4% | Down 98 basis points |
| Consolidated net income | $11.3 billion | $13.9 billion | Down $2.6 billion |
| Diluted EPS attributable to Walmart | $4.27 | $4.87 | Down 12.3% |
| Operating cash flow | $28.8 billion | $24.2 billion | Up $4.7 billion |
| Capital expenditures | $16.9 billion | $13.1 billion | Up $3.8 billion |
| Free cash flow | $12.0 billion | $11.1 billion | Up $0.9 billion |
Net income attributable to Walmart was $11.7 billion in fiscal 2023 versus $13.7 billion in fiscal 2022; this differs from consolidated net income because of noncontrolling interests. Fiscal 2022 also included a $2.4 billion loss on early debt extinguishment.
Segments
- Walmart U.S.: Net sales of $420.6 billion, up 6.9%; comparable sales rose 7.0%. Operating income declined to $20.6 billion from $21.6 billion.
- Walmart International: Net sales were essentially flat at $101.0 billion. Operating income declined to $3.0 billion from $3.8 billion. Results reflected divestitures, unfavorable currency effects and restructuring charges.
- Sam’s Club: Net sales rose 14.7% to $84.3 billion; comparable sales increased 14.6%. Operating income declined to $2.0 billion from $2.3 billion, amid lower gross profit rate.
Liquidity, debt and capital allocation
Cash and cash equivalents were $8.6 billion at year-end, down from $14.8 billion. Total debt was $39.2 billion, including $38.8 billion of long-term debt and $0.4 billion of short-term borrowings. The company had $15.0 billion of undrawn U.S. committed credit lines. Working capital deficit widened to $16.5 billion from $6.3 billion; management attributes the deficit in part to its operating model and shareholder returns. Walmart said liquidity should be sufficient for operations, investment, dividends and repurchases.
Cash dividends paid were $6.1 billion and share repurchases totaled $9.9 billion. A new $20.0 billion repurchase authorization was approved in November 2022, with $19.3 billion remaining at year-end. Fiscal 2024 annual dividend was raised to $2.28 per share from $2.24.
Material changes and management commentary
- Revenue growth was supported by comparable-sales growth, food sales, higher average tickets and inflation in some categories. International sales also faced $3.7 billion of unfavorable currency impacts and the absence of U.K. and Japan operations.
- Gross margin contracted, principally due to U.S. markdowns and merchandise mix, higher supply-chain costs, and Sam’s Club inventory write-downs, fulfillment costs and inflation-related LIFO charges. Management said it absorbed some cost increases and used price and merchandising actions to protect value for customers.
- Operating expenses included $3.3 billion of opioid-related settlement charges and $0.8 billion of Walmart International reorganization and restructuring charges. These were partly offset by sales growth and lower incremental COVID-19 costs.
- Operating cash flow improved mainly because inventory purchases moderated, partly offset by lower operating income and payment timing. Capital spending increased as investment shifted toward supply chain, customer-facing initiatives, technology and remodels.
Guidance, risks and contingencies
Management projected fiscal 2024 capital expenditures of approximately $17 billion to $18 billion, focused on technology, supply chain and customer-facing initiatives. The filing does not provide a clear numerical fiscal 2024 revenue, operating-income or EPS outlook. Management cited continuing uncertainty from inflation, consumer confidence and employment trends, supply-chain pressures and global health risks.
Major disclosed risks include intense retail and digital competition; execution and costs of eCommerce, technology and automation investments; inflation, labor and supply-chain costs; foreign-exchange exposure; cybersecurity and privacy incidents; regulatory and tax changes; and climate, geopolitical and other disruptions.
Walmart accrued approximately $3.3 billion for an opioid settlement framework and other agreed settlements in fiscal 2023. After $0.4 billion of payments, $2.9 billion remained accrued at year-end. The framework depends on participation thresholds; the company cannot assure completion or final cost. A separate two-county judgment ordered defendants, jointly and severally, to pay approximately $651 million over 15 years; Walmart appealed, and the monetary judgment was stayed pending appeal. Other opioid litigation and investigations, FTC litigation concerning money-transfer services, and other legal matters remain unresolved; some potential losses cannot be reasonably estimated.
Important facts for investors to verify
- Track whether comparable-sales growth translates into improved gross margin and operating income as inflation and inventory effects change.
- Review the final participation and payment outcomes under the opioid settlement framework, along with the appeal and remaining opioid proceedings.
- Monitor Walmart International performance, foreign-exchange effects and restructuring, and returns on technology and supply-chain investment.
- Assess the cash and debt outlook alongside planned capital expenditures, dividends and share repurchases; free cash flow does not deduct debt service or other contractual obligations.
- Confirm the fiscal 2024 financial outlook in subsequent filings and earnings releases; this 10-K gives capital-spending guidance but no clear numerical sales or earnings guidance.