Walmart(WMT) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section presents Walmart's comprehensive financial performance, position, and cash flows for the reported period Financial Statements This section presents Walmart's unaudited condensed consolidated financial statements, highlighting revenue growth, decreased net income due to investment value changes, stable balance sheet, and reduced operating cash flow Condensed Consolidated Statements of Income Total revenues increased by 4.8% to $169.3 billion, but net income significantly decreased to $4.7 billion due to unfavorable changes in equity investment fair value Q2 Fiscal 2025 vs Q2 Fiscal 2024 Income Statement Highlights (in millions, except EPS) | Metric | Three Months Ended July 31, 2024 | Three Months Ended July 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $169,335 | $161,632 | 4.8% | | Operating Income | $7,940 | $7,316 | 8.5% | | Other (gains) and losses | $1,162 | $(3,905) | N/A | | Consolidated Net Income | $4,711 | $8,053 | (41.5)% | | Diluted EPS | $0.56 | $0.97 | (42.3)% | Condensed Consolidated Balance Sheets Total assets slightly decreased to $254.4 billion, cash and equivalents significantly declined, while total liabilities decreased and total equity increased Balance Sheet Highlights (in billions) | Account | July 31, 2024 | July 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $8.8 | $13.9 | | Inventories | $55.6 | $56.7 | | Total Assets | $254.4 | $255.1 | | Accounts payable | $56.7 | $56.6 | | Long-term debt (incl. current) | $36.9 | $39.7 | | Total Liabilities | $163.9 | $169.8 | | Total Equity | $90.6 | $85.3 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $16.4 billion, while cash used in investing and financing activities significantly increased, leading to a net decrease in cash Six-Month Cash Flow Summary (in billions) | Cash Flow Activity | Six Months Ended July 31, 2024 | Six Months Ended July 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16.4 | $18.2 | | Net cash used in investing activities | $(10.1) | $(9.9) | | Net cash used in financing activities | $(6.9) | $(3.3) | | Net (decrease) in cash | $(1.1) | $5.1 | Notes to Condensed Consolidated Financial Statements This section details accounting policies, a 3-for-1 stock split, supplier financing, debt, fair value measurements, legal contingencies, segment data, and the subsequent sale of JD.com investment - On February 23, 2024, the Company effected a 3-for-1 forward stock split, with all share and per-share information retroactively adjusted[22] - Outstanding payment obligations under supplier financing programs increased to $5.7 billion as of July 31, 2024[23] - The company settled certain opioid-related claims, accruing and substantially paying a $3.3 billion liability in fiscal 2023, with other opioid litigation ongoing[43][44] - Subsequent to quarter end, the company sold its investment in JD.com, expecting a $0.3 billion recognized loss and a $3.8 billion reduction in other long-term assets next quarter[57] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 FY2025 performance, highlighting strong revenue growth, improved operating income, negative impact from investment value changes, and details on liquidity and capital allocation Company Performance Metrics Performance metrics show 4.3% Total U.S. comparable sales growth, improved operating margin, increased ROI to 15.1%, but a decrease in free cash flow to $5.9 billion Q2 Calendar Comparable Sales (With Fuel) | Segment | Q2 FY2025 | Q2 FY2024 | | :--- | :--- | :--- | | Walmart U.S. | 4.2% | 5.9% | | Sam's Club | 4.7% | (0.2)% | | Total U.S. | 4.3% | 4.9% | - Gross profit rate increased by 43 basis points in Q2, while operating expenses as a percentage of sales increased by 35 basis points[66] - Return on Investment (ROI) for the trailing twelve months increased to 15.1% from 12.8% in the prior year period[68] - Free cash flow for the first six months of fiscal 2025 was $5.9 billion, a $3.1 billion decrease from prior year, due to lower operating cash flow and higher capital expenditures[74] Results of Operations Consolidated revenues grew 4.8% in Q2, driven by strong segment performance, with operating income increasing across all segments despite a net income decline from equity investment losses Q2 Net Sales and Operating Income by Segment (in billions) | Segment | Q2 FY2025 Net Sales | YoY Change | Q2 FY2025 Operating Income | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Walmart U.S. | $115.3 | 4.1% | $6.6 | 7.8% | | Walmart International | $29.6 | 7.1% | $1.4 | 14.3% | | Sam's Club | $22.9 | 4.7% | $0.6 | 11.5% | Liquidity and Capital Resources Walmart maintains strong liquidity, funded by $16.4 billion in operating cash flow, with capital allocation including $2.1 billion in share repurchases and $3.3 billion in dividends, supported by strong credit ratings - Net cash provided by operating activities decreased to $16.4 billion for the first six months of FY2025, down from $18.2 billion in the prior year[85] - The company repurchased 33.3 million shares for $2.1 billion in the first six months, with $14.5 billion remaining under the current repurchase authorization as of July 31, 2024[94][95] - The fiscal 2025 annual dividend was increased to $0.83 per share from $0.76 per share in fiscal 2024[93] - The company maintains strong credit ratings including A-1+/AA from S&P, P-1/Aa2 from Moody's, and F1+/AA from Fitch[99] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risks, primarily from interest rates, currency exchange rates, and equity investment fair values, have occurred since the last 10-K filing - As of July 31, 2024, no material changes to market risks disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2024, have occurred[101] Controls and Procedures Management concluded that disclosure controls and procedures are effective, with no significant changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective to provide reasonable assurance[103] - No significant changes to internal control over financial reporting occurred during the fiscal quarter ended July 31, 2024[103] Part II. Other Information This section provides supplemental information on legal proceedings, confirms no material changes to risk factors, details share repurchase activity, and includes cautionary forward-looking statements Legal Proceedings This section details ongoing legal matters including opioid litigation, FTC money transfer claims, and a $7.5 million hazardous waste settlement with California - The company continues to face numerous opioid-related lawsuits in U.S. and Canadian courts, separate from the fiscal 2023 settlement[105] - The company is defending against FTC claims related to its money transfer agent services and cooperating with a related DOJ investigation[47][105] - On July 15, 2024, the company entered into a $7.5 million settlement with the State of California regarding hazardous waste management claims, pending court approval[107] Risk Factors No material changes to the company's risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended January 31, 2024 - No material change in the risk factors discussed in the Form 10-K for the fiscal year ended January 31, 2024, has occurred[108] Unregistered Sales of Equity Securities and Use of Proceeds This section details the repurchase of approximately 15.0 million shares during the quarter under the $20 billion program, with $14.5 billion remaining authorization Share Repurchases for the Three Months Ended July 31, 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 2024 | 5,828,379 | $62.19 | | June 2024 | 4,356,393 | $67.12 | | July 2024 | 4,860,317 | $69.66 | | Total | 15,045,089 | N/A | - As of July 31, 2024, authorization for $14.5 billion of share repurchases remained under the current program[109] Other Information This section includes cautionary statements regarding forward-looking information, outlining economic, operational, and regulatory risks, and confirms no Rule 10b5-1 trading plan changes by officers - The report includes forward-looking statements concerning litigation outcomes, business strategies, financial performance, and liquidity, subject to various risks and uncertainties[113][114] - Key risk categories highlighted include economic factors, operating factors, and regulatory factors[116][117][118] Exhibits This section lists exhibits filed with the 10-Q, including corporate documents, CEO/CFO certifications, opioid litigation citations, and Inline XBRL data files - Exhibits filed include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906[121] - The report includes Inline XBRL instance, schema, and related linkbase documents as required by the SEC[121]