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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended July 31, 2023.
or
| | | | | |
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to .
Commission File Number 001-06991
WALMART INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
Delaware | | 71-0415188 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
702 S.W. 8th Street | | 72716 |
Bentonville | AR | |
(Address of principal executive offices) | | (Zip Code) |
Registrant's telephone number, including area code: (479) 273-4000
Former name, former address and former fiscal year, if changed since last report: N/A
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.10 per share | | WMT | | New York Stock Exchange |
2.550% Notes Due 2026 | | WMT26 | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer | | ☒ | | Accelerated Filer | | ☐ |
Non-Accelerated Filer | | ☐ | | Smaller Reporting Company | | ☐ |
| | | | Emerging Growth Company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrant had 2,691,563,850 shares of common stock outstanding as of August 30, 2023.
Walmart Inc.
Form 10-Q
For the Quarterly Period Ended July 31, 2023
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Walmart Inc.
Condensed Consolidated Statements of Income
(Unaudited)
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| | Three Months Ended July 31, | | Six Months Ended July 31, |
(Amounts in millions, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Revenues: | | | | | | | | |
Net sales | | $ | 160,280 | | | $ | 151,381 | | | $ | 311,284 | | | $ | 291,669 | |
Membership and other income | | 1,352 | | | 1,478 | | | 2,649 | | | 2,759 | |
Total revenues | | 161,632 | | | 152,859 | | | 313,933 | | | 294,428 | |
Costs and expenses: | | | | | | | | |
Cost of sales | | 121,850 | | | 115,838 | | | 237,134 | | | 222,685 | |
Operating, selling, general and administrative expenses | | 32,466 | | | 30,167 | | | 63,243 | | | 59,571 | |
Operating income | | 7,316 | | | 6,854 | | | 13,556 | | | 12,172 | |
Interest: | | | | | | | | |
Debt | | 543 | | | 395 | | | 1,111 | | | 767 | |
Finance lease | | 99 | | | 84 | | | 195 | | | 167 | |
Interest income | | (148) | | | (31) | | | (255) | | | (67) | |
Interest, net | | 494 | | | 448 | | | 1,051 | | | 867 | |
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Other (gains) and losses | | (3,905) | | | (238) | | | (910) | | | 1,760 | |
Income before income taxes | | 10,727 | | | 6,644 | | | 13,415 | | | 9,545 | |
Provision for income taxes | | 2,674 | | | 1,497 | | | 3,466 | | | 2,295 | |
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Consolidated net income | | 8,053 | | | 5,147 | | | 9,949 | | | 7,250 | |
Consolidated net (income) loss attributable to noncontrolling interest | | (162) | | | 2 | | | (385) | | | (47) | |
Consolidated net income attributable to Walmart | | $ | 7,891 | | | $ | 5,149 | | | $ | 9,564 | | | $ | 7,203 | |
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Net income per common share: | | | | | | | | |
Basic net income per common share attributable to Walmart | | $ | 2.93 | | | $ | 1.88 | | | $ | 3.55 | | | $ | 2.62 | |
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Diluted net income per common share attributable to Walmart | | 2.92 | | | 1.88 | | | 3.54 | | | 2.61 | |
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Weighted-average common shares outstanding: | | | | | | | | |
Basic | | 2,693 | | | 2,736 | | | 2,694 | | | 2,745 | |
Diluted | | 2,703 | | | 2,745 | | | 2,703 | | | 2,755 | |
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Dividends declared per common share | | $ | — | | | $ | — | | | $ | 2.28 | | | $ | 2.24 | |
See accompanying notes.
Walmart Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
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| Three Months Ended July 31, | | Six Months Ended July 31, |
(Amounts in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Consolidated net income | $ | 8,053 | | | $ | 5,147 | | | $ | 9,949 | | | $ | 7,250 | |
Consolidated net (income) loss attributable to noncontrolling interest | (162) | | | 2 | | | (385) | | | (47) | |
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Consolidated net income attributable to Walmart | 7,891 | | | 5,149 | | | 9,564 | | | 7,203 | |
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Other comprehensive income (loss), net of income taxes | | | | | | | |
Currency translation and other | 307 | | | (1,380) | | | 1,116 | | | (1,148) | |
Net investment hedges | — | | | — | | | — | | | — | |
Cash flow hedges | 135 | | | (293) | | | 66 | | | (251) | |
Minimum pension liability | (1) | | | 2 | | | 1 | | | 3 | |
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Other comprehensive income (loss), net of income taxes | 441 | | | (1,671) | | | 1,183 | | | (1,396) | |
Other comprehensive (income) loss attributable to noncontrolling interest | (112) | | | 275 | | | (321) | | | 268 | |
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Other comprehensive income (loss) attributable to Walmart | 329 | | | (1,396) | | | 862 | | | (1,128) | |
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Comprehensive income, net of income taxes | 8,494 | | | 3,476 | | | 11,132 | | | 5,854 | |
Comprehensive (income) loss attributable to noncontrolling interest | (274) | | | 277 | | | (706) | | | 221 | |
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Comprehensive income attributable to Walmart | $ | 8,220 | | | $ | 3,753 | | | $ | 10,426 | | | $ | 6,075 | |
See accompanying notes.
Walmart Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
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| | July 31, | | January 31, | | July 31, |
(Amounts in millions) | | 2023 | | 2023 | | 2022 |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 13,888 | | | $ | 8,625 | | | $ | 13,923 | |
Receivables, net | | 7,891 | | | 7,933 | | | 7,522 | |
Inventories | | 56,722 | | | 56,576 | | | 59,921 | |
Prepaid expenses and other | | 3,531 | | | 2,521 | | | 2,798 | |
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Total current assets | | 82,032 | | | 75,655 | | | 84,164 | |
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Property and equipment, net | | 104,733 | | | 100,760 | | | 96,006 | |
Operating lease right-of-use assets | | 13,710 | | | 13,555 | | | 13,872 | |
Finance lease right-of-use assets, net | | 5,552 | | | 4,919 | | | 4,514 | |
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Goodwill | | 28,268 | | | 28,174 | | | 28,664 | |
Other long-term assets | | 20,826 | | | 20,134 | | | 19,979 | |
Total assets | | $ | 255,121 | | | $ | 243,197 | | | $ | 247,199 | |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND EQUITY | | | | | | |
Current liabilities: | | | | | | |
Short-term borrowings | | $ | 4,546 | | | $ | 372 | | | $ | 10,634 | |
Accounts payable | | 56,576 | | | 53,742 | | | 54,191 | |
Dividends payable | | 3,067 | | | — | | | 3,049 | |
Accrued liabilities | | 29,239 | | | 31,126 | | | 23,843 | |
Accrued income taxes | | 770 | | | 727 | | | 868 | |
Long-term debt due within one year | | 2,897 | | | 4,191 | | | 5,316 | |
Operating lease obligations due within one year | | 1,472 | | | 1,473 | | | 1,464 | |
Finance lease obligations due within one year | | 653 | | | 567 | | | 534 | |
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Total current liabilities | | 99,220 | | | 92,198 | | | 99,899 | |
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Long-term debt | | 36,806 | | | 34,649 | | | 29,801 | |
Long-term operating lease obligations | | 12,978 | | | 12,828 | | | 13,140 | |
Long-term finance lease obligations | | 5,449 | | | 4,843 | | | 4,420 | |
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Deferred income taxes and other | | 15,109 | | | 14,688 | | | 14,092 | |
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Commitments and contingencies | | | | | | |
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Redeemable noncontrolling interest | | 232 | | | 237 | | | 260 | |
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Equity: | | | | | | |
Common stock | | 269 | | | 269 | | | 272 | |
Capital in excess of par value | | 4,635 | | | 4,969 | | | 4,672 | |
Retained earnings | | 85,470 | | | 83,135 | | | 82,519 | |
Accumulated other comprehensive loss | | (10,818) | | | (11,680) | | | (9,894) | |
Total Walmart shareholders' equity | | 79,556 | | | 76,693 | | | 77,569 | |
Nonredeemable noncontrolling interest | | 5,771 | | | 7,061 | | | 8,018 | |
Total equity | | 85,327 | | | 83,754 | | | 85,587 | |
Total liabilities, redeemable noncontrolling interest, and equity | | $ | 255,121 | | | $ | 243,197 | | | $ | 247,199 | |
See accompanying notes.
Walmart Inc.
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
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| | | | | | | | | Accumulated | | Total | | | | | | | |
| | | | | Capital in | | | | Other | | Walmart | | Nonredeemable | | | | | |
(Amounts in millions) | Common Stock | | Excess of | | Retained | | Comprehensive | | Shareholders' | | Noncontrolling | | Total | | | |
Shares | | Amount | | Par Value | | Earnings | | Loss | | Equity | | Interest | | Equity | | | |
Balances as of February 1, 2023 | 2,693 | | | $ | 269 | | | $ | 4,969 | | | $ | 83,135 | | | $ | (11,680) | | | $ | 76,693 | | | $ | 7,061 | | | $ | 83,754 | | | | |
Consolidated net income | — | | | — | | | — | | | 1,673 | | | — | | | 1,673 | | | 223 | | | 1,896 | | | | |
Other comprehensive income, net of income taxes | — | | | — | | | — | | | — | | | 533 | | | 533 | | | 209 | | | 742 | | | | |
Dividends declared ($2.28 per share) | — | | | — | | | — | | | (6,139) | | | — | | | (6,139) | | | — | | | (6,139) | | | | |
Purchase of Company stock | (5) | | | (1) | | | (38) | | | (632) | | | — | | | (671) | | | — | | | (671) | | | | |
Dividends declared to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | (761) | | | (761) | | | | |
Sale of subsidiary stock | — | | | — | | | 389 | | | — | | | — | | | 389 | | | 94 | | | 483 | | | | |
Other | 6 | | | 1 | | | (72) | | | (2) | | | — | | | (73) | | | — | | | (73) | | | | |
Balances as of April 30, 2023 | 2,694 | | | $ | 269 | | | $ | 5,248 | | | $ | 78,035 | | | $ | (11,147) | | | $ | 72,405 | | | $ | 6,826 | | | $ | 79,231 | | | | |
Consolidated net income | — | | | — | | | — | | | 7,891 | | | — | | | 7,891 | | | 162 | | | 8,053 | | | | |
Other comprehensive income, net of income taxes | — | | | — | | | — | | | — | | | 329 | | | 329 | | | 112 | | | 441 | | | | |
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Purchase of Company stock | (3) | | | — | | | (29) | | | (454) | | | — | | | (483) | | | — | | | (483) | | | | |
Dividends to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | (6) | | | (6) | | | | |
Purchase of noncontrolling interest | — | | | — | | | (1,076) | | | — | | | — | | | (1,076) | | | (1,367) | | | (2,443) | | | | |
Sale of subsidiary stock | — | | | — | | | 160 | | | — | | | — | | | 160 | | | 54 | | | 214 | | | | |
Other | 1 | | | — | | | 332 | | | (2) | | | — | | | 330 | | | (10) | | | 320 | | | | |
Balances as of July 31, 2023 | 2,692 | | | $ | 269 | | | $ | 4,635 | | | $ | 85,470 | | | $ | (10,818) | | | $ | 79,556 | | | $ | 5,771 | | | $ | 85,327 | | | | |
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See accompanying notes.
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| | | | | | | | | Accumulated | | Total | | | | | | | |
| | | | | Capital in | | | | Other | | Walmart | | Nonredeemable | | | | | |
(Amounts in millions) | Common Stock | | Excess of | | Retained | | Comprehensive | | Shareholders' | | Noncontrolling | | Total | | | |
Shares | | Amount | | Par Value | | Earnings | | Loss | | Equity | | Interest | | Equity | | | |
Balances as of February 1, 2022 | 2,761 | | | $ | 276 | | | $ | 4,839 | | | $ | 86,904 | | | $ | (8,766) | | | $ | 83,253 | | | $ | 8,638 | | | $ | 91,891 | | | | |
Consolidated net income | — | | | — | | | — | | | 2,054 | | | — | | | 2,054 | | | 49 | | | 2,103 | | | | |
Other comprehensive income, net of income taxes | — | | | — | | | — | | | — | | | 268 | | | 268 | | | 7 | | | 275 | | | | |
Dividends declared ($2.24 per share) | — | | | — | | | — | | | (6,173) | | | — | | | (6,173) | | | — | | | (6,173) | | | | |
Purchase of Company stock | (17) | | | (2) | | | (125) | | | (2,249) | | | — | | | (2,376) | | | — | | | (2,376) | | | | |
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Sale of subsidiary stock | — | | | — | | | 24 | | | — | | | — | | | 24 | | | 11 | | | 35 | | | | |
Other | 4 | | | 1 | | | (151) | | | (4) | | | — | | | (154) | | | (1) | | | (155) | | | | |
Balances as of April 30, 2022 | 2,748 | | | $ | 275 | | | $ | 4,587 | | | $ | 80,532 | | | $ | (8,498) | | | $ | 76,896 | | | $ | 8,704 | | | $ | 85,600 | | | | |
Consolidated net income | — | | | — | | | — | | | 5,149 | | | — | | | 5,149 | | | (2) | | | 5,147 | | | | |
Other comprehensive (loss), net of income taxes | — | | | — | | | — | | | — | | | (1,396) | | | (1,396) | | | (275) | | | (1,671) | | | | |
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Purchase of Company stock | (26) | | | (3) | | | (182) | | | (3,201) | | | — | | | (3,386) | | | — | | | (3,386) | | | | |
Dividends to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | (434) | | | (434) | | | | |
Sale of subsidiary stock | — | | | — | | | 8 | | | — | | | — | | | 8 | | | 2 | | | 10 | | | | |
Other | — | | | — | | | 259 | | | 39 | | | — | | | 298 | | | 23 | | | 321 | | | | |
Balances as of July 31, 2022 | 2,722 | | | $ | 272 | | | $ | 4,672 | | | $ | 82,519 | | | $ | (9,894) | | | $ | 77,569 | | | $ | 8,018 | | | $ | 85,587 | | | | |
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See accompanying notes.
Walmart Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | | | | | |
| | Six Months Ended July 31, | | |
(Amounts in millions) | | 2023 | | 2022 | | |
Cash flows from operating activities: | | | | | | |
Consolidated net income | | $ | 9,949 | | | $ | 7,250 | | | |
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Adjustments to reconcile consolidated net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | 5,750 | | | 5,379 | | | |
Investment (gains) and losses, net | | (773) | | | 1,988 | | | |
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Deferred income taxes | | 436 | | | 111 | | | |
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Other operating activities | | 849 | | | 244 | | | |
Changes in certain assets and liabilities, net of effects of acquisitions and dispositions: | | | | | | |
Receivables, net | | 115 | | | 874 | | | |
Inventories | | 222 | | | (3,730) | | | |
Accounts payable | | 2,999 | | | (453) | | | |
Accrued liabilities | | (1,368) | | | (2,439) | | | |
Accrued income taxes | | 22 | | | 16 | | | |
Net cash provided by operating activities | | 18,201 | | | 9,240 | | | |
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Cash flows from investing activities: | | | | | | |
Payments for property and equipment | | (9,216) | | | (7,492) | | | |
Proceeds from the disposal of property and equipment | | 133 | | | 72 | | | |
Proceeds from disposal of certain operations | | 135 | | | — | | | |
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Payments for business acquisitions, net of cash acquired | | (9) | | | (616) | | | |
Other investing activities | | (952) | | | (548) | | | |
Net cash used in investing activities | | (9,909) | | | (8,584) | | | |
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Cash flows from financing activities: | | | | | | |
Net change in short-term borrowings | | 4,181 | | | 10,230 | | | |
Proceeds from issuance of long-term debt | | 4,967 | | | — | | | |
Repayments of long-term debt | | (4,063) | | | (1,439) | | | |
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Dividends paid | | (3,072) | | | (3,081) | | | |
Purchase of Company stock | | (1,171) | | | (5,747) | | | |
Dividends paid to noncontrolling interest | | (214) | | | — | | | |
Sale of subsidiary stock | | 697 | | | 45 | | | |
Purchase of noncontrolling interest | | (3,462) | | | — | | | |
Other financing activities | | (1,172) | | | (1,408) | | | |
Net cash used in financing activities | | (3,309) | | | (1,400) | | | |
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Effect of exchange rates on cash, cash equivalents and restricted cash | | 147 | | | (100) | | | |
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Net increase (decrease) in cash, cash equivalents and restricted cash | | 5,130 | | | (844) | | | |
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Cash, cash equivalents and restricted cash at beginning of year | | 8,841 | | | 14,834 | | | |
Cash, cash equivalents and restricted cash at end of period | | $ | 13,971 | | | $ | 13,990 | | | |
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See accompanying notes.
Walmart Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The Condensed Consolidated Financial Statements of Walmart Inc. and its subsidiaries ("Walmart" or the "Company") and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2023 ("fiscal 2023"). Therefore, the interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K.
The Company's Condensed Consolidated Financial Statements are based on a fiscal year ending January 31 for the United States ("U.S.") and Canadian operations. The Company consolidates all other operations generally using a one-month lag based on a calendar year. There were no significant intervening events during the month of July 2023 related to the consolidated operations using a lag that materially affected the Condensed Consolidated Financial Statements.
The Company's business is seasonal to a certain extent due to calendar events and national and religious holidays, as well as weather patterns. Historically, the Company's highest sales volume has occurred in the fiscal quarter ending January 31.
Use of Estimates
The Condensed Consolidated Financial Statements have been prepared in conformity with GAAP. Those principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Management's estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from those estimates.
Supplier Financing Program Obligations
In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances the transparency about the use of supplier finance programs for investors and other allocators of capital. The Company adopted this ASU as of February 1, 2023, other than the roll-forward disclosure requirement which the Company will adopt in fiscal 2025.
The Company has supplier financing programs with financial institutions, in which the Company agrees to pay the financial institution the stated amount of confirmed invoices on the invoice due date for participating suppliers. Participation in these programs is optional and solely up to the supplier, who negotiates the terms of the arrangement directly with the financial institution and may allow early payment. Supplier participation in these programs has no bearing on the Company's amounts due. The payment terms that the Company has with participating suppliers under these programs generally range between 30 and 90 days. The Company does not have an economic interest in a supplier's participation in the program or a direct financial relationship with the financial institution funding the program. The Company is responsible for ensuring that participating financial institutions are paid according to the terms negotiated with the supplier, regardless of whether the supplier elects to receive early payment from the financial institution. The outstanding payment obligations to financial institutions under these programs were $5.3 billion, $5.2 billion and $6.4 billion, as of July 31, 2023, January 31, 2023 and July 31, 2022, respectively. These obligations are generally classified as accounts payable within the Condensed Consolidated Balance Sheets. The activity related to these programs is classified as an operating activity within the Condensed Consolidated Statements of Cash Flows.
Note 2. Net Income Per Common Share
Basic net income per common share attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period. Diluted net income per common share attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period adjusted for the dilutive effect of share-based awards. The Company did not have significant share-based awards outstanding that were anti-dilutive and not included in the calculation of diluted net income per common share attributable to Walmart for the three and six months ended July 31, 2023 and 2022.
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income per common share attributable to Walmart:
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| | Three Months Ended July 31, | | Six Months Ended July 31, |
(Amounts in millions, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Numerator | | | | | | | | |
Consolidated net income | | $ | 8,053 | | | $ | 5,147 | | | $ | 9,949 | | | $ | 7,250 | |
Consolidated net (income) loss attributable to noncontrolling interest | | (162) | | | 2 | | | (385) | | | (47) | |
Consolidated net income attributable to Walmart | | $ | 7,891 | | | $ | 5,149 | | | $ | 9,564 | | | $ | 7,203 | |
| | | | | | | | |
Denominator | | | | | | | | |
Weighted-average common shares outstanding, basic | | 2,693 | | | 2,736 | | | 2,694 | | | 2,745 | |
Dilutive impact of share-based awards | | 10 | | | 9 | | | 9 | | | 10 | |
Weighted-average common shares outstanding, diluted | | 2,703 | | | 2,745 | | | 2,703 | | | 2,755 | |
| | | | | | | | |
Net income per common share attributable to Walmart | | | | | | | | |
Basic | | $ | 2.93 | | | $ | 1.88 | | | $ | 3.55 | | | $ | 2.62 | |
Diluted | | 2.92 | | | 1.88 | | | 3.54 | | | 2.61 | |
Note 3. Accumulated Other Comprehensive Loss
The following tables provide the changes in the composition of total accumulated other comprehensive loss:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions and net of immaterial income taxes) | | Currency Translation and Other | | Net Investment Hedges | | Cash Flow Hedges | | Minimum Pension Liability | | Total |
Balances as of February 1, 2023 | | $ | (10,816) | | | $ | 94 | | | $ | (951) | | | $ | (7) | | | $ | (11,680) | |
Other comprehensive income (loss) before reclassifications, net | | 600 | | | — | | | (82) | | | 2 | | | 520 | |
Reclassifications to income, net | | — | | | — | | | 13 | | | — | | | 13 | |
Balances as of April 30, 2023 | | $ | (10,216) | | | $ | 94 | | | $ | (1,020) | | | $ | (5) | | | $ | (11,147) | |
Other comprehensive income (loss) before reclassifications, net | | 195 | | | — | | | 115 | | | (1) | | | 309 | |
Reclassifications to income, net | | — | | | — | | | 20 | | | — | | | 20 | |
Balances as of July 31, 2023 | | $ | (10,021) | | | $ | 94 | | | $ | (885) | | | $ | (6) | | | $ | (10,818) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions and net of immaterial income taxes) | | Currency Translation and Other | | Net Investment Hedges | | Cash Flow Hedges | | Minimum Pension Liability | | Total |
Balances as of February 1, 2022 | | $ | (8,100) | | | $ | 94 | | | $ | (748) | | | $ | (12) | | | $ | (8,766) | |
Other comprehensive income before reclassifications, net | | 225 | | | — | | | 26 | | | — | | | 251 | |
Reclassifications to income, net | | — | | | — | | | 16 | | | 1 | | | 17 | |
Balances as of April 30, 2022 | | $ | (7,875) | | | $ | 94 | | | $ | (706) | | | $ | (11) | | | $ | (8,498) | |
Other comprehensive income (loss) before reclassifications, net | | (796) | | | — | | | (622) | | | 2 | | | (1,416) | |
Reclassifications to income, net | | (309) | | | — | | | 329 | | | — | | | 20 | |
Balances as of July 31, 2022 | | $ | (8,980) | | | $ | 94 | | | $ | (999) | | | $ | (9) | | | $ | (9,894) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive loss for derivative instruments are generally recorded in interest, net, in the Company's Condensed Consolidated Statements of Income. Amounts for the minimum pension liability and currency translation are recorded in other gains and losses in the Company's Condensed Consolidated Statements of Income.
Note 4. Short-term Borrowings and Long-term Debt
The Company has various committed lines of credit in the U.S. that are used to support its commercial paper program. In April 2023, the Company renewed and extended its existing 364-day revolving credit facility of $10.0 billion as well as its five-year credit facility of $5.0 billion. In total, the Company had committed lines of credit in the U.S. of $15.0 billion at July 31, 2023 and January 31, 2023, all undrawn.
The following table provides the changes in the Company's long-term debt for the six months ended July 31, 2023:
| | | | | | | | | | | | | | | | | | | | |
(Amounts in millions) | | Long-term debt due within one year | | Long-term debt | | Total |
Balances as of February 1, 2023 | | $ | 4,191 | | | $ | 34,649 | | | $ | 38,840 | |
Proceeds from issuance of long-term debt(1) | | — | | | 4,967 | | | 4,967 | |
Repayments of long-term debt | | (4,063) | | | — | | | (4,063) | |
Reclassifications of long-term debt | | 2,773 | | | (2,773) | | | — | |
Other | | (4) | | | (37) | | | (41) | |
Balances as of July 31, 2023 | | $ | 2,897 | | | $ | 36,806 | | | $ | 39,703 | |
(1) Proceeds from issuance of long-term debt are net of deferred loan costs and any related discount or premium.
Debt Issuances
Information on significant long-term debt issued during the six months ended July 31, 2023, for general corporate purposes, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions) | | | | | | | | | | |
Issue Date | | Principal Amount | | Maturity Date | | | | Fixed Interest Rate | | Net Proceeds |
April 18, 2023 | | $ | 750 | | | April 15, 2026 | | | | 4.00% | | $ | 748 | |
April 18, 2023 | | $ | 750 | | | April 15, 2028 | | | | 3.90% | | $ | 746 | |
April 18, 2023 | | $ | 500 | | | April 15, 2030 | | | | 4.00% | | $ | 497 | |
April 18, 2023 | | $ | 1,500 | | | April 15, 2033 | | | | 4.10% | | $ | 1,491 | |
April 18, 2023 | | $ | 1,500 | | | April 15, 2053 | | | | 4.50% | | $ | 1,485 | |
Total | | | | | | | | | | $ | 4,967 | |
These issuances are senior, unsecured notes which rank equally with all other senior, unsecured debt obligations of the Company, and are not convertible or exchangeable. These issuances do not contain any financial covenants and do not restrict the Company's ability to pay dividends or repurchase company stock.
Debt Repayments
Information on significant long-term debt repayments during the six months ended July 31, 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions) | | | | | | | | | | |
Maturity Date | | | | Principal Amount | | Fixed vs. Floating | | Interest Rate | | Repayment |
April 11, 2023 | | | | $ | 1,750 | | | Fixed | | 2.55% | | $ | 1,750 | |
June 26, 2023 | | | | $ | 2,280 | | | Fixed | | 3.40% | | $ | 2,280 | |
Total | | | | | | | | | | $ | 4,030 | |
Note 5. Fair Value Measurements
Assets and liabilities recorded at fair value are measured using the fair value hierarchy, which prioritizes the inputs used in measuring fair value. The levels of the fair value hierarchy are:
•Level 1: observable inputs such as quoted prices in active markets;
•Level 2: inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•Level 3: unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions.
The Company measures the fair value of certain equity investments, including certain equity method investments, on a recurring basis within other long-term assets in the accompanying Condensed Consolidated Balance Sheets. The fair value of these investments is as follows:
| | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions) | | | | | | | | Fair Value as of July 31, 2023 | | | Fair Value as of January 31, 2023 |
Equity investments measured using Level 1 inputs | | | | | | | | $ | 4,424 | | | | $ | 5,099 | |
Equity investments measured using Level 2 inputs | | | | | | | | 6,281 | | | | 5,570 | |
| | | | | | | | | | | |
Total | | | | | | | | $ | 10,705 | | | | $ | 10,669 | |
Changes in fair value of equity securities, as well as certain immaterial equity method investments where the Company has elected the fair value option measured on a recurring basis, are recognized within other gains and losses in the Condensed Consolidated Statements of Income. These fair value changes, along with certain other immaterial investment activity, resulted in net gains of $3.2 billion and $36 million for the three and six months ended July 31, 2023, respectively, and a net gain of $0.8 billion and a net loss of $1.2 billion for the three and six months ended July 31, 2022, respectively. These fair value changes were primarily due to net changes in the underlying stock prices of those investments. Equity investments without readily determinable fair values are carried at cost and adjusted for any observable price changes or impairments within other gains and losses in the Condensed Consolidated Statements of Income.
Derivatives
The Company also has derivatives recorded at fair value. Derivative fair values are the estimated amounts the Company would receive or pay upon termination of the related derivative agreements as of the reporting dates. The fair values have been measured using the income approach and Level 2 inputs, which include the relevant interest rate and foreign currency forward curves. As of July 31, 2023 and January 31, 2023, the notional amounts and fair values of these derivatives were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| July 31, 2023 | | January 31, 2023 | |
(Amounts in millions) | Notional Amount | | Fair Value | | Notional Amount | | Fair Value | |
Receive fixed-rate, pay variable-rate interest rate swaps designated as fair value hedges | $ | 6,271 | | | $ | (765) | | (1) | $ | 8,021 | | | $ | (689) | | (1) |
| | | | | | | | |
Receive fixed-rate, pay fixed-rate cross-currency swaps designated as cash flow hedges | 6,019 | | | (1,295) | | (1) | 5,900 | | | (1,423) | | (1) |
| | | | | | | | |
Total | $ | 12,290 | | | $ | (2,060) | | | $ | 13,921 | | | $ | (2,112) | | |
(1) Classified primarily in deferred income taxes and other within the Company's Condensed Consolidated Balance Sheets.
Nonrecurring Fair Value Measurements
In addition to assets and liabilities recorded at fair value on a recurring basis, the Company's assets and liabilities are also subject to nonrecurring fair value measurements. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company did not have any material assets or liabilities resulting in nonrecurring fair value measurements as of July 31, 2023 in the Company's Condensed Consolidated Balance Sheets.
Other Fair Value Disclosures
The Company records cash and cash equivalents, restricted cash, and short-term borrowings at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities.
The Company's long-term debt is also recorded at cost. The fair value is estimated using Level 2 inputs based on the Company's current incremental borrowing rate for similar types of borrowing arrangements. The carrying value and fair value of the Company's long-term debt as of July 31, 2023 and January 31, 2023, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | July 31, 2023 | | January 31, 2023 |
(Amounts in millions) | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Long-term debt, including amounts due within one year | | $ | 39,703 | | | $ | 37,988 | | | $ | 38,840 | | | $ | 38,169 | |
Note 6. Contingencies
Legal Proceedings
The Company is involved in a number of legal proceedings and certain regulatory matters. The Company records a liability for those legal proceedings and regulatory matters when it determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company also discloses when it is reasonably possible that a material loss may be incurred. From time to time, the Company may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company and its shareholders.
Unless stated otherwise, the matters discussed below, if decided adversely to or settled by the Company, individually or in the aggregate, may result in a liability material to the Company's financial position, results of operations or cash flows.
Settlement Framework Regarding Multidistrict and State or Local Opioid-Related Litigation
During fiscal 2023, the Company accrued a liability for approximately $3.3 billion for the Settlement Framework (described below) and other previously agreed upon state and tribal settlements. The Settlement Framework includes no admission of wrongdoing or liability by the Company, and the Company continues to believe it has substantial factual and legal defenses to opioids-related litigation.
In December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous lawsuits filed against a wide array of defendants by various plaintiffs, including counties, cities, healthcare providers, Native American tribes, individuals, and third-party payers, asserting claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation is entitled In re National Prescription Opiate Litigation (MDL No. 2804) (the "MDL") and is pending in the U.S. District Court for the Northern District of Ohio. The Company is named as a defendant in some of the cases included in the MDL.
Similar cases that name the Company also have been filed in state courts by state, local, and tribal governments, healthcare providers, and other plaintiffs. Plaintiffs in these state court cases and in the MDL are seeking compensatory and punitive damages, as well as injunctive relief including abatement. The Company has also been responding to subpoenas, information requests, and investigations from governmental entities related to nationwide controlled substance dispensing and distribution practices involving opioids.
On November 15, 2022, the Company announced it had agreed to financial amounts and payment terms to resolve substantially all opioids-related lawsuits filed against the Company by states, political subdivisions, and Native American tribes whether as part of the MDL (excluding, however, a single, two-county trial described further below) or in state court, as well as all potential claims that could be made against the Company by states, political subdivisions, and Native American tribes for up to approximately $3.1 billion (the "Settlement Amount"). The Settlement Amount includes amounts for remediation of alleged harms as well as attorneys' fees and costs and also includes some, but not all, amounts from previously agreed recent settlements by the Company. One settlement framework with corresponding conditions and participation thresholds applies for the states and political subdivisions, and another settlement framework with corresponding conditions and participation thresholds applies for the Native American tribes. Both settlement frameworks are referred to collectively as the "Settlement Framework."
The Settlement Framework, among other applicable conditions, provides that payments to states and political subdivisions are contingent upon the number of states and political subdivisions, including those states and political subdivisions who have not yet sued the Company, that agree to participate in the Settlement Framework or otherwise have their claims foreclosed within a prescribed deadline. On December 20, 2022, the Company announced that it had settlement agreements with all 50 states, including four states that previously settled with the Company, as well as the District of Columbia, Puerto Rico, and three other U.S. territories (the "Settling States"), thus satisfying the initial threshold of required participation by Settling States. On August 22, 2023, the settlement administrator determined that a sufficient number of political subdivisions had agreed to participate in the Settlement Framework, which was a necessary condition for the Settlement Framework to become effective. The Settlement Framework will become effective 15 days later, on September 6, 2023. The Company is required to deposit up to the full portion of the Settlement Amount attributable to the Settling States within 15 days following the effective date of the Settlement Framework, which the Company expects to pay during the fiscal quarter ending October 31, 2023. Although the settlement administrator has determined a sufficient number of political subdivisions have agreed to participate in the State Settlement Framework, and thus the State Settlement Framework will become effective, eligible political subdivisions still have until July 15, 2025 to join the State Settlement Framework.
Through July 2023, the Company has paid approximately $0.6 billion in the aggregate for separate settlements with Cherokee Nation, New Mexico, Florida, West Virginia, and Alabama, as well as various Native American tribes (excluding Cherokee Nation) that agreed to participate in the Settlement Framework or otherwise have their claims foreclosed within a prescribed deadline. Of the original approximately $3.3 billion accrued liability for the Settlement Framework and other settlements, approximately $2.8 billion remains and is recorded in accrued liabilities within the Company's Condensed Consolidated Balance Sheet as of July 31, 2023.
Other Opioid-Related Litigation
The Company will continue to vigorously defend against any opioid-related litigation not covered or otherwise resolved by the Settlement Framework, including, but not limited to, each of the matters described below; any other actions filed by healthcare providers, individuals, and third-party payers; and any action filed by a political subdivision or Native American tribe that is not resolved by the Settlement Framework. Accordingly, the Company has not accrued a liability for these opioid-related litigation matters nor can the Company reasonably estimate any loss or range of loss that may arise from these matters. The Company can provide no assurance as to the scope and outcome of any of these matters and no assurance that its business, financial position, results of operations or cash flows will not be materially adversely affected.
Two-County Trial and MDL Bellwethers; and Canada. The liability phase of a single, two-county trial in one of the MDL cases resulted in a jury verdict on November 23, 2021, finding in favor of the plaintiffs as to the liability of all defendants, including
the Company. The abatement phase of the single, two-county trial resulted in a judgment on August 17, 2022, that ordered all three defendants, including the Company, to pay an aggregate amount of approximately $0.7 billion over fifteen years, on a joint and several liability basis, and granted the plaintiffs injunctive relief. On September 7, 2022, the Company filed an appeal with the Sixth Circuit Court of Appeals. The monetary aspect of the judgment is stayed pending appeal, and the injunctive aspect of the judgment went into effect on February 20, 2023.
The MDL designated five additional single-county cases as bellwethers to proceed through discovery; however, these five counties have elected to participate in the Settlement Framework and receive a portion of the Settlement Amount rather than go to trial. The MDL may designate additional bellwethers of cases brought by healthcare providers and third-party payers.
Wal-Mart Canada Corp. and certain other subsidiaries of the Company have been named as defendants in two putative class action complaints filed in Canada related to dispensing and distribution practices involving opioids. These matters remain pending.
DOJ Opioid Civil Litigation. On December 22, 2020, the U.S. Department of Justice (the "DOJ") filed a civil complaint in the U.S. District Court for the District of Delaware alleging that the Company unlawfully dispensed controlled substances from its pharmacies and unlawfully distributed controlled substances to those pharmacies. The complaint alleges that this conduct resulted in violations of the Controlled Substances Act. The DOJ is seeking civil penalties and injunctive relief. The Company initially moved to dismiss the DOJ complaint on February 22, 2021. After that motion was fully briefed, the DOJ filed an amended complaint on October 7, 2022. On November 7, 2022, the Company filed a partial motion to dismiss the amended complaint. That motion remains pending.
Opioid-Related Securities Class Actions and Derivative Litigation. In addition, the Company is the subject of two securities class actions alleging violations of the federal securities laws regarding the Company's disclosures with respect to opioids, filed in the U.S. District Court for the District of Delaware on January 20, 2021 and March 5, 2021, purportedly on behalf of a class of investors who acquired Walmart stock from March 30, 2016 through December 22, 2020. Those cases have been consolidated. On October 8, 2021, the defendants filed a motion to dismiss the consolidated securities action. After the parties had fully briefed the motion to dismiss, on September 9, 2022, the Court entered an order permitting the plaintiffs to file an amended complaint, which was filed on October 14, 2022, and which revised the applicable putative class of investors to those who acquired Walmart stock from March 31, 2017 through December 22, 2020. On November 16, 2022, the defendants filed a motion to dismiss the amended complaint. That motion remains pending.
Derivative actions were also filed by two of the Company's shareholders in the U.S. District Court for the District of Delaware on February 9, 2021 and April 16, 2021, alleging breach of fiduciary duties against certain of its current and former directors with respect to oversight of the Company's distribution and dispensing of opioids and also alleging violations of the federal securities laws and other breaches of duty by current directors and two current officers in connection with the Company's opioids disclosures. Those cases have been stayed pending developments in other opioids litigation matters. On September 27, 2021, three shareholders filed a derivative action in the Delaware Court of Chancery alleging that certain members of the current Board of Directors and certain former officers breached their fiduciary duties in failing to adequately oversee the Company's prescription opioids business. The defendants moved to dismiss and/or to stay proceedings on December 21, 2021, and the plaintiffs responded by filing an amended complaint on February 22, 2022. On April 20, 2022, the defendants moved to dismiss and/or to stay proceedings with respect to the amended complaint. In two orders issued on April 12 and 26, 2023, the Court of Chancery granted the defendants' motion to dismiss with respect to claims involving the Company's distribution practices and denied the remainder of the motion, including the Company's request to stay the litigation. On May 5, 2023, the Company's Board of Directors (the "Board") appointed an independent Special Litigation Committee (the "SLC") to investigate the allegations regarding certain current and former officers and directors named in the various derivative proceedings regarding oversight with respect to opioids. The Board has authorized the SLC to retain independent legal counsel and such other advisors as the SLC deems appropriate in carrying out its duties. The derivative matter pending in the Delaware Court of Chancery is stayed until the SLC completes its investigation.
Other Legal Proceedings
Asda Equal Value Claims. Asda, formerly a subsidiary of the Company, was and still is a defendant in certain equal value claims that began in 2008 and are proceeding before an Employment Tribunal in Manchester in the United Kingdom on behalf of current and former Asda store employees, as well as additional claims in the High Court of the United Kingdom (the "Asda Equal Value Claims"). Further claims may be asserted in the future. Subsequent to the divestiture of Asda in February 2021, the Company continues to oversee the conduct of the defense of these claims. While potential liability for these claims remains with Asda, the Company has agreed to provide indemnification with respect to certain of these claims up to a contractually determined amount. The Company cannot predict the number of such claims that may be filed, and cannot reasonably estimate any loss or range of loss that may arise related to these proceedings. Accordingly, the Company can provide no assurance as to the scope and outcome of these matters.
Money Transfer Agent Services Matters. The Company has responded to grand jury subpoenas issued by the United States Attorney's Office for the Middle District of Pennsylvania on behalf of the DOJ seeking documents regarding the Company's consumer fraud prevention program and anti-money laundering compliance related to the Company's money transfer services,
where Walmart is an agent. The most recent subpoena was issued in August 2020. The Company continues to cooperate with and provide information in response to requests from the DOJ. The Company has also responded to civil investigative demands from the United States Federal Trade Commission (the "FTC") in connection with the FTC's investigation related to money transfers and the Company's anti-fraud program in its capacity as an agent. On June 28, 2022, the FTC filed a complaint against the Company in the U.S. District Court for the Northern District of Illinois alleging that Walmart violated the Federal Trade Commission Act and the Telemarketing Sales Rule regarding its money transfer agent services and is requesting non-monetary relief and civil penalties. On August 29, 2022, the Company filed a motion to dismiss the complaint. On October 5, 2022, the FTC responded to the motion, and on October 28, 2022, the Company filed its reply. On March 27, 2023, the Court issued an opinion dismissing the FTC's claim under the Telemarketing Sales Rule and denying Walmart's motion to dismiss the claim under Section 5 of the Federal Trade Commission Act. On April 12, 2023, Walmart filed a motion to certify the Court's March 27, 2023, order for interlocutory appeal. The FTC's response to Walmart's motion to certify an interlocutory appeal was filed on May 8, 2023; Walmart filed its reply on May 18, 2023. On June 30, 2023, the FTC filed an amended complaint against Walmart again asserting claims under the Federal Trade Commission Act and Telemarketing Sales Rule. Walmart's motion to dismiss the amended complaint was filed on August 11, 2023; the FTC's response is due on September 15, 2023; and Walmart's reply is due on October 9, 2023. On July 20, 2023, the Court denied Walmart's motion to certify the Court's March 27, 2023, order for interlocutory appeal, finding that it would be more orderly to consider a request for interlocutory appeal after a ruling on Walmart's motion to dismiss the amended complaint. The Company intends to vigorously defend these matters. However, the Company can provide no assurance as to the scope and outcome of these matters and cannot reasonably estimate any loss or range of loss that may arise. Accordingly, the Company can provide no assurance that its business, financial position, results of operations or cash flows will not be materially adversely affected.
Note 7. Segments and Disaggregated Revenue
Segments
The Company is engaged in the operation of retail and wholesale stores and clubs, as well as eCommerce websites, located throughout the U.S., Africa, Canada, Central America, Chile, China, India and Mexico. The Company's operations are conducted in three reportable segments: Walmart U.S., Walmart International and Sam's Club. The Company defines its segments as those operations whose results the chief operating decision maker ("CODM") regularly reviews to analyze performance and allocate resources. The Company sells similar individual products and services in each of its segments. It is impractical to segregate and identify revenues for each of these individual products and services.
The Walmart U.S. segment includes the Company's mass merchandising concept in the U.S., as well as eCommerce, which includes omni-channel initiatives and certain other business offerings such as advertising services through Walmart Connect. The Walmart International segment consists of the Company's operations outside of the U.S., as well as eCommerce and omni-channel initiatives. The Sam's Club segment includes the warehouse membership clubs in the U.S., as well as samsclub.com and omni-channel initiatives. Corporate and support consists of corporate overhead and other items not allocated to any of the Company's segments.
The Company measures the results of its segments using, among other measures, each segment's net sales and operating income, which includes certain corporate overhead allocations. From time to time, the Company revises the measurement of each segment's operating income and other measures, including any corporate overhead allocations, as determined by the information regularly reviewed by its CODM. When the measurement of a segment significantly changes, previous period amounts and balances are reclassified to be comparable to the current period's presentation.
Net sales by segment are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended July 31, | | Six Months Ended July 31, |
(Amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales: | | | | | | | | |
Walmart U.S. | | $ | 110,854 | | | $ | 105,130 | | | $ | 214,755 | | | $ | 202,034 | |
Walmart International | | 27,596 | | | 24,350 | | | 54,200 | | | 48,113 | |
Sam's Club | | 21,830 | | | 21,901 | | | 42,329 | | | 41,522 | |
Net sales | | $ | 160,280 | | | $ | 151,381 | | | $ | 311,284 | | | $ | 291,669 | |
Operating income by segment, as well as unallocated operating expenses for corporate and support, interest, net, and other gains and losses are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended July 31, | | Six Months Ended July 31, | | |
(Amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 | | | | |
Operating income (loss): | | | | | | | | | | | | |
Walmart U.S. | | $ | 6,114 | | | $ | 5,683 | | | $ | 11,098 | | | $ | 10,145 | | | | | |
Walmart International | | 1,190 | | | 1,043 | | | 2,354 | | | 1,815 | | | | | |
Sam's Club | | 521 | | | 427 | | | 979 | | | 887 | | | | | |
Corporate and support | | (509) | | | (299) | | | (875) | | | (675) | | | | | |
Operating income | | 7,316 | | | 6,854 | | | 13,556 | | | 12,172 | | | | | |
Interest, net | | 494 | | | 448 | | | 1,051 | | | 867 | | | | | |
| | | | | | | | | | | | |
Other (gains) and losses | | (3,905) | | | (238) | | | (910) | | | 1,760 | | | | | |
Income before income taxes | | $ | 10,727 | | | $ | 6,644 | | | $ | 13,415 | | | $ | 9,545 | | | | | |
Disaggregated Revenues
In the following tables, segment net sales are disaggregated by either merchandise category or by market. From time to time, the Company revises the assignment of net sales of a particular item to a merchandise category. When the assignment changes, previous period amounts are reclassified to be comparable to the current period's presentation.
In addition, net sales related to eCommerce are provided for each segment, which include omni-channel sales, where a customer initiates an order digitally and the order is fulfilled through a store or club.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions) | | Three Months Ended July 31, | | Six Months Ended July 31, |
Walmart U.S. net sales by merchandise category | | 2023 | | 2022 | | 2023 | | 2022 |
Grocery | | $ | 66,240 | | | $ | 61,469 | | | $ | 129,647 | | | $ | 118,233 | |
General merchandise | | 29,076 | | | 30,073 | | | 54,841 | | | 57,452 | |
Health and wellness | | 13,374 | | | 11,331 | | | 26,222 | | | 22,225 | |
Other categories | | 2,164 | | | 2,257 | | | 4,045 | | | 4,124 | |
Total | | $ | 110,854 | | | $ | 105,130 | | | $ | 214,755 | | | $ | 202,034 | |
Of Walmart U.S.'s total net sales, approximately $15.5 billion and $12.5 billion related to eCommerce for the three months ended July 31, 2023 and 2022, respectively, and approximately $30.0 billion and $23.9 billion related to eCommerce for the six months ended July 31, 2023 and 2022, respectively.
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(Amounts in millions) | | Three Months Ended July 31, | | Six Months Ended July 31, |
Walmart International net sales by market | | 2023 | | 2022 | | 2023 | | 2022 |
Mexico and Central America | | $ | 11,994 | | | $ | 9,690 | | | $ | 22,952 | | | $ | 18,778 | |
Canada | | 5,842 | | | 5,767 | | | 10,982 | | | 10,917 | |
China | | 3,896 | | | 3,397 | | | 8,820 | | | 7,524 | |
| | | | | | | | |
Other | | 5,864 | | | 5,496 | | | 11,446 | | | 10,894 | |
Total | | $ | 27,596 | | | $ | 24,350 | | | $ | 54,200 | | | $ | 48,113 | |
Of Walmart International's total net sales, approximately $5.8 billion and $4.6 billion related to eCommerce for the three months ended July 31, 2023 and 2022, respectively, and approximately $11.2 billion and $8.9 billion related to eCommerce for the six months ended July 31, 2023 and 2022, respectively.
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(Amounts in millions) | | Three Months Ended July 31, | | Six Months Ended July 31, |
Sam's Club net sales by merchandise category | | 2023 | | 2022 | | 2023 | | 2022 |
Grocery and consumables | | $ | 14,325 | | | $ | 13,392 | | | $ | 27,823 | | | $ | 25,693 | |
Fuel, tobacco and other categories | | 3,338 | | | 4,390 | | | 6,526 | | | 7,948 | |
Home and apparel | | 2,428 | | | 2,492 | | | 4,507 | | | 4,607 | |
Health and wellness | | 1,186 | | | 1,006 | | | 2,342 | | | 2,016 | |
Technology, office and entertainment | | 553 | | | 621 | | | 1,131 | | | 1,258 | |
Total | | $ | 21,830 | | | $ | 21,901 | | | $ | 42,329 | | | $ | 41,522 | |
Of Sam's Club's total net sales, approximately $2.4 billion and $2.1 billion related to eCommerce for the three months ended July 31, 2023 and 2022, respectively, and approximately $4.7 billion and $3.9 billion related to eCommerce for the six months ended July 31, 2023 and 2022, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
This discussion, which presents Walmart Inc.'s ("Walmart," the "Company," "our," or "we") results for periods occurring in the fiscal year ending January 31, 2024 ("fiscal 2024") and the fiscal year ended January 31, 2023 ("fiscal 2023"), should be read in conjunction with our Condensed Consolidated Financial Statements as of and for the three and six months ended July 31, 2023, and the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of and for the year ended January 31, 2023, the accompanying notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the year ended January 31, 2023. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of each of the three segments of our business to provide a better understanding of how each of those segments and its results of operations affect the financial condition and results of operations of the Company as a whole.
Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, we discuss segment operating income, comparable store and club sales and other measures. Management measures the results of the Company's segments using each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income and other measures as determined by the information regularly reviewed by our chief operating decision maker.
Comparable store and club sales, or comparable sales, is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs for a particular period from the corresponding prior year period. Walmart's definition of comparable sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as eCommerce sales. We measure the eCommerce sales impact by including all sales initiated digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our strategy, such as our Walmart Connect advertising business. Sales at a store that has changed in format are excluded from comparable sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than five percent. Sales related to divested businesses are excluded from comparable sales, and sales related to acquisitions are excluded until such acquisitions have been owned for 12 months. Comparable sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable sales varies across the retail industry. As a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other companies.
In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. Additionally, no currency exchange rate fluctuations are calculated for non-USD acquisitions until owned for 12 months. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company and the Walmart International segment in the future.
Each of our segments contributes to the Company's operating results differently. Each, however, has generally maintained a relatively consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates.
We operate in the highly competitive omni-channel retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as eCommerce businesses and companies that offer services in digital advertising, fulfillment and delivery services, health and wellness, and financial services. Many of these competitors are national, regional or international chains or have a national or international omni-channel or eCommerce presence. We compete with a number of companies for attracting and retaining quality employees ("associates"). We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather and other risks related to climate change, global health epidemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain and inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment.
We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs. However, like other retail companies, we have experienced continued inflation that impacts our merchandise costs. The impact to our net sales and gross profit margin is influenced in part by our pricing and merchandising strategies in response to cost increases. Those pricing strategies include, but are not limited to: absorbing cost increases instead of passing those cost increases on to our customers and members; reducing prices in certain merchandise categories; focusing on opening price points for certain food categories; and when necessary, passing cost increases on to our customers and members. Merchandising strategies include, but are not limited to: working with our suppliers to reduce product costs and share in absorbing cost increases; focusing on private label brands and smaller pack sizes; earlier-than-usual purchasing and in greater volumes or moderating purchasing in certain categories; and securing ocean carrier and container capacity. These strategies have and may continue to impact gross profit as a percentage of net sales.
Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in our securities can be found herein under "Item 5. Other Information." We expect continued uncertainty in our business and the global economy due to pressure from inflation, a challenging macro environment, geopolitical conditions, supply chain disruptions, volatility in employment trends and consumer confidence. For a detailed discussion on results of operations by reportable segment, refer to "Results of Operations" below.
Company Performance Metrics
We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs. At times, we adjust our business strategies to maintain and strengthen our competitive positions in the countries in which we operate. We define our financial priorities as follows:
•Growth - serve customers through a seamless omni-channel experience;
•Margin - improve our operating income margin through productivity initiatives as well as category and business mix; and
•Returns - improve our Return on Investment ("ROI") through margin improvement and disciplined capital spend.
Growth
Our objective of prioritizing growth means we will focus on serving customers and members however they want to shop through our omni-channel business model. This includes increasing comparable store and club sales through increasing membership at Sam's Club and through Walmart+, accelerating eCommerce sales growth and expansion of omni-channel initiatives that complement our strategy.
Comparable sales is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, including eCommerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable sales using the retail calendar (also known as the 4-5-4 calendar). To be consistent with the retail industry, we provide comparable sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable sales below, we are referring to our calendar comparable sales calculated using our fiscal calendar, which may result in differences when compared to comparable sales using the retail calendar. We focus on comparable sales in the U.S. as we believe it is a meaningful metric within the context of the U.S. retail market where there is a single currency, one inflationary market and generally consistent store and club formats from year to year.
Calendar comparable sales, as well as the impact of fuel, for the three and six months ended July 31, 2023 and 2022, were as follows:
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| | Three Months Ended July 31, | | Six Months Ended July 31, |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| | With Fuel | | Fuel Impact | | With Fuel | | Fuel Impact |
Walmart U.S. | | 5.9 | % | | 7.0 | % | | (0.3) | % | | 0.6 | % | | 6.7 | % | | 5.5 | % | | (0.3) | % | | 0.5 | % |
Sam's Club | | (0.2) | % | | 17.3 | % | | (5.6) | % | | 8.0 | % | | 2.1 | % | | 17.4 | % | | (4.4) | % | | 7.5 | % |
Total U.S. | | 4.9 | % | | 8.7 | % | | (1.2) | % | | 1.9 | % | | 5.9 | % | | 7.4 | % | | (1.0) | % | | 1.7 | % |
Comparable sales in the U.S., including fuel, increased 4.9% and 5.9% for the three and six months ended July 31, 2023, respectively, when compared to the same periods in the previous fiscal year. The Walmart U.S. segment had comparable sales growth of 5.9% and 6.7% for the three and six months ended July 31, 2023, respectively, driven by growth in average ticket, including strong sales in grocery and health and wellness, as well as elevated inflation impacts in certain merchandise categories, combined with growth in transactions. The increases were partially offset by a modest decrease in general merchandise sales. The Walmart U.S. segment's eCommerce sales positively contributed approximately 2.5% and 2.6% to comparable sales for the three and six months ended July 31, 2023, respectively, which was primarily driven by store pickup and delivery.
Comparable sales at the Sam's Club segment decreased 0.2% and increased 2.1% for the three and six months ended July 31, 2023, respectively. The decrease in comparable sales for the three months ended July 31, 2023 was primarily due to lower fuel sales from deflation in this category, offset by growth in merchandise sales, which benefited from growth in transactions and average ticket and included elevated inflation impacts on certain merchandise categories. Growth in comparable sales for the six months ended July 31, 2023 benefited from growth in average ticket and transactions and included elevated inflation impacts in certain merchandise categories, partially offset by lower fuel sales due to deflation in this category. The Sam's Club segment's eCommerce sales positively contributed approximately 1.8% and 1.7% to comparable sales for the three and six months ended July 31, 2023, respectively, which was primarily driven by Curbside Pickup and Ship to Home.
Margin