wal-mart stores, inc. (nyse: wmt)
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Wal-Mart Stores, Inc. (NYSE: WMT)1
Wal-Mart Stores, Inc. (NYSE: WMT)
Bank of America Merrill Lynch Consumer & Retail ConferenceMarch 11, 2014
Charles HolleyExecutive Vice President & CFO
Wal-Mart Stores, Inc. (NYSE: WMT)2
Forward-looking statement
Walmart includes the following cautionary statement so that any forward-looking statements made by, or on behalf of, Walmart will enjoy the safe harbor protection of the PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, as amended. Such forward-looking statements, which will describe our objectives, plans, goals, targets or expectations, can be identified by their use of words or phrases such as “anticipate,” “estimate,” “expect,” “forecast,” “plan,” “projected,” “will be” or words or phrases of similar import. Statements of our expectations for FY15, and any subsequent fiscal years are forward-looking. Walmart’s actual results might differ materially from those expressed or implied in a forward-looking statement as a result of factors including, among others, recessionary economic environment, cost of goods, competitive pressures, availability of credit, geopolitical conditions and events, labor and healthcare costs, inflation, deflation, consumer spending patterns, debt levels and credit access, currency exchange fluctuations, trade restrictions, tariff and freight rate changes, fluctuations in fuel, other energy, transportation and utility costs, health care and other insurance costs, accident costs, interest rate fluctuations, other capital market conditions, weather conditions, storm-related damage to facilities, customer traffic, factors limiting our ability to construct, expand or relocate stores, regulatory matters and other risks set forth in our SEC filings. Our most recent Annual Report on Form 10-K and our other filings with the SEC contain more information concerning factors that, along with changes in facts, assumptions not being realized or other circumstances, could cause actual results to differ materially from those expressed or implied in a forward-looking statement. Walmart undertakes no obligation to update any forward-looking statement to reflect subsequent events.
Wal-Mart Stores, Inc. (NYSE: WMT)3
Net Sales($ Billions)
FY10 FY11 FY12 FY13 FY14
$24.0
$25.5
$26.6
$27.7 $27.8 $B
FY10 FY11 FY12 FY13 FY14
$405$419
$444
$466$473
$B
Strong sales growth5-yr. CAGR: 3.4%
Continued op inc growth 5-yr. CAGR: 4.1%
EPS
FY10 FY11 FY12 FY13 FY14
$3.73
$4.18
$4.54
$5.01 $5.11
Returned value (EPS)5-yr. CAGR: 8.8%
FY 14 underlying consolidated results
Wal-Mart Stores, Inc. (NYSE: WMT)4
Financial priorities Metrics FY 14
guidance FY 14 actual Report card
Growth
Sales growth 2 - 3%* 1.6% X
Square footage growth 3 - 4% 3%
Leverage
Operating expense < sales 2.0% vs. 1.6% X
Operating income growth > sales 0.2% vs. 1.6% X
Returns Free cash flow Strong Strong
FY 14 guidance vs. report card
*Revised FY 14 Q2 earnings call Aug. 15, 2013
Wal-Mart Stores, Inc. (NYSE: WMT)5
Net sales
~$279.4B Increase of 2% or $5B
Operating expenses
18 bps of leverage4 consecutive years
Operating income
~$22.4BIncrease of 4% or $860M
Grew profit faster than sales
Gross profit rate -1 bps
Priceinvestment
Walmart U.S. delivered a strong FY 14
Wal-Mart Stores, Inc. (NYSE: WMT)6
Net sales
~$50.6B Increase of 1.6% or $785M
Operating expenses
14 bps of deleverage
Operating income
~$2.0BIncrease of 5.0%
Grew profit faster than sales
Gross profit rate -1 bps
Priceinvestment
Membership income
5.9%
Sam’s Club increased membership income in FY 14
Note: All data is without fuel
Wal-Mart Stores, Inc. (NYSE: WMT)7
Net sales
~$136.5B Increase of 1.3% or $1.8B
Operating expenses
18 bps of deleverage
Operating income
~$6.3Bdecrease of 4.7%
Gross profit rate -10 bps
Priceinvestment
Walmart International invested in price in FY 14
Wal-Mart Stores, Inc. (NYSE: WMT)8
Financial priorities Metrics FY 15 guidance* Updated FY 15
guidance**
GrowthSales growth 3 - 5% At low end
Square footage growth 33 - 37M sq. ft. 35 - 39M sq. ft.
Leverage
Operating expense < sales < sales
Operating income growth > salesMay not grow
faster, or at the same rate as sales
Returns Free cash flow Strong Strong
FY 15 guidance
*October 15, 2013**February 20, 2014
Wal-Mart Stores, Inc. (NYSE: WMT)9
Keys to Walmart’s success in FY 15
Strengthen global compliance & ethics
model
Continue strong financial position
Increase comp sales
Drive EDLC & EDLP
Develop associate talent
Grow e-commerce & m-commerce
Wal-Mart Stores, Inc. (NYSE: WMT)10
Headwinds
Macroeconomic headwinds Weather
Priorities
Increase comp sales Drive productivityProduct and brand innovation
Small format acceleration E-commerce
Bottom 10%
Inconsistentexecution
Deflation
Walmart U.S. FY 15 agenda
Wal-Mart Stores, Inc. (NYSE: WMT)11
Headwinds
Macroeconomic headwinds Weather
Priorities
Merchandise differentiation
Personalize with Big Data
Enhance member experience
Increase member access/e-commerce
Deflation
Sam’s Club FY 15 agenda
Small business challenges
Wal-Mart Stores, Inc. (NYSE: WMT)12
Headwinds
Macroeconomic headwinds
Priorities
Increase comp sales in each market
Improve capital discipline
Drive productivity loopInvest in price
Extending credit
International FY 15 agenda
Wholesale formats Key market challenges
Wal-Mart Stores, Inc. (NYSE: WMT)13
• Continue incremental investments• Add strategic acquisitions
• Launch Pangaea• walmart.com enhancements
• Increase fulfillment capabilities• Drive greater sales in 4 key markets
– Launch, expand others
Priorities
Global Ecommerce FY 15 agenda
Wal-Mart Stores, Inc. (NYSE: WMT)14
Driving innovation to combine physical & digital
Walmart’s full assortment
Convenient mix of assortment & services
Express
Supercenter walmart.comGM & fresh Endless aisle
Leveraging global best practices
Wal-Mart Stores, Inc. (NYSE: WMT)15
Accelerated roll-out of Walmart U.S. small stores
Total Neighborhood Market & Walmart Express Total units by year
FY 11 – FY 15Up to ~645
Expansive growth to continue in the next 3 years
+320% growth in 4 years
◄Walmart Express
FY11 FY12 FY13 FY14 FY15
153 168241
34610
13
20 ~500 to
525
Up to120
◄Neighborhood Market
Based on fiscal year -end unit counts
Wal-Mart Stores, Inc. (NYSE: WMT)16
(US$ billions)
Segment Actual FY14 FY 15 guidance* Updated FY 15 guidance**
Walmart U.S. $6.4 $5.8 - $6.3 $6.4 - $6.9
Sam’s Club $1.1 $1.0 $1.0
Walmart International $4.4 $4.0 - $4.5 $4.0 - $4.5
Corporate and Support $1.2 $1.0 $1.0
Total $13.1 $11.8 - $12.8 $12.4 - $13.4
Capital expenditure detail
Additional $600M in Walmart U.S.
small store growth
*October 15, 2013**February 20, 2014
Wal-Mart Stores, Inc. (NYSE: WMT)17
1. Grow the businesso Organic growth
• Stores• e-commerce• Leverage
o Acquisitions
2. Dividends
3. Share repurchases
Cashfrom
operations
AA-rated Balance Sheet
Disciplined capital allocation drives efficiency
Wal-Mart Stores, Inc. (NYSE: WMT)18
Cash flow from
operations
&
net debt growth
$26.3
$13.1
$12.8
FY 14
AA rated balance sheet
$12.4 - $13.4
FY 15 E
Sources of cash* Uses of cash
CapEx
Share repurchases, dividends & acquisitions
AA rated balance sheet
Sources of cash Uses of cash
CapEx
Share repurchases & dividends
ExcesscashCash flow
from operations
&
net debt growth
Capital allocation priorities
*Not drawn to scale
Wal-Mart Stores, Inc. (NYSE: WMT)19
Lead on issues important to Walmart customers
Associate opportunity- Veterans
Healthy eating/nutritionCommunity giving
U.S. manufacturing- Suppliers
Women’s economic empowermentSustainability
Wal-Mart Stores, Inc. (NYSE: WMT)20
Key takeaways for Walmart this year
Grow comp sales
Drive operational efficiencies, productivity
Deliver disciplined capital allocation
Continue investing in Global eCommerce
Deliver strong shareholder returns
Wal-Mart Stores, Inc. (NYSE: WMT)21
Q&A
Wal-Mart Stores, Inc. (NYSE: WMT)22
Q&A
Wal-Mart Stores, Inc. (NYSE: WMT)23
Appendix
Wal-Mart Stores, Inc. (NYSE: WMT)24
Underlying EPS
The underlying diluted earnings per share from continuing operations attributable to Walmart (“Underlying EPS”) for the three months and the fiscal year ended Jan. 31, 2014 is considered a non-GAAP financial measure under the SEC’s rules because the Underlying EPS for each such period includes certain amounts not included in the diluted earning per share from continuing operations attributable to Walmart calculated in accordance with GAAP (“EPS”) for the three months and the fiscal year ended Jan. 31, 2014. Management believes that the Underlying EPS for the three months and the fiscal year ended Jan. 31, 2014 is a meaningful metric to share with investors because that metric, which adjusts EPS for each of such periods for certain items recorded in the three months and fiscal year ended Jan. 31, 2013, respectively. In addition, the metric affords investors a view of what management considers Walmart’s core earnings performance for the three months and the fiscal year ended Jan. 31, 2014 and also affords investors the ability to make a more informed assessment of such core earnings performance for each of such periods when compared to Walmart’s earnings performance for the three months and the fiscal year ended Jan. 31, 2013 respectively.
We have calculated the Underlying EPS for the three months and the fiscal year ended Jan. 31, 2014 by adjusting the EPS for each period for the amount of the dilutive impact of (1) Brazil non-income tax contingencies (“Brazil Taxes”); (2) Brazil employment claim contingencies (“Brazil Employment Matters”); (3) the closure of 54 underperforming Brazil and China stores (“Store Closures”); (4) China store lease expense charges (“Lease Matters”); (5) the India transaction (“India Transaction”); and (6) Sam’s Club U.S. staff restructuring and club closure (“Sam’s Restructuring”).
Wal-Mart Stores, Inc. (NYSE: WMT)25
Underlying EPS impacts
Fiscal Year Ended January 31, 2014
Diluted net income per common share:
Underlying EPS $5.11
Adjustments to underlying EPS
Brazil taxes (0.06)
Brazil employment matters (0.05)
Store closures (0.06)
Lease matters (0.03)
India transaction (0.05)
Sam’s restructuring (0.01)
Total impact (0.26)
EPS $4.85
Wal-Mart Stores, Inc. (NYSE: WMT)26
Underlying performance FY14Q4 D D FY’14 D D
Wal-Mart, Inc.Operating expenses percent to sales 18.23% n/a 2bps 19.12% n/a 8bps
Operating income $8,258 ($322) (3.8%) $27,783 $58 0.2%
Income from continuing operations $5,408 ($455) (7.8%) $17,415 ($289) (1.6%)
Diluted EPS $1.60 ($0.7) (4.2%) $5.11 $0.10 0.2%
Walmart InternationalOperating expenses percent to sales 18.35% n/a 11bps 19.42% n/a 18bps
Operating income $2,162 ($254) (10.5%) $6,306 ($311) (4.7%)
Diluted EPS $1.60 ($0.7) (4.2%) $5.11 $0.10 0.2%
Sam’s ClubOperating expenses percent to sales 11.84% n/a 46bps 11.75% n/a 14bps
Operating income $471 ($18) (3.7%) $2,008 $95 5.0%
Diluted EPS $1.60 ($0.7) (4.2%) $5.11 $0.10 0.2%
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