WALMART INC. 
Overview
This discussion, which presentsWalmart Inc.'s ("Walmart ," the "Company," "our," or "we") results for periods occurring in the fiscal year endingJanuary 31, 2023 ("fiscal 2023") and the fiscal year endedJanuary 31, 2022 ("fiscal 2022"), should be read in conjunction with our Condensed Consolidated Financial Statements as of and for the three and six months endedJuly 31, 2022 , 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 endedJanuary 31, 2022 , 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 endedJanuary 31, 2022 . 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, including eCommerce sales, 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 flywheel strategy such as ourWalmart 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 theU.S. dollar intoU.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 theWalmart International segment in the future. Each of our segments contributes to the Company's operating results differently. Each, however, has generally maintained a consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for theWalmart 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. 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, including the COVID-19 pandemic, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, supply chain disruptions, 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. 15
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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 seen continued supply chain disruptions contributing to higher than normal inventory levels. In addition, our merchandise costs for the six months endedJuly 31, 2022 have been impacted by high inflation, greater than what we have experienced in recent years which has increased costs and decreased profitability. 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 share in absorbing cost increases; focusing on private label brands and smaller pack sizes; earlier-than-usual purchasing and in greater volumes; 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, supply chain disruptions, volatility in employment trends and consumer confidence, ongoing uncertainties related to the COVID-19 pandemic, including, among other matters, the effectiveness and extent of administration of vaccinations and medical treatment, any of which may impact our results. 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 framework as:
•strong, efficient growth;
•consistent operating discipline; and
•strategic capital allocation.
As we execute on this financial framework, we believe our returns on capital will improve over time.
Strong, Efficient Growth Our objective of prioritizing strong, efficient growth means we will focus on the most productive growth opportunities, increasing comparable store and club sales, accelerating eCommerce sales growth and expansion of omni-channel initiatives that complement our flywheel strategy while slowing the rate of growth of new stores and clubs. At times, we make strategic investments which are focused on the long-term growth of the Company. 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.
Calendar comparable sales, as well as the impact of fuel, for the three and six
months ended
Three Months Ended July 31, Six Months Ended July 31,
2022 2021 2022 2021 2022 2021 2022 2021
With Fuel Fuel Impact With Fuel Fuel Impact
Walmart U.S . 7.0 % 5.4 % 0.6 % 0.4 % 5.5 % 5.4 % 0.5 % 0.4 %
Sam's Club 17.3 % 13.9 % 8.0 % 6.2 % 17.4 % 12.0 % 7.5 % 5.0 %
Total U.S. 8.7 % 6.7 % 1.9 % 1.3 % 7.4 % 6.4 % 1.7 % 1.1 %
Comparable sales in the U.S. , including fuel, increased 8.7% and 7.4% for the
three and six months ended July 31, 2022 , respectively, when compared to the
same period in the previous fiscal year. The Walmart U.S . segment had comparable
sales growth of 7.0% and 5.5% for the three and six months ended July 31, 2022 ,
respectively, driven by growth in average ticket, including strong food sales
and higher inflation impacts in certain merchandise categories, as well as a
slight increase in transactions. The Walmart U.S . segment's eCommerce sales
positively contributed approximately 0.6% for the three months ended July 31,
2022 , which was primarily driven by store pickup and delivery. For the six
months ended July 31, 2022 , eCommerce sales growth had a negligible impact on
the Walmart U.S . segment total comparable sales growth.
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Comparable sales at theSam's Club segment increased 17.3% and 17.4% for the three and six months endedJuly 31, 2022 , respectively. Growth in comparable sales benefited from growth in transactions and average ticket and included higher inflation impacts in certain merchandise categories. TheSam's Club segment's eCommerce sales positively contributed approximately 0.8% and 0.7% to comparable sales for the three and six months endedJuly 31, 2022 , respectively.
Consistent Operating Discipline
We operate with discipline by managing expenses and optimizing the efficiency of
how we work and creating an environment in which we have sustainable lowest cost
to serve. We invest in technology and process improvements to increase
productivity, manage inventory, and reduce costs. We measure operating
discipline through expense leverage, which we define as net sales growing at a
faster rate than operating, selling, general and administrative ("operating")
expenses.
Three Months Ended July 31, Six Months Ended July 31,
(Amounts in millions) 2022 2021 2022 2021
Net sales $ 151,381 $ 139,871 $ 291,669 $ 277,030
Percentage change from comparable period 8.2 % 2.2 % 5.3 % 2.4 %
Operating, selling, general and administrative
$ 28,511 $ 59,571 $ 56,640
expenses
Percentage change from comparable period 5.8 % (1.7) % 5.2 % 0.5 % Operating, selling, general and administrative 19.9 % 20.4 % 20.4 % 20.4 %
expenses as a percentage of net sales
Operating expenses as a percentage of net sales decreased 45 and 3 basis points for the three and six months endedJuly 31, 2022 , respectively. The decrease for the three months endedJuly 31, 2022 was primarily driven by growth in net sales, partially offset by increased wage costs in theWalmart U.S . segment. The slight decrease for the six months endedJuly 31, 2022 was primarily driven by growth in net sales and lower incremental COVID-19 costs, partially offset by increased wage costs in theWalmart U.S . segment.
Strategic Capital Allocation
Our strategy includes improving our customer-facing initiatives in stores and clubs and creating a seamless omni-channel experience for our customers. As such, we are allocating more capital to supply chain, customer-facing initiatives, technology and store remodels, and less to new store and club openings. The following table provides additional detail:
Six Months Ended
(Amounts in millions) July 31,
Allocation of Capital Expenditures 2022 2021
Supply chain, customer-facing initiatives and technology $ 4,106 $ 2,454
Store and club remodels 2,377 1,446
New stores and clubs, including expansions and relocations 21 73
Total U.S. 6,504 3,973
Walmart International 988 1,046
Total Capital Expenditures $ 7,492 $ 5,019
Returns
As we execute our financial framework, we believe our return on capital will
improve over time. We measure return on capital with our return on investment
and free cash flow metrics. In addition, we provide returns in the form of share
repurchases and dividends, which are discussed in the Liquidity and Capital
Resources section.
Return on Assets and Return on Investment
We include Return on Assets ("ROA"), the most directly comparable measure based
on our financial statements presented in accordance with generally accepted
accounting principles in the U.S. ("GAAP"), and Return on Investment ("ROI") as
metrics to assess returns on assets. While ROI is considered a non-GAAP
financial measure, management believes ROI is a meaningful metric to share with
investors because it helps investors assess how effectively Walmart is deploying
its assets. Trends in ROI can fluctuate over time as management balances
long-term strategic initiatives with possible short-term impacts. ROA was 5.8%
and 4.4% for the trailing twelve months ended July 31, 2022 and 2021,
respectively. The increase in ROA was primarily due to the increase in net
income. ROI was 13.8% and 14.8% for the trailing twelve months ended July 31,
2022 and 2021, respectively. The decrease in ROI was primarily due to a decrease
in operating income and increase in average total assets driven by higher
inventories.
We define ROI as adjusted operating income (operating income plus interest
income, depreciation and amortization, and rent expense) for the trailing 12
months divided by average invested capital during that period. We consider
average invested capital to be the average of our beginning and ending total
assets, plus average accumulated depreciation and amortization, less average
accounts payable and average accrued liabilities for that period.
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Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. As mentioned above, we consider ROA to be the financial measure computed in accordance with GAAP most directly comparable to our calculation of ROI. ROI differs from ROA (which is consolidated net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; and adjusts total assets for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities to arrive at total invested capital. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA. Although ROI is a standard financial measure, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI.
The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:
For the Trailing Twelve Months
Ending July 31,
(Amounts in millions) 2022 2021
CALCULATION OF RETURN ON ASSETS
Numerator
Consolidated net income $ 14,015 $ 10,368 Denominator
Average total assets(1)$ 242,876 $ 237,967 Return on assets (ROA) 5.8 % 4.4 % CALCULATION OF RETURN ON INVESTMENT Numerator Operating income$ 23,851 $ 25,528 + Interest income 155 122 + Depreciation and amortization 10,733 10,892 + Rent 2,302 2,451 = ROI operating income$ 37,041 $ 38,993 Denominator Average total assets(1)$ 242,876 $ 237,967 '+ Average accumulated depreciation and amortization(1) 102,155 97,685 '- Average accounts payable(1) 51,896 47,964 - Average accrued liabilities(1) 23,878 23,842 = Average invested capital$ 269,257 $ 263,846 Return on investment (ROI) 13.8 % 14.8 % (1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2. As of July 31, 2022 2021 2020 Certain Balance Sheet Data Total assets$ 247,199 $ 238,552 $ 237,382 Accumulated depreciation and amortization 105,963 98,346 97,023 Accounts payable 54,191 49,601 46,326 Accrued liabilities 23,843 23,915 23,768 18
-------------------------------------------------------------------------------- Table of Contents Free Cash Flow Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See Liquidity and Capital Resources for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities. We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. Net cash provided by operating activities was$9.2 billion for the six months endedJuly 31, 2022 , which represents a decline of$3.2 billion when compared to the same period in the prior year. The decline is primarily due to a decrease in operating income, higher inventory costs and purchases to support strong sales and the timing of certain payments. Free cash flow for the six months endedJuly 31, 2022 was$1.7 billion , which represents a decline of$5.7 billion when compared to the same period in the prior year. The decline in free cash flow is due to the reduction in operating cash flows described above, as well as an increase of$2.5 billion in capital expenditures to support our investment strategy.Walmart 's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows. Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow. The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities. Six Months Ended July 31, (Amounts in millions) 2022 2021 Net cash provided by operating activities$ 9,240 $ 12,423 Payments for property and equipment (7,492) (5,019) Free cash flow$ 1,748 $ 7,404 Net cash (used in) provided by investing activities(1)$ (8,584) $ 2,402 Net cash used in financing activities (1,400) (11,559) (1) "Net cash (used in) provided by investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow. 19 -------------------------------------------------------------------------------- Table of Contents Results of Operations
Consolidated Results of Operations
Three Months Ended July 31, Six Months Ended July 31,
(Amounts in millions, except unit counts) 2022 2021 2022 2021
Total revenues $ 152,859 $ 141,048 $ 294,428 $ 279,358
Percentage change from comparable period 8.4% 2.4% 5.4 % 2.6%
Net sales $ 151,381 $ 139,871 $ 291,669 $ 277,030
Percentage change from comparable period 8.2% 2.2% 5.3 % 2.4%
Total U.S. calendar comparable sales 8.7% 6.7% 7.4 % 6.4%
increase
Gross profit margin as a percentage of net 23.5% 24.8% 23.7 % 24.8%
sales
Operating income$ 6,854 $ 7,354 $ 12,172 $ 14,263 Operating income as a percentage of net 4.5% 5.3% 4.2 % 5.1% sales Other (gains) and losses $ (238)$ 953 $ 1,760 $ 3,482 Consolidated net income$ 5,147 $ 4,364 $ 7,250 $ 7,175 Unit counts at period end 10,585 10,524 10,585 10,524 Retail square feet at period end 1,057 1,063 1,057 1,063 Our total revenues, which are mostly comprised of net sales, but also include membership and other income, increased$11.8 billion or 8.4% and$15.1 billion or 5.4% for the three and six months endedJuly 31, 2022 , respectively, when compared to the same periods in the previous fiscal year. The increases in revenues were primarily due to strong positive comparable sales for theWalmart U.S . andSam's Club segments which were impacted by higher inflation, along with positive comparable sales in most of our international markets. For the six months endedJuly 31, 2022 , these increases were partially offset by a net sales decrease of$5.0 billion related to the divestiture of our operations in theU.K. andJapan , which closed in the first quarter of fiscal 2022. Net sales were negatively impacted by$1.0 billion and$1.3 billion of fluctuations in currency exchange rates for the three and six months endedJuly 31, 2022 , respectively. Gross profit as a percentage of net sales ("gross profit rate") decreased 132 and 110 basis points respectively for the three and six months endedJuly 31, 2022 , when compared to the same periods in the previous fiscal year. The decrease for the three months endedJuly 31, 2022 was primarily due to markdowns and mix of sales in theU.S. , as well as an inflation related LIFO charge in theSam's Club segment. The decrease for the six months endedJuly 31, 2022 was primarily due to mix of sales and markdowns in theU.S. and higher supply chain costs. Operating expenses as a percentage of net sales decreased 45 and 3 basis points for the three and six months endedJuly 31, 2022 , respectively, when compared to the same periods in the previous fiscal year. The decrease for the three months endedJuly 31, 2022 was primarily driven by growth in net sales, partially offset by increased wage costs in theWalmart U.S . segment. The slight decrease for the six months endedJuly 31, 2022 was primarily driven by growth in net sales and lower incremental COVID-19 costs, partially offset by increased wage costs in theWalmart U.S . segment. Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period. The net increase of$1.2 billion in other gains for the three months endedJuly 31, 2022 , when compared to the same period in the previous fiscal year, was primarily due to: a net gain of$0.6 billion from changes in fair value of our equity and other investments; a gain of$0.4 billion recognized on the sale of our remaining equity method investment inBrazil ; and a$0.2 billion dividend from one of our investments. The net decrease of$1.7 billion in other losses for the six months endedJuly 31, 2022 , when compared to the same period in the previous fiscal year, was primarily due to: a net gain of$0.6 billion from changes in fair value of our equity and other investments; lapping$0.4 billion in incremental losses associated with the divestiture of our operations in theU.K. andJapan upon closing of the transactions during the first quarter of fiscal 2022; a gain of$0.4 billion recognized on the sale of our remaining equity method investment inBrazil during the second quarter of fiscal 2023; and a$0.2 billion dividend from one of our investments in the second quarter of fiscal 2023. Our effective income tax rate was 22.5% and 24.0% for the three and six months endedJuly 31, 2022 , respectively, compared to 26.3% and 26.5% for the same periods in the previous fiscal year. The decrease in effective tax rate includes the gain recognized on the sale of our remaining equity method investment inBrazil which provided minimal realizable tax expense and a discrete tax item recognized during the second quarter of fiscal 2023. Our effective income tax rate may fluctuate from quarter to quarter as a result of factors including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix and size of earnings among ourU.S. operations and international operations, which are subject to statutory rates that may be different than theU.S. statutory rate. 20
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As a result of the factors discussed above, as well as a benefit in membership and other income related to an insurance settlement forWalmart Chile , consolidated net income increased$0.8 billion and$0.1 billion for the three and six months endedJuly 31, 2022 , respectively, when compared to the same periods in the previous fiscal year. Accordingly, diluted net income per common share attributable toWalmart was$1.88 and$2.61 for the three and six months endedJuly 31, 2022 , respectively, which represents respective increases of$0.36 and$0.13 when compared to the same periods in the previous fiscal year.Walmart U.S . Segment Three Months Ended July 31, Six Months Ended July 31, (Amounts in millions, except unit counts) 2022 2021 2022 2021 Net sales$ 105,130 $ 98,192 $ 202,034 $ 191,359 Percentage change from comparable period 7.1 % 5.3 % 5.6 % 5.1 % Calendar comparable sales increase 7.0 % 5.4 % 5.5 % 5.4 % Operating income$ 5,683 $ 6,089 $ 10,145 $ 11,544 Operating income as a percentage of net sales 5.4 % 6.2 % 5.0 % 6.0 % Unit counts at period end 4,735 4,740 4,735 4,740 Retail square feet at period end 702 703 702 703 Net sales for theWalmart U.S . segment increased$6.9 billion or 7.1% and$10.7 billion or 5.6% for the three and six months endedJuly 31, 2022 , when compared to the same periods in the previous fiscal year. The increases were due to comparable sales of 7.0% and 5.5% for the three and six months endedJuly 31, 2022 , respectively, driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as a slight increase in transactions. TheWalmart U.S . segment's eCommerce sales positively contributed approximately 0.6% for the three months endedJuly 31, 2022 , which was primarily driven by store pickup and delivery. For the six months endedJuly 31, 2022 , eCommerce sales growth had a negligible impact on theWalmart U.S . segment total comparable sales growth. Gross profit rate decreased 106 basis points for the three months endedJuly 31, 2022 , when compared to the same period in the previous fiscal year, primarily driven by product mix shifts into lower margin categories and net markdowns, partially offset by price management impacts driven by higher inflation. For the six months endedJuly 31, 2022 , gross profit rate decreased 74 basis points primarily due to product mix shifts into lower margin categories and increased supply chain costs, partially offset by price management impacts driven by higher inflation. Operating expenses as a percentage of net sales decreased 21 basis points for three months endedJuly 31, 2022 , when compared to the same period in the previous fiscal year, primarily driven by strong sales growth and lower incremental COVID-19 costs, partially offset by increased wage costs. Operating expenses as a percentage of net sales increased 35 basis points for the six months endedJuly 31, 2022 , when compared to the same period in the previous fiscal year, primarily driven by increased wage costs, partially offset by strong sales growth and lower incremental COVID-19 costs.
As a result of the factors discussed above, operating income decreased
Three Months Ended July 31, Six Months Ended July 31,
(Amounts in millions, except unit counts) 2022 2021 2022 2021
Net sales $ 24,350 $ 23,035 $ 48,113 $ 50,335
Percentage change from comparable period 5.7 % (15.2) % (4.4) % (11.6) %
Operating income $ 1,043 $ 861 $ 1,815 $ 2,055
Operating income as a percentage of net sales 4.3 % 3.7 % 3.8 % 4.1 %
Unit counts at period end 5,250 5,185 5,250 5,185
Retail square feet at period end 274 280 274 280
Net sales for the Walmart International segment increased $1.3 billion or 5.7%
and decreased $2.2 billion or 4.4% for the three and six months ended July 31,
2022 , respectively, when compared to the same periods in the previous fiscal
year. For the three months ended July 31, 2022 , the increase was primarily due
to positive comparable sales in most of our international markets, partially
offset by negative fluctuations in currency exchange rates of $1.0 billion . For
the six months ended July 31, 2022 , the reduction in net sales was due to a $5.0
billion decrease related to the divestiture of our operations in the U.K. and
Japan during the first quarter of fiscal 2022, as well as negative fluctuations
in currency exchange rates of $1.3 billion , partially offset by positive
comparable sales in each of our remaining markets.
Gross profit rate decreased 18 basis points and 63 basis points for the three
and six months ended
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channels inChina and category mix shifts into lower margin categories. Divested markets further impacted the gross profit rate for the six months endedJuly 31, 2022 . Operating expenses as a percentage of net sales decreased 7 basis points and increased 6 basis points for the three and six months endedJuly 31, 2022 , respectively, when compared to the same periods in the previous fiscal year. For the three months endedJuly 31, 2022 , the decrease was primarily driven by strong sales growth, partially offset by planned strategic investments. For the six months endedJuly 31, 2022 , the increase was primarily due to impacts from the divested markets, partially offset by strong sales growth. As a result of the factors discussed above, as well as a benefit of$0.2 billion related to an insurance settlement forWalmart Chile recorded in membership and other income, operating income increased$0.2 billion and decreased$0.2 billion for the three and six months endedJuly 31, 2022 , respectively, when compared to the same periods in the previous fiscal year.
Sam's Club Segment
Three Months Ended July 31, Six Months Ended July 31,
(Amounts in millions, except unit counts) 2022 2021 2022 2021
Including Fuel
Net sales $ 21,901 $ 18,644 $ 41,522 $ 35,336
Percentage change from comparable period 17.5 % 13.9 % 17.5 % 12.0 %
Calendar comparable sales increase 17.3 % 13.9 % 17.4 % 12.0 %
Operating income $ 427 $ 660 $ 887 $ 1,235
Operating income as a percentage of net sales 1.9 % 3.5 % 2.1 % 3.5 %
Unit counts at period end 600 599 600 599
Retail square feet at period end 80 80 80 80
Excluding Fuel (1)
Net sales $ 17,999 $ 16,437 $ 34,531 $ 31,374
Percentage change from comparable period 9.5 % 7.7 % 10.1 % 7.0 %
Operating income $ 222 $ 575 $ 557 $ 1,105
Operating income as a percentage of net sales 1.2 % 3.5 % 1.6 % 3.5 %
(1) We believe the "Excluding Fuel" information is useful to investors because
it permits investors to understand the effect of the Sam's Club segment's fuel
sales on its results of operations, which are impacted by the volatility of fuel
prices. Volatility in fuel prices may continue to impact the operating results
of the Sam's Club segment in the future.
Net sales for the Sam's Club segment increased $3.3 billion or 17.5% and $6.2
billion or 17.5% for the three and six months ended July 31, 2022 , respectively,
when compared to the same periods in the previous fiscal year. The increases
were primarily due to comparable sales, including fuel, of 17.3% and 17.4% for
the three and six months ended July 31, 2022 , respectively. Growth in comparable
sales benefited from growth in transactions and average ticket and included
higher inflation impacts in certain merchandise categories. Sam's Club eCommerce
net sales positively contributed approximately 0.8% and 0.7% to comparable sales
for the three and six months ended July 31, 2022 , respectively.
Gross profit rate decreased 272 and 245 basis points for the three and six
months ended July 31, 2022 , respectively, when compared to the same periods in
the previous fiscal year. The decreases in gross profit rate were due to
inventory write-downs, including an inflation related LIFO charge, and elevated
supply chain and eCommerce fulfillment costs.
Membership and other income increased 8.4% and 10.1% for the three and six
months ended
Operating expenses as a percentage of segment net sales decreased 131 and 124 basis points for the three and six months endedJuly 31, 2022 , respectively, when compared to the same periods in the previous fiscal year, primarily driven by higher sales.
As a result of the factors discussed above, operating income decreased
Liquidity and Capital Resources
Liquidity
The strength and stability of our operations have historically supplied us with
a significant source of liquidity. Our cash flows provided by operating
activities, supplemented with our long-term debt and short-term borrowings, have
been sufficient to fund our operations while allowing us to invest in activities
that support the long-term growth of our operations. Generally, some or all of
the remaining available cash flow has been used to fund dividends on our common
stock and share repurchases. We believe our sources of liquidity will continue
to be sufficient to fund operations, finance our global investment activities,
pay dividends and fund our share repurchases for at least the next 12 months and
thereafter for the foreseeable future.
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Net Cash Provided by Operating Activities
Six Months Ended July 31,
(Amounts in millions) 2022 2021
Net cash provided by operating activities $ 9,240 $ 12,423
Net cash provided by operating activities was $9.2 billion as compared to $12.4
billion for the six months ended July 31, 2022 and 2021, respectively. The
decline is primarily due to a decrease in operating income, higher inventory
costs and purchases to support strong sales and the timing of certain payments.
Cash Equivalents and Working Capital Deficit
Cash and cash equivalents were$13.9 billion and$22.8 billion atJuly 31, 2022 and 2021, respectively. Our working capital deficit was$15.7 billion as ofJuly 31, 2022 , which increased when compared to$2.9 billion as ofJuly 31, 2021 , primarily driven by an increase in short-term borrowings and a decrease in cash and cash equivalents, partially offset by the increase in inventory described above. We generally operate with a working capital deficit due to our efficient use of cash in funding operations, consistent access to the capital markets and returns provided to our shareholders in the form of payments of cash dividends and share repurchases. As ofJuly 31, 2022 andJanuary 31, 2022 , cash and cash equivalents of$3.5 billion and$4.3 billion , respectively, may not be freely transferable to theU.S. due to local laws or other restrictions. Of the$3.5 billion atJuly 31, 2022 , approximately$1.1 billion can only be accessed through dividends or intercompany financing arrangements subject to approval of theFlipkart minority shareholders; however, this cash is expected to be utilized byFlipkart .
Six Months Ended
July 31,
(Amounts in millions) 2022 2021
Net cash (used in) provided by investing activities Net cash used in investing activities was$8.6 billion as compared to net cash provided by investing activities of$2.4 billion for the six months endedJuly 31, 2022 and 2021, respectively. Net cash used in investing activities increased$11.0 billion for the six months endedJuly 31, 2022 primarily as a result of lapping the net proceeds received from the divestitures of our operations in theU.K. andJapan and an increase in capital expenditures to support our investment strategy.
Six Months Ended
(Amounts in millions) 2022 2021
Net cash used in financing activities Net cash from financing activities generally consists of transactions related to our short-term and long-term debt, dividends paid and the repurchase of Company stock. Transactions with noncontrolling interest shareholders are also classified as cash flows from financing activities. Net cash used in financing activities was$1.4 billion as compared to$11.6 billion for the six months endedJuly 31, 2022 and 2021, respectively. The decrease in net cash used in financing activities is primarily due to an increase in short-term borrowings to fund working capital needs. InApril 2022 , 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, we had committed lines of credit in theU.S. of$15.0 billion atJuly 31, 2022 , all undrawn.
Long-term Debt
The following table provides the changes in our long-term debt for the six
months ended
Long-term debt
due within one
(Amounts in millions) year Long-term debt Total
Balances as of February 1, 2022 $
2,803
Repayments of long-term debt (1,439) - (1,439) Reclassifications of long-term debt 4,030 (4,030) - Other (78) (1,033) (1,111) Balances as of July 31, 2022 $
5,316
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Dividends
EffectiveFebruary 17, 2022 , the Board of Directors approved the fiscal 2023 annual dividend of$2.24 per share, an increase over the fiscal 2022 annual dividend of$2.20 per share. For fiscal 2023, the annual dividend was or will be paid in four quarterly installments of$0.56 per share, according to the following record and payable dates: Record Date Payable DateMarch 18, 2022 April 4, 2022 May 6, 2022 May 31, 2022 August 12, 2022 September 6, 2022 December 9, 2022 January 3, 2023
The dividend installments payable on
Company Share Repurchase Program
From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Company's Board of Directors. All repurchases made during the six months endedJuly 31, 2022 were made under the current$20 billion share repurchase program approved inFebruary 2021 , which has no expiration date or other restrictions limiting the period over which the Company can make repurchases. As ofJuly 31, 2022 , authorization for$4.9 billion of share repurchases remained under the share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status. We regularly review share repurchase activity and consider several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, our results of operations and the market price of our common stock. We anticipate that a majority of the ongoing share repurchase program will be funded through the Company's free cash flow. The following table provides, on a settlement date basis, share repurchase information for the six months endedJuly 31, 2022 and 2021: Six Months Ended July 31, (Amounts in millions, except per share data) 2022 2021 Total number of shares repurchased 43.3 37.7 Average price paid per share$ 132.74 $ 137.94 Total amount paid for share repurchases$ 5,747 $ 5,200
Material Cash Requirements
Material cash requirements from operating activities primarily consist of inventory purchases, employee related costs, taxes, interest and other general operating expenses, which we expect to be primarily satisfied by our cash from operations. Other material cash requirements from known contractual and other obligations include short-term borrowings, long-term debt and related interest payments, leases and purchase obligations.
Capital Resources
We believe our cash flows from operations, current cash position, short-term borrowings and access to capital markets will continue to be sufficient to meet our anticipated cash requirements and contractual obligations, which includes funding seasonal buildups in merchandise inventories and funding our capital expenditures, acquisitions, dividend payments and share repurchases. We have strong commercial paper and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in capital markets. As ofJuly 31, 2022 , the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows: Rating agency Commercial paper Long-term debt Standard & Poor's A-1+ AA Moody's Investors Service P-1 Aa2 Fitch Ratings F1+ AA Credit rating agencies review their ratings periodically and, therefore, the credit ratings assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain consistent over time. Factors that could affect our credit ratings include changes in our operating performance, the general economic environment, conditions in the retail industry, our financial position, including our total debt and capitalization, and changes in our business strategy. Any downgrade of our credit ratings by a credit rating agency could increase our future borrowing costs or impair our ability to access capital and credit markets on terms commercially acceptable to us. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper markets with the same flexibility that we have experienced historically, potentially requiring us to rely more heavily on more expensive types of debt financing. 24
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The credit rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies. Other Matters In Note 6 to our Condensed Consolidated Financial Statements, which is captioned "Contingencies" and appears in Part I of this Quarterly Report on Form 10-Q under the caption " Item 1. Financial Statements ," we discuss, under the sub-caption "Opioids Litigation," the Prescription Opiate Litigation and other matters, including certain risks arising therefrom. In that Note 6 , we also discuss, under the sub-caption "Asda Equal Value Claims," the Company's indemnification obligation for the Asda Equal Value Claims matter as well as under the sub-caption "Money Transfer Agent Services Matters," aUnited States Federal Trade Commission complaint related to money transfers and the Company's anti-fraud program and a government investigation by theU.S. Attorney's Office for the Middle District of Pennsylvania into the Company's consumer fraud prevention program and anti-money laundering compliance related to the Company's money transfer agent services. We also discuss various legal proceedings related to the Federal and State Prescription Opiate Litigation, DOJ Opioid Civil Litigation and Opioids Related Securities Class Actions and Derivative Litigation, Asda Equal Value Claims, and Money Transfer Agent Services litigation in Part II of this Quarterly Report on Form 10-Q under the caption " Item 1. Legal Proceedings ," under the sub-caption "I. Supplemental Information." We also discuss items related to theForeign Direct Investment matter in India in Part II of this Quarterly Report on Form 10-Q under the caption " Item 1. Legal Proceedings ," under the sub-caption "II. Certain Other Matters." We also discuss an environmental matter with the State of California in Part II of this Quarterly Report on Form 10-Q under the caption " Item 1. Legal Proceedings ," under the sub-caption "III. Environmental Matters." The foregoing matters and other matters described elsewhere in this Quarterly Report on Form 10-Q represent contingent liabilities of the Company that may or may not result in the incurrence of a material liability by the Company upon their final resolution.
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