Walmart updates guidance for FY'19 GAAP EPS to $2.90 to $3.05, ex. Flipkart3

Walmart raises guidance for FY'19 Adjusted EPS2 to $4.90 to $5.05, ex. Flipkart3


Total revenue was $128.0 billion, an increase of $4.7 billion, or 3.8%. Excluding currency2, total revenue was $127.8 billion, an increase of $4.4 billion, or 3.6%.Walmart U.S. comp sales1 increased 4.5%, the strongest growth in more than ten years led by the performance of grocery, apparel and seasonal. Strong comp sales were supported by traffic and ticket growth as each exceeded 2.0%.Walmart U.S. omni-channel saw significant progress with an expanded online assortment, including 1,100 popular new brands. Grocery pickup is now in more than 1,800 locations, and the company is on track to reach about 40% of the U.S. population by year-end with grocery delivery.Sam's Club comp sales1 increased 5.0%4, the strongest growth in six years.Net sales at Walmart International were $29.5 billion, an increase of 4.0%. Excluding currency2, net sales were $29.2 billion, an increase of 3.1%. Comp sales were positive in the four largest markets.Adjusted EPS2 excludes the impact of three items:Charge of $1.51 related to the sale of a majority stake in Walmart BrazilNegative impact of $0.04 due to an adjustment in the provisional amount related to Tax ReformUnrealized loss of $0.03 on the company's equity investment in JD.com

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Key results
(Amounts in billions, except as noted. Dollar and percentage changes may not recalculate due to rounding.)

Walmart

Q2 FY19

Q2 FY18

$ Change

% Change

Revenue

$128.0

$123.4

$4.7

3.8%

Revenue (constant currency)2

$127.8

$123.4

$4.4

3.6%

Operating income

$5.8

$6.0

-$0.2

-3.7%

Operating income (constant currency)2

$5.7

$6.0

-$0.2

-4.0%


Free Cash Flow

YTD FY19

$ Change

Returns to Shareholders

Q2 FY19

% Change

Operating cash flow

$11.1

-$0.3


Dividends

$1.5

-0.3%

Capital expenditures

$4.3

-$0.1


Share repurchases5

$1.3

-42.3%

Free cash flow2

$6.8

-$0.1


Total

$2.8

-25.3%

1 13-week period ended July 27, 2018, compared to 13-week period ended July 28, 2017, and excludes fuel. See Supplemental Financial Information for additional information.
2 See additional information at the end of this release regarding non-GAAP financial measures.
3 Guidance does not incorporate the previously provided estimated impact for Flipkart, which included the incremental interest expense to fund the transaction, as the transaction has not yet closed.
4 Tobacco sales negatively impacted Sam's Club's comparable sales by approximately 150 basis points.
5 $16.9 billion remaining of the $20 billion authorization approved in October 2017. The company repurchased approximately 15.3 million shares in Q2.

Guidance
The following guidance reflects the company’s expectations for fiscal year 2019. Assumptions in today’s guidance include that economic conditions, currency rates and the tax and regulatory landscape in our largest markets remain generally consistent. Additionally, the guidance does not include the expected impact of the company's investment in Flipkart, including interest related to the purchase, as the transaction has not yet closed.


Metric

Updated FY19 Guidance

Original FY19 Guidance

Consolidated net sales
About 2% in constant currency, impacted by:
  • Sale of a majority stake in Walmart Brazil
  • Sam’s Club closures and tobacco actions
  • Wind-down of first-party Brazil eCommerce
  • Divestiture of Suburbia

Combined impact: -180 bps

+1.5 to +2% in constant currency, impacted by:
  • Sam’s Club closures and tobacco actions
  • Wind-down of first party Brazil eCommerce
  • Divestiture of Suburbia

Combined impact: -140 bps

Comp sales (ex. fuel)
  • Walmart U.S.: around +3%
  • Sam's Club: around +3%, with negative impact from tobacco of 200 bps
  • Walmart U.S.: at least 2%
  • Sam's Club: -1% to flat, with negative impact from tobacco of 400 bps
Walmart U.S. eCommerce net sales
Approximately 40%Approximately 40%
Walmart International net sales
About 0.7% in constant currency, impacted by:
  • Sale of a majority stake in Walmart Brazil
  • Wind-down of first-party Brazil eCommerce
  • Divestiture of Suburbia

Combined impact: -330 bps

+3% in constant currency, impacted by:
  • Wind-down of first-party Brazil eCommerce
  • Divestiture of Suburbia

Combined impact: -63 bps

Consolidated operating income, adjusted3Flat to slight percentage decrease3Low single-digit percentage decrease3
Consolidated operating income marginAround 4.4% in constant currency4.3% to 4.4% in constant currency
GAAP EPS1$2.90 to $3.05$4.75 to $5.00
Adjusted EPS1,2$4.90 to $5.05, excluding:
  • Sale of a majority stake in Walmart Brazil
  • Unrealized losses on JD.com investment
  • Tax Reform adjustments
$4.75 to $5.00
Effective tax rate
  • 31% - 33%, impacted +700 bps due to the combined impact of unrealized losses on JD.com investment, sale of a majority stake in Walmart Brazil and Tax Reform adjustments
  • For adjusted EPS, 24% to 26%
24% to 26%


Other gains and losses
Other gains and losses in Q2 fiscal 2019 consists primarily of a $4.8 billion pre-tax loss related to the sale of a majority stake in Walmart Brazil and a $94 million unrealized loss on the company's JD.com investment due to a decline in the JD.com stock price during the quarter.

1 Guidance does not incorporate the previously provided estimated impact for Flipkart, which included the incremental interest expense to fund the transaction, as the transaction has not yet closed.
2 See additional information at the end of this release regarding non-GAAP financial measures.
3 Adjusted for discrete items in the prior year. Including discrete items in the prior year, the fiscal 2019 consolidated operating income is expected to result in a high single-digit percentage increase.

Portfolio Repositioning
Thoughtful and deliberate consideration of the company's portfolio of businesses is a key enabler of its strategic framework. Following is an update of recently announced transactions.

Investment in Flipkart Group
On Aug. 8, 2018, the Competition Commission of India issued an unconditional approval for the company's investment in Flipkart, which satisfies one of the conditions to the closing of the company's investment in Flipkart. The transaction is expected to close as soon as reasonably practicable after the satisfaction or waiver of the remaining closing conditions.

Sale of a majority stake in Walmart Brazil
On Aug. 1, 2018, the company completed the sale of an 80 percent stake in Walmart Brazil.

Combination of Sainsbury's and Asda, Walmart's U.K. subsidiary
The previously announced proposed combination of Sainsbury's and Asda is pending regulatory review.

Segment results
(Amounts in billions, except as noted. Dollar and percentage changes may not recalculate due to rounding.)

In the first quarter of fiscal 2019, the company revised its corporate overhead allocations to the operating segments. Accordingly, previous segment operating income was recast to be comparable to the current period.

Walmart U.S.

Q2 FY19

Q2 FY18

$ Change

% Change

Net sales

$82.8

$78.7

$4.1

5.2%

Comp sales (ex. fuel)1

4.5%

1.8%

270 bps

N/A

Traffic

2.2%

1.3%

90 bps

N/A

Ticket

2.3%

0.5%

180 bps

N/A

eCommerce

~100 bps

~70 bps

~30 bps

N/A

Operating income

$4.5

$4.4

$0.1

1.4%


Walmart International

Q2 FY19

Q2 FY18

$ Change

% Change

Net sales

$29.5

$28.3

$1.1

4.0%

Net sales
(constant currency)2

$29.2

$28.3

$0.9

3.1%

Operating income

$1.3

$1.6

-$0.3

-19.1%

Operating income
(constant currency)2

$1.2

$1.6

-$0.3

-20.4%


Sam's Club

Q2 FY19

Q2 FY18

$ Change

% Change

Net sales

$14.8

$14.9

-$0.1

-0.6%

Comp sales (ex. fuel)1

5.0%

1.2%

380 bps

N/A

Traffic

6.7%

2.1%

460 bps

N/A

Ticket

-1.7%

-0.9%

-80 bps

N/A

eCommerce

~110 bps

~80 bps

~30 bps

N/A

Operating income

$0.4

$0.4

$—

2.8%

1 13-week period ended July 27, 2018, compared to 13-week period ended July 28, 2017, and excludes fuel.
2 See additional information at the end of this release regarding non-GAAP financial measures.

About Walmart
Walmart Inc. (NYSE: WMT) helps people around the world save money and live better - anytime and anywhere - in retail stores, online, and through their mobile devices. Each week, nearly 265 million customers and members visit our more than 11,200 stores under 55 banners in 27 countries and eCommerce websites. With fiscal year 2018 revenue of $500.3 billion, Walmart employs over 2.2 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity. Additional information about Walmart can be found by visiting http://corporate.walmart.com, on Facebook at http://facebook.com/walmartand on Twitter at http://twitter.com/walmart.


Investor Relations contact
Dan Binder (479) 258-7172

Media Relations contact
Randy Hargrove (800) 331-0085

Forward-Looking Statements
This release contains statements as to Walmart management's guidance regarding earnings per share, adjusted earnings per share, consolidated net sales growth, Walmart U.S. eCommerce sales growth, Walmart International sales growth, capital expenditures and Walmart's effective tax rate for the fiscal year ending January 31, 2019, and comparable sales (excluding fuel) for Walmart U.S. and Sam's Club for the 52 weeks ending January 25, 2019. Walmart believes such statements are "forward-looking statements" as defined in, and are intended to enjoy the protection of the safe harbor for forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Assumptions on which such forward-looking statements are based are also forward-looking statements. Walmart's actual results may differ materially from the guidance provided as a result of changes in circumstances, assumptions not being realized or other risks, uncertainties and factors including:

economic, geo-political, capital markets and business conditions, trends and events around the world and in the markets in which Walmart operates;currency exchange rate fluctuations, changes in market interest rates and commodity prices;unemployment levels; competitive pressures; inflation or deflation, generally and in particular product categories;consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels and demand for certain merchandise;consumer enrollment in health and drug insurance programs and such programs' reimbursement rates;the amount of Walmart's net sales denominated in the U.S. dollar and various foreign currencies;the impact of acquisitions, investments, divestitures, store or club closures, and other strategic decisions;Walmart's ability to successfully integrate acquired businesses, including within the eCommerce space;Walmart's effective tax rate and the factors affecting Walmart's effective tax rate, including assessments of certain tax contingencies, valuation allowances, changes in law, administrative audit outcomes, impact of discrete items and the mix of earnings between the U.S. and Walmart's international operations;changes in existing tax, labor and other laws and regulations and changes in tax rates, trade agreements, trade restrictions and tariff rates;customer traffic and average ticket in Walmart's stores and clubs and on its eCommerce websites;the mix of merchandise Walmart sells, the cost of goods it sells and the shrinkage it experiences;the amount of Walmart's total sales and operating expenses in the various markets in which it operates;transportation, energy and utility costs and the selling prices of gasoline and diesel fuel;supply chain disruptions and disruptions in seasonal buying patterns;consumer acceptance of and response to Walmart's stores, clubs, digital platforms, programs, merchandise offerings and delivery methods;cyber security events affecting Walmart and related costs;developments in, outcomes of, and costs incurred in legal or regulatory proceedings to which Walmart is a party;casualty and accident-related costs and insurance costs;the turnover in Walmart's workforce and labor costs, including healthcare and other benefit costs;changes in accounting estimates or judgments;the level of public assistance payments;natural disasters, public health emergencies, civil disturbances, and terrorist attacks; andWalmart's expenditures for Foreign Corrupt Practices Act "FCPA" and other compliance related costs, including the adequacy of the accrual with respect to this matter.

Such risks, uncertainties and factors also include the risks relating to Walmart’s strategy, operations and performance and the financial, legal, tax, regulatory, compliance, reputational and other risks discussed in Walmart’s most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the SEC. Walmart urges you to consider all of the risks, uncertainties and factors identified above or discussed in such reports carefully in evaluating the forward-looking statements in this release. Walmart cannot assure you that the results reflected or implied by any forward-looking statement will be realized or, even if substantially realized, that those results will have the forecasted or expected consequences and effects for or on Walmart’s operations or financial performance. The forward-looking statements made in this release are as of the date of this release. Walmart undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.