Wal-Mart Stores, Inc. (NYSE: WMT)
Charles Holley
Executive Vice President & CFO
Bank of America Merrill Lynch Consumer & Retail Conference
March 11, 2014
1
Wal-Mart Stores, Inc. (NYSE: WMT)
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.
2
Wal-Mart Stores, Inc. (NYSE: WMT)
FY 14 underlying consolidated results
Continued op inc growth
5-yr. CAGR: 4.1%
$B
$27.7
$27.8
$26.6
$25.5
$24.0
Strong sales growth
5-yr. CAGR: 3.4%
$B
$466
$473
FY10
Returned value (EPS)
5-yr. CAGR: 8.8%
FY11
FY12
FY13
FY14
FY13
FY14
$4.18
$419
$405
3
$5.11
$4.54
$444
FY10
$5.01
$3.73
FY11
FY12
FY13
FY14
Wal-Mart Stores, Inc. (NYSE: WMT)
FY10
FY11
FY12
FY 14 guidance vs. report card
Financial
priorities
Metrics
FY 14
guidance
Sales growth
2 - 3%*
1.6%
Square footage
growth
3 - 4%
3%
Operating expense
< sales
2.0% vs. 1.6%
X
Operating income
growth
> sales
0.2% vs. 1.6%
X
Free cash flow
Strong
Strong
FY 14 actual Report card
X
Growth
Leverage
Returns
*Revised FY 14 Q2 earnings call Aug. 15, 2013
4
Wal-Mart Stores, Inc. (NYSE: WMT)
Walmart U.S. delivered a strong FY 14
Net sales
~$279.4B
Increase of 2% or $5B
Operating
expenses
18 bps of leverage
4 consecutive years
5
Wal-Mart Stores, Inc. (NYSE: WMT)
Price
investment
Gross profit rate
-1 bps
Operating
income
~$22.4B
Increase of 4% or $860M
Grew profit faster than sales
Sam’s Club increased membership income in FY 14
Price
investment
Net sales
~$50.6B
Increase of 1.6% or $785M
Membership income
Gross profit rate
-1 bps
5.9%
Operating
expenses
14 bps of deleverage
Note: All data is without fuel
6
Wal-Mart Stores, Inc. (NYSE: WMT)
Operating
income
~$2.0B
Increase of 5.0%
Grew profit faster than sales
Walmart International invested in price in FY 14
Net sales
~$136.5B
Increase of 1.3% or $1.8B
Operating
expenses
18 bps of deleverage
7
Wal-Mart Stores, Inc. (NYSE: WMT)
Price
investment
Gross profit rate
-10 bps
Operating
income
~$6.3B
decrease of 4.7%
FY 15 guidance
Financial
priorities
Metrics
FY 15 guidance*
Updated FY 15
guidance**
Sales growth
3 - 5%
At low end
Square footage growth
33 - 37M sq. ft.
35 - 39M sq. ft.
Operating expense
< sales
< sales
Operating income growth
> sales
May not grow
faster, or at the
same rate as sales
Free cash flow
Strong
Strong
Growth
Leverage
Returns
*October 15, 2013
**February 20, 2014
8
Wal-Mart Stores, Inc. (NYSE: WMT)
Keys to Walmart’s success in FY 15
Continue strong
financial position
Strengthen global
compliance & ethics
model
Drive EDLC &
EDLP
Develop
associate talent
Increase comp sales
Grow e-commerce
& m-commerce
9
Wal-Mart Stores, Inc. (NYSE: WMT)
Walmart U.S. FY 15 agenda
Priorities
Increase comp sales
Small format acceleration
E-commerce
Product and brand
innovation
Drive productivity
Headwinds
Bottom 10%
Inconsistent
execution
10
Wal-Mart Stores, Inc. (NYSE: WMT)
Deflation
Weather
Macroeconomic headwinds
Sam’s Club FY 15 agenda
Priorities
Merchandise
differentiation
Increase member
access/e-commerce
Enhance member
experience
Personalize with
Big Data
Headwinds
Small business challenges
11
Deflation
Wal-Mart Stores, Inc. (NYSE: WMT)
Weather
Macroeconomic headwinds
International FY 15 agenda
Priorities
Increase comp sales
in each market
Invest in price
Drive productivity
loop
Improve capital
discipline
Headwinds
Macroeconomic headwinds
12
Extending credit
Wal-Mart Stores, Inc. (NYSE: WMT)
Wholesale formats
Key market challenges
Global Ecommerce FY 15 agenda
Priorities
• Continue incremental investments
• Add strategic acquisitions
• Launch Pangaea
• walmart.com enhancements
• Increase fulfillment capabilities
• Drive greater sales in 4 key markets
– Launch, expand others
13
Wal-Mart Stores, Inc. (NYSE: WMT)
Driving innovation to combine physical & digital
Walmart’s full assortment
Supercenter
walmart.com
GM & fresh
Endless aisle
Express
Convenient mix of assortment & services
14
Wal-Mart Stores, Inc. (NYSE: WMT)
Leveraging global best practices
Accelerated roll-out of Walmart U.S. small stores
Total Neighborhood Market & Walmart Express
Total units by year
FY 11 – FY 15
Up to
~645
Up to
120
+320%
◄Walmart
Express
growth in 4 years
20
~500
to
525
13
10
153
168
FY11
FY12
◄Neighborhood
Market
346
241
FY13
FY14
FY15
Expansive growth to continue in the next 3 years
Based on fiscal year -end unit counts
15
Wal-Mart Stores, Inc. (NYSE: WMT)
Capital expenditure detail
(US$ billions)
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
$13.1
$11.8 - $12.8
$12.4 - $13.4
Segment
Total
Additional $600M
in Walmart U.S.
small store growth
*October 15, 2013
**February 20, 2014
16
Wal-Mart Stores, Inc. (NYSE: WMT)
Disciplined capital allocation drives efficiency
1. Grow the business
o
Cash
from
operations
Organic growth
• Stores
• e-commerce
• Leverage
o Acquisitions
2. Dividends
3. Share repurchases
AA-rated Balance Sheet
17
Wal-Mart Stores, Inc. (NYSE: WMT)
Capital allocation priorities
FY 14
Sources of cash
&
Uses of cash
$12.8
Cash flow
from
operations
FY 15 E
Share
repurchases Cash flow
& dividends
from
operations
$26.3
net debt
growth
Uses of cash
Excess
cash
Share
repurchases,
dividends &
acquisitions
&
$13.1
AA rated balance sheet
*Not drawn to scale
18
Sources of cash*
Wal-Mart Stores, Inc. (NYSE: WMT)
CapEx
net debt
growth
$12.4 $13.4
AA rated balance sheet
CapEx
Lead on issues important to Walmart customers
Sustainability
Associate opportunity
- Veterans
Community giving
19
Wal-Mart Stores, Inc. (NYSE: WMT)
Women’s economic
empowerment
U.S. manufacturing
- Suppliers
Healthy eating/nutrition
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
20
Wal-Mart Stores, Inc. (NYSE: WMT)
Q&A
21
Wal-Mart Stores, Inc. (NYSE: WMT)
Q&A
22
Wal-Mart Stores, Inc. (NYSE: WMT)
Appendix
23
Wal-Mart Stores, Inc. (NYSE: WMT)
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”).
24
Wal-Mart Stores, Inc. (NYSE: WMT)
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
25
Wal-Mart Stores, Inc. (NYSE: WMT)
$4.85
Underlying performance FY14
Q4
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 International
Operating 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 Club
Operating 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
(4.2%)
$5.11
$0.10
0.2%
26
($0.7)
Wal-Mart Stores, Inc. (NYSE: WMT)