Insight
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 months endedApril 30, 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. 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. 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 ." 15
————————————————– ——————————
Contents
We expect continued uncertainty in our business and the global economy due to the duration and intensity of the COVID-19 pandemic; the duration and extent of economic stimulus measures; the effectiveness and extent of administration of vaccinations and medical treatment; pressure from inflation; supply chain disruptions; and volatility in employment trends and consumer confidence which may impact our results. For a detailed discussion on results of operations by reportable segment, refer to " Results of Operations " below.
Company performance indicators
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 and efficient growth;
•constant operational discipline; and
•strategic allocation of capital.
As we execute 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 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.
Year-to-date comparable sales, as well as the impact of fuel, for the three months ended
Three Months Ended April 30,
2022 2021 2022 2021
With Fuel Fuel Impact
Walmart U.S . 4.0 % 5.3 % 0.6 % 0.2 %
Sam's Club 17.4 % 10.1 % 6.9 % 3.9 %
Total U.S. 6.0 % 6.0 % 1.6 % 0.8 %
Comparable sales in the U.S. , including fuel, increased 6.0% for the three
months ended April 30, 2022 when compared to the same period in the previous
fiscal year. The Walmart U.S . segment had comparable sales growth of 4.0% for
the three months ended April 30, 2022 driven by growth in average ticket,
including strong sales in grocery and some higher inflation impacts in certain
merchandise categories, while transactions were relatively flat. The Walmart
U.S . segment's eCommerce sales grew at a slower rate than total comparable sales
which negatively contributed approximately 0.4% to comparable sales for the
three months ended April 30, 2022 .
Comparable sales at the Sam's Club segment increased 17.4% for the three months
ended April 30, 2022 . Growth in comparable sales benefited from growth in
transactions and average ticket and included some higher inflation impacts in
certain merchandise categories. The Sam's Club segment's eCommerce sales
positively contributed approximately 0.5% to comparable sales for the three
months ended April 30, 2022 .
16
————————————————– ——————————
Contents
Constant operational 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 April 30,
(Amounts in millions) 2022 2021
Net sales $ 140,288 $ 137,159
Percentage change from comparable period 2.3 % 2.6 %
Operating, selling, general and administrative expenses $ 29,404 $ 28,129
Percentage change from comparable period 4.5 % 2.8 %
Operating, selling, general and administrative expenses as a 21.0 % 20.5 %
percentage of net sales
Operating expenses as a percentage of net sales increased 45 basis points for the three months endedApril 30, 2022 , primarily driven by increased wage costs in theWalmart U.S . segment, partially offset by net sales growth.
Strategic capital allocation
Our strategy includes improving our customer contact initiatives in stores and clubs and creating a seamless omnichannel experience for our customers. As such, we are allocating more capital to supply chain, customer-facing initiatives, technology and store renovations, and less to new store and club openings. The following table provides additional details:
Three Months
(Amounts in millions) Ended April 30,
Allocation of Capital Expenditures 2022 2021
Supply chain, customer-facing initiatives and technology $ 2,063 $ 1,013
Store and club remodels 981 613
New stores and clubs, including expansions and relocations 11 38
Total U.S. 3,055 1,664
Walmart International 484 550
Total Capital Expenditures $ 3,539 $ 2,214
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 5.5%
and 5.3% for the trailing twelve months ended April 30, 2022 and 2021,
respectively. The increase in ROA was primarily due to the increase in net
income. ROI was 13.9% and 14.4% for the trailing twelve months ended April 30,
2022 and 2021, respectively. The decrease in ROI was primarily due to the
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.
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.
17
————————————————– ——————————
Contents
Although ROI is a standard financial metric, many methods exist to calculate a company’s ROI. Accordingly, the method used by management to calculate our return on investment may differ from the methods used by other companies to calculate their return on investment.
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 last twelve months
Ending April 30, (Amounts in millions) 2022 2021 CALCULATION OF RETURN ON ASSETS Numerator Consolidated net income$ 13,232 $ 12,443
Denominator
Average total assets(1)$ 241,362 $ 234,737 Return on assets (ROA) 5.5 % 5.3 % CALCULATION OF RETURN ON INVESTMENT Numerator Operating income$ 24,351 $ 24,233 + Interest income 163 108 + Depreciation and amortization 10,679 11,022 + Rent 2,270 2,534 = ROI operating income$ 37,463 $ 37,897 Denominator Average total assets(1)$ 241,362 $ 234,737 '+ Average accumulated depreciation and amortization(1) 100,315 95,424 '- Average accounts payable(1) 50,539 46,124 - Average accrued liabilities(1) 21,216 20,874 = Average invested capital$ 269,922 $ 263,163 Return on investment (ROI) 13.9 % 14.4 % (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 April 30, 2022 2021 2020 Certain Balance Sheet Data Total assets$ 246,142 $ 236,581 $ 232,892 Accumulated depreciation and amortization 104,295 96,334 94,514 Accounts payable 52,926 48,151 44,096 Accrued liabilities 21,061 21,371 20,377 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 used in or provided by operating activities in a period minus payments for property and equipment made in that period. Net cash used in operating activities was$3.8 billion for the three months endedApril 30, 2022 , which represents a decline of$6.6 billion when compared to the same period in the prior year. The decline is primarily due to an increase in inventory costs and purchases to support strong sales, lower operating income and the timing of certain payments and payables. Free cash flow for the three months endedApril 30, 2022 was negative$7.3 billion , which represents a decline of$7.9 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$1.3 billion in capital expenditures to support our investment strategy.Walmart 's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows. Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow. The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities. Three Months Ended April 30, (Amounts in millions) 2022 2021 Net cash provided by (used in) operating activities$ (3,758) $ 2,858 Payments for property and equipment (3,539) (2,214) Free cash flow$ (7,297) $ 644 Net cash provided by (used in) investing activities(1)$ (4,558) $ 5,850 Net cash provided by (used in) financing activities 5,315 (5,399) (1) "Net cash provided by (used in) 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 operating results
Three Months Ended April 30,
(Amounts in millions, except unit counts) 2022 2021
Total revenues $ 141,569 $ 138,310
Percentage change from comparable period 2.4% 2.7%
Net sales $ 140,288 $ 137,159
Percentage change from comparable period 2.3% 2.6%
Total U.S. calendar comparable sales increase 6.0% 6.0%
Gross profit margin as a percentage of net sales 23.8% 24.7%
Operating income $ 5,318 $ 6,909
Operating income as a percentage of net sales 3.8% 5.0%
Other (gains) and losses $ 1,998 $ 2,529
Consolidated net income $ 2,103 $ 2,811
Unit counts at period end 10,585 10,526
Retail square feet at period end 1,059 1,065
Our total revenues, which are mostly comprised of net sales, but also include
membership and other income, increased $3.3 billion or 2.4% for the three months
ended April 30, 2022 , when compared to the same period in the previous fiscal
year. The increase in revenue was primarily due to strong positive comparable
sales for the Walmart U.S . and Sam's Club segments which was impacted by higher
inflation, along with positive comparable sales in each of our international
markets. The increase in net sales was partially offset by a $5.0 billion
decrease related to the divestiture of our operations in the U.K. and Japan ,
which closed in the first quarter fiscal 2022. Net sales for the three months
ended April 30, 2022 included a $0.4 billion negative impact of fluctuations in
currency exchange rates.
Gross profit as a percentage of net sales ("gross profit rate") decreased 87
basis points for the three months ended April 30, 2022 , when compared to the
same period in the previous fiscal year driven by higher supply chain costs,
product and fuel mix, and inflation.
Operating expenses as a percentage of net sales increased 45 basis points for
the three months ended April 30, 2022 , primarily driven by increased wage costs
in the Walmart U.S . segment, partially offset by net sales growth.
Other gains and losses for the three months ended April 30, 2022 consisted of a
net loss of $2.0 billion primarily associated with the fair value changes of our
equity investments. For the three months ended April 30, 2021 , other gains and
losses consisted of a net loss of $2.5 billion , which primarily reflects $2.1
billion in net losses associated with the fair value changes of our equity
investments, as well as $0.4 billion in incremental losses associated with the
divestiture of our operations in the U.K. and Japan upon closing of the
transactions during the first quarter of fiscal 2022.
Our effective income tax rate was 27.5% for the three months ended April 30,
2022 , compared to 26.9% for the same period in the previous fiscal year. 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 our U.S.
operations and international operations, which are subject to statutory rates
that may be different than the U.S. statutory rate.
As a result of the factors discussed above, consolidated net income decreased
$0.7 billion for the three months ended April 30, 2022 , when compared to the
same period in the previous fiscal year. Accordingly, diluted net income per
common share attributable to Walmart was $0.74 for the three months ended April
30, 2022 , which represents a decrease of $0.23 when compared to the same period
in the previous fiscal year.
Walmart U.S . Segment
Three Months Ended April 30,
(Amounts in millions, except unit counts) 2022
2021
Net sales$ 96,904 $ 93,167 Percentage change from comparable period 4.0 % 5.0 % Calendar comparable sales increase 4.0 % 5.3 % Operating income$ 4,462 $ 5,455 Operating income as a percentage of net sales 4.6 % 5.9 % Unit counts at period end 4,735
4,743
Retail square feet at period end 702 703 Net sales for theWalmart U.S . segment increased$3.7 billion or 4.0% for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year. The increase was due to comparable sales of 4.0% for the three months endedApril 30, 2022 , driven by growth in average ticket, including strong sales in grocery and some higher inflation 20 -------------------------------------------------------------------------------- Table of Contents impacts in certain merchandise categories, while transactions were relatively flat. TheWalmart U.S . segment's eCommerce sales grew at a slower rate than total comparable sales which negatively contributed approximately 0.4% to comparable sales for the three months endedApril 30, 2022 . Gross profit rate decreased 38 basis points for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year, primarily driven by increased supply chain costs and product mix shifts into lower margin categories, partially offset by price management impacts driven by higher cost inflation. Operating expenses as a percentage of net sales increased 95 basis points for the three months endedApril 30, 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$0.2 billion of lower incremental COVID-19 costs.
Due to the above factors, operating profit decreased
Three Months Ended April 30 ,
(Amounts in millions, except unit counts) 2022
2021
Net sales$ 23,763 $ 27,300 Percentage change from comparable period (13.0) % (8.3) % Operating income $ 772$ 1,194 Operating income as a percentage of net sales 3.2 % 4.4 % Unit counts at period end 5,250
5,184
Retail square feet at period end 277 282 Net sales for theWalmart International segment decreased$3.5 billion or 13.0% for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year. The reduction in net sales was due to a$5.0 billion decrease related to the divestiture of our operations in theU.K. andJapan during the first quarter of fiscal 2022, partially offset by positive comparables sales in each of our remaining markets. Net sales for the three months endedApril 30, 2022 included negative fluctuations in currency exchange rates of$0.4 billion . Gross profit rate decreased 108 basis points for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year, primarily driven by higher markdowns and shifts into lower margin formats and channels inChina , as well as the impact related to our divested markets. Operating expenses as a percentage of net sales increased 12 basis points for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year, due to impacts from the divested markets.
Due to the above factors, operating profit decreased
Sam’s Club Segment
Three Months Ended April 30 ,
(Amounts in millions, except unit counts) 2022
2021
Including Fuel Net sales$ 19,621 $ 16,692 Percentage change from comparable period 17.5 % 10.1 % Calendar comparable sales increase 17.4 % 10.1 % Operating income $ 460$ 575 Operating income as a percentage of net sales 2.3 % 3.4 % Unit counts at period end 600 599 Retail square feet at period end 80 80 Excluding Fuel (1) Net sales$ 16,532 $ 14,937 Percentage change from comparable period 10.7 % 6.2 % Operating income $ 335$ 530 Operating income as a percentage of net sales 2.0 % 3.5 % (1) We believe the "Excluding Fuel" information is useful to investors because it permits investors to understand the effect of theSam'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 theSam's Club segment in the future. Net sales for theSam's Club segment increased$2.9 billion or 17.5% for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year. The increases were primarily due to comparable sales, including fuel, of 17.4% for the three months endedApril 30, 2022 . Growth in comparable sales benefited from growth in transactions and 21
————————————————– ——————————
Contents
average ticket and included some higher inflation impacts in certain merchandise categories.Sam's Club eCommerce net sales positively contributed approximately 0.5% to comparable sales for the three months endedApril 30, 2022 . Gross profit rate decreased 216 basis points for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year. The gross profit rate was negatively impacted by higher supply chain costs, elevated inflation and markdowns caused by inventory delays. Membership and other income increased 11.9% for the three months endedApril 30, 2022 , when compared to the same period in the previous fiscal year. The increase was due to increases in new member sign-ups and Plus penetration.
Operating expenses as a percentage of segment net sales decreased 117 basis points for the quarter ended
Due to the above factors, operating profit decreased
Cash 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.
Net cash provided by or used in operating activities
Three Months Ended April 30,
(Amounts in millions) 2022 2021
Net cash provided by (used in) operating activities $ (3,758) $ 2,858
Net cash used in operating activities was
Cash equivalents and working capital deficit
Cash and cash equivalents were$11.8 billion and$22.8 billion atApril 30, 2022 and 2021, respectively. Our working capital deficit was$13.3 billion as ofApril 30, 2022 , which increased when compared to$4.3 billion as ofApril 30, 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 ofApril 30, 2022 andJanuary 31, 2022 , cash and cash equivalents of$3.3 billion and$4.3 billion , respectively, may not be freely transferable to theU.S. due to local laws or other restrictions. Of the$3.3 billion atApril 30, 2022 , approximately$1.5 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 .
Net cash provided by or used in investing activities
Three Months Ended
April 30,
(Amounts in millions) 2022 2021
Net cash provided by (used in) investing activities
Net cash used in investing activities was$4.6 billion as compared to net cash provided by investing activities of$5.9 billion for the three months endedApril 30, 2022 and 2021, respectively. Net cash used in investing activities increased$10.4 billion for the three months endedApril 30, 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. 22
————————————————– ——————————
Contents
Net cash provided by or used in financing activities
Three Months
Ended April 30,
(Amounts in millions) 2022 2021
Net cash provided by (used in) financing activities $ 5,315 $ (5,399)
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 provided by
financing activities was $5.3 billion as compared to net cash used in financing
activities of $5.4 billion for the three months ended April 30, 2022 and 2021,
respectively. The increase in net cash provided by financing activities is
primarily due to an increase in short-term borrowings to fund working capital
needs.
In April 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 the U.S. of $15.0
billion at April 30, 2022 , all undrawn.
long-term debt
The following table shows the changes in our long-term debt for the three 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 (926) - (926) Reclassifications of long-term debt 1,750 (1,750) - Other (47) (940) (987) Balances as of April 30, 2022$ 3,580 $ 32,174 $ 35,754 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 Date March 18, 2022 April 4, 2022 May 6, 2022 May 31, 2022 August 12, 2022 September 6, 2022 December 9, 2022 January 3, 2023
Dividend maturities payable on
Company share buyback 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 three months endedApril 30, 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 ofApril 30, 2022 , authorization for$8.3 billion of share repurchases remained under the share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status. We regularly review share repurchase activity and consider several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, our results of operations and the market price of our common stock. We anticipate that a majority of the ongoing share repurchase program will be funded through the Company's free cash flow. The following table provides, on a settlement date basis, share repurchase information for the three months endedApril 30, 2022 and 2021: Three Months Ended April 30, (Amounts in millions, except per share data) 2022 2021 Total number of shares repurchased 16.9 20.6 Average price paid per share$ 142.17 $ 136.18 Total amount paid for share repurchases$ 2,408 $ 2,809 23
————————————————– ——————————
Contents
Material cash needs
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 ofApril 30, 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. 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 topics
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 investigation and possible complaint related to money transfers and the Company's anti-fraud program. We 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 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 the Asda Equal Value Claims matter and the Foreign Direct Investment matters 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.
© Edgar Online, source
