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WALMART INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Posted on June 3, 2022June 3, 2022 by Amy A. Stuart
03
Jun

Insight


This discussion, which presents Walmart Inc.'s ("Walmart," the "Company," "our,"
or "we") results for periods occurring in the fiscal year ending January 31,
2023 ("fiscal 2023") and the fiscal year ended January 31, 2022 ("fiscal 2022"),
should be read in conjunction with our Condensed Consolidated Financial
Statements as of and for the three months ended April 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 ended January 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 ended January 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 the U.S. dollar into U.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 the Walmart
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 the Walmart 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  ."
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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 April 30, 2022 and 2021, were as follows:

                                               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.
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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 ended April 30, 2022, primarily driven by increased wage costs
in the Walmart 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.
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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







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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 ended
April 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 ended April 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.
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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 the Walmart U.S. segment increased $3.7 billion or 4.0% for the
three months ended April 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 ended April 30, 2022, driven by growth in average ticket, including
strong sales in grocery and some higher inflation
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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.

Gross profit rate decreased 38 basis points for the three months ended April 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 ended April 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 $1.0 billion for the three months ended April 30, 2022compared to the same period of the previous year.

walmart International sector


                                                          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 the Walmart International segment decreased $3.5 billion or 13.0%
for the three months ended April 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 the U.K. and Japan
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 ended April 30, 2022 included negative fluctuations in currency exchange
rates of $0.4 billion.

Gross profit rate decreased 108 basis points for the three months ended April
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 in China, 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 ended April 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 $0.4 billion for the three months ended April 30, 2022compared to the same period of the previous year.

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 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 $2.9 billion or 17.5% for the
three months ended April 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 ended April 30, 2022. Growth in
comparable sales benefited from growth in transactions and
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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 ended April 30, 2022.

Gross profit rate decreased 216 basis points for the three months ended April
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 ended April 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 April 30, 2022compared to the same period of the previous year, mainly due to the increase in sales.

Due to the above factors, operating profit decreased $115 million for the three months ended April 30, 2022compared to the same period of the previous year.

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 $3.8 billion compared to the net cash generated by the operating activities of $2.9 billion for the three months ended
April 30, 2022 and 2021, respectively. The decline was primarily due to higher inventory and purchasing costs to support strong sales, lower operating profit and the timing of certain payments and debts.

Cash equivalents and working capital deficit


Cash and cash equivalents were $11.8 billion and $22.8 billion at April 30, 2022
and 2021, respectively. Our working capital deficit was $13.3 billion as of
April 30, 2022, which increased when compared to $4.3 billion as of April 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 of April 30, 2022 and January 31, 2022, cash and cash equivalents of $3.3
billion and $4.3 billion, respectively, may not be freely transferable to the
U.S. due to local laws or other restrictions. Of the $3.3 billion at April 30,
2022, approximately $1.5 billion can only be accessed through dividends or
intercompany financing arrangements subject to approval of the Flipkart minority
shareholders; however, this cash is expected to be utilized by Flipkart.

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                         

($4,558) $5,850



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 ended
April 30, 2022 and 2021, respectively. Net cash used in investing activities
increased $10.4 billion for the three months ended April 30, 2022 primarily as a
result of lapping the net proceeds received from the divestitures of our
operations in the U.K. and Japan and an increase in capital expenditures to
support our investment strategy.
                                       22

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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 April 30, 2022:

                                                                     Long-term debt
                                                                     due within one
(Amounts in millions)                                                     year                Long-term debt             Total
Balances as of February 1, 2022                                     $       

2,803 $34,864 $37,667


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

Effective February 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 April 4, 2022 and May 31, 2022 were paid as scheduled.

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 ended April 30, 2022 were made under
the current $20 billion share repurchase program approved in February 2021,
which has no expiration date or other restrictions limiting the period over
which the Company can make repurchases. As of April 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 ended April 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

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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 of April 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," a United 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.

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