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Walmart reports Q4 underlying EPS of $1.60, Fiscal 2014 underlying EPS of $5.11

February 21, 2014



ENP Newswire - 21 February 2014

Release date- 20022014 - Wal-Mart Stores, Inc. (Walmart) reported fourth quarter diluted earnings per share from continuing operations (EPS) of $1.34, which includes the impact of discrete items detailed in this press release. Underlying1 EPS for the quarter was $1.60. Last year's EPS for the fourth quarter was $1.67.

The company reported EPS for fiscal 2014 of $4.85, which includes certain discrete items that impacted the fourth quarter. Underlying1 EPS for fiscal year 2014 was $5.11, a 2.0 percent increase over last year's reported EPS of $5.01.

Consolidated net sales reached $473.1 billion for the year, an increase of $7.5 billion, or 1.6 percent. On a constant currency basis,1 net sales would have increased 2.5 percent to $477.5 billion. Currency negatively impacted net sales by approximately $5.1 billion, and acquisitions added approximately $0.7 billion.

Consolidated operating income was $26.9 billion for the year, a decrease of 3.1 percent. The company had certain discrete items that impacted operating income by approximately $0.9 billion or 3.3 percent. Excluding these items, underlying1 operating income increased 0.2 percent to $27.8 billion. Walmart U.S., with operating income growth of 4.0 percent, was the major contributor to Walmart's underlying1 profit growth.

Walmart U.S. grew net sales 2.4 percent in the quarter and comp sales declined 0.4 percent in the 14-week period ended Jan. 31, 2014. Comp sales for the Neighborhood Market format rose approximately 5.0 percent.

Walmart U.S. will increase capital expenditures for fiscal 2015 to accelerate the rollout of small format stores, both Neighborhood Market and Walmart Express.

Walmart International grew annual net sales to $136.5 billion, an increase of 1.3 percent. On a constant currency basis,1 International net sales would have increased 4.6 percent to $140.9 billion.

Global eCommerce sales, including acquisitions, grew to more than $10 billion during fiscal 2014.

The company returned $12.8 billion to shareholders through share repurchases and dividends during the year. [Note: Please see separate release on dividend for fiscal 2015, dated Feb. 20, 2014.]

The company issued fiscal 2015 first quarter and fiscal year EPS guidance ranges of $1.10 to $1.20 and $5.10 to $5.45, respectively.

1 See additional information at the end of this release regarding non-GAAP financial measures.

BENTONVILLE, Ark.--(BUSINESS WIRE)--Feb. 20, 2014-- Wal-Mart Stores, Inc. (NYSE: WMT) today reported financial results for the fourth quarter and fiscal year ended Jan. 31, 2014.

Net sales for the fourth quarter were $128.8 billion, an increase of 1.4 percent over last year. This quarter included the negative impact of approximately $1.8 billion from currency exchange rate fluctuations. On a constant currency basis,1 net sales would have increased 2.8 percent to $130.6 billion. Membership and other income for the fourth quarter increased 12.7 percent versus last year. Total revenue was $129.7 billion, an increase of $1.9 billion, or 1.5 percent, over last year.

Consolidated net income attributable to Walmart was $4.4 billion, a decrease of 21.0 percent. Diluted earnings per share from continuing operations attributable to Walmart were $1.34, 19.8 percent below last year's $1.67. The impact from the discrete items detailed below was $0.26 per share for the fourth quarter.

Fiscal 2014 results

Consolidated net sales for the year were $473.1 billion, an increase of 1.6 percent over fiscal year 2013. Net sales included approximately $5.1 billion of negative impact from currency exchange rate fluctuations and included a favorable impact of approximately $0.7 billion from acquisitions. Membership and other income was $3.2 billion, an increase of 5.6 percent from the prior year. Total revenue was $476.3 billion, an increase of 1.6 percent or $7.6 billion.

Consolidated net income attributable to Walmart was $16.0 billion, a decrease of 5.7 percent. Diluted earnings per share from continuing operations attributable to Walmart were $4.85, 3.2 percent below last year's $5.01.

The total EPS impact of certain discrete items on the company's reported fourth quarter and fiscal year results from continuing operations was $0.26 per share. The discrete items and the respective EPS impact were as follows:

Brazil non-income tax contingencies $ 0.06

Brazil employment claim contingencies $ 0.05

Brazil and China store closures $ 0.06

China store lease expense charges $ 0.03

India transaction $ 0.05

Sam's Club U.S. staff restructuring and club closure $ 0.01



Brazil non-income tax contingencies: The company is subject to tax examinations for non-income taxes in Brazil. A number of these examinations are ongoing, and in certain cases, have resulted in assessments from taxing authorities, some of which we are currently contesting. As part of the company's standard review process and as a result of changing conditions and circumstances, the company recorded additional liabilities related to these loss contingencies.

Brazil employment claim contingencies: Walmart Brazil has experienced a significant increase in employment claims in recent years as a result of company efforts to improve productivity and reduce costs. The company has performed a detailed review of potential liabilities related to these claims, as well as a review of historical processes and practices related to accounting for court deposits required to litigate such claims. As a result of this review, the company recorded charges to increase its liabilities and account for settlements of historical employment claims.

Brazil and China store closures: The company announced the closure of 54 underperforming units between these two markets -- 25 in Brazil and 29 in China.

China store lease expense charges: The company identified a historical lease accounting practice that did not conform to its U.S. GAAP-based global policies. As a result, the company recorded a charge to conform this accounting practice.

India transaction: Walmart terminated the joint venture, franchise and supply agreements with Bharti Enterprises related to retail stores, and exited its investment in the parent of that business.

Sam's Club U.S. staff restructuring and club closure: Sam's Club is implementing a new in-club leadership and staff structure to better align U.S. club teams with the sales volume of each club; the resulting charge was for severance-related costs. Additionally, one club has closed.

1 See additional information at the end of this release regarding non-GAAP financial measures.

Focus on customers and growth

'Our company grew net sales this year to reach more than $473 billion. Global eCommerce sales, including acquisitions, surpassed the $10 billion mark, a 30 percent increase over last year,' said Doug McMillon, Wal-Mart Stores, Inc. president and chief executive officer. 'We will continue to grow our global business by focusing on customers and serving them how they want to be served.'

McMillon also discussed the company's priorities.

'Comp sales improvement is a key priority, and we'll focus on being even stronger item and category merchants, delivering value and improving our service levels,' McMillon said. 'We'll remain focused on our expense structure, and innovate to improve productivity and aid our ability to deliver every day low prices. Our EDLP approach earns trust with customers and helps us keep our cost structure low.

'We'll invest aggressively in e-commerce and increase our small store rollout in the U.S., as we've done in several other countries, to deliver value and convenience. Today, we are announcing an increased capital allocation, above our previous forecast, to accelerate small store growth in the U.S.,' McMillon added. 'The combination of supercenters and smaller formats closer to customers' homes, along with e-commerce and mobile commerce, will enable us to increase our relevance for the Walmart brand around the world.'

Returns

During fiscal 2014, the company repurchased approximately 89 million shares for $6.7 billion. In addition, the company paid $6.1 billion in dividends. In total, the company returned $12.8 billion to shareholders through share repurchases and dividends.

Return on investment1 (ROI) for the fiscal year ended Jan. 31, 2014 was 17.0 percent, compared to 18.1 percent for the prior year. ROI was impacted by a decrease in operating income, as well as investments in fixed assets, and the impact of acquisitions.

'It's important to remember that our reported results included the discrete items we have included in this quarter. If you exclude these items that accounted for 40 basis points, ROI would have been about 17.4 percent for the period,' said Charles Holley, executive vice president and chief financial officer.

Free cash flow1 was $10.1 billion for the fiscal year ended Jan. 31, 2014, compared to $12.7 billion in the prior year. Timing of tax payments, as well as slightly higher capital expenditures, were the primary drivers of the reduction.

'Improved operating results and better management of working capital, including inventory efficiency, will drive stronger cash flow,' added Holley. 'We are working hard across the organization on these opportunities in order to maximize free cash flow this year.'

1 See additional information at the end of this release regarding non-GAAP financial measures.

Guidance

'We expect first quarter fiscal year 2015 earnings per share from continuing operations to be between $1.10 and $1.20. This compares to the reported $1.14 last year,' said Holley. 'We expect full year earnings per share from continuing operations to be in the range of $5.10 and $5.45. This compares to a reported EPS of $4.85 in fiscal 2014, which included the discrete items we told you about. Underlying1 EPS for fiscal 2014 was $5.11.

'We expect economic factors to continue to weigh on our outlook,' said Holley. 'Some of the factors affecting our consumers include reductions in government benefits, higher taxes and tighter credit. Further, we have higher group health care costs in the U.S. These concerns, combined with investments in e-commerce, will make it difficult to achieve the goal we have of growing operating income at the same or faster rate than sales. In October, we forecasted a 3 to 5 percent net sales increase for fiscal 2015. Given these factors and the ongoing headwind from currency exchange, we expect to be toward the low end of the net sales guidance.

'Additionally, all guidance provided today assumes currency exchange rates remain at current levels,' added Holley. 'If currency rates remain where they are today, net sales would be negatively impacted by approximately $3.5 billion for fiscal 2015. During the first quarter of this year, we will begin to anniversary the increased costs we incurred last year for FCPA matters, including compliance program enhancements and the ongoing investigations. We anticipate expenses for FCPA matters and compliance-related enhancements to range between $200 and $240 million for fiscal 2015.'

The company's pending sale of the Vips restaurant business in Mexico remains subject to regulatory approval and is now expected to be completed in the first quarter of fiscal 2015. The Vips results are recorded in discontinued operations, and the estimated future gain from the sale is expected to be approximately $0.06 per share.

Expanding U.S. store growth

The company announced plans to expand its original Walmart U.S. capital plan for this fiscal year by accelerating U.S. small store growth through Neighborhood Market and Walmart Express units.

'In October, we announced our plan to grow our U.S. store base with large and small formats,' said Bill Simon, Walmart U.S. president and CEO. 'Today, we are expanding on our original plans with additional small stores. We will maintain our projection for supercenter growth with approximately 115 new stores.

'Neighborhood Markets continued to deliver consistent solid comp sales growth, and customers appreciate the convenience of our small stores. They are a proven model,' added Simon. 'We're also pleased with how well the 20 Express stores are doing, and we're expanding our pilot beyond the initial three markets. These small formats are digitally connected and provide customers convenient access to a broad assortment, including fresh, pharmacy and fuel. We will now open between 270 and 300 small format units this year, which will nearly double our fleet and fuel growth as we enter the next generation of retail.'

The result of this program enhancement is an increase of $600 million to the company's total fiscal year 2015 forecast for capital expenditures. The updated range is $12.4 to $13.4 billion versus the October forecast of $11.8 to $12.8 billion.

The following tables provide an update to the company's previously provided plans for capital expenditures, net retail square footage growth and total U.S. unit growth for fiscal year 2015.

1 See additional information at the end of this release regarding non-GAAP financial measures.

http://news.walmart.com/news-archive/investors/2014/02/20/walmart-reports-q4-underlying1-eps-of-160-fiscal-2014-underlying1-eps-of-511

Source: Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc.

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Source: ENP Newswire


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