Walmart 1998 Annual Report Download

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Annual
LOOK
LOOKLOOK
who’s on
the DOW!
who’s on
the DOW!
• Strategy pays off
• Asset management
• Shareholder value
• Tech leadership
• Asset management
• Tech leadership
• Inventory control
MAKING THE
MAKING THEMAKING THE
•PEOPLE POWER
•SUPERCENTERS
•GLOBAL GROWTH
PLUS
PLPLUSUS

Table of contents

  • Page 1
    Annual K O O n L o o on s s ' ' o h w wh D W W!! O O D e he tth MAKING THE • Strategy pays off • Asset management • Shareholder value • Tech leadership • Inventory control PLUS PLUS • PEOPLE POWER • SUPERCENTERS • GLOBAL GROWTH

  • Page 2
    ... The Children's Miracle Network is just one of the causes that Wal-Mart associates support. People power! "Our People Make the Difference" - shareholder value and customer service built on respect for the individual. The Wal-Mart nobody knows Only a major real estate and transportation company could...

  • Page 3
    ... Dr. Paula Stern John T. Walton S. Robson Walton CHAIRMAN OF THE BOARD S. Robson Walton David D. Glass Donald G. Soderquist Paul R. Carter 18 Wal-Mart value translates into any culture. Just ask John Evanson of Store 3064 in Oakville, Ontario, Canada. ➣ CEO, PRESIDENT VICE CHAIRMAN, COO...

  • Page 4
    ... TH GROW by design With a strategy for improving returns on our investment base,Wal-Mart focuses on customer and shareholder value. s I reflect on the year just ended, I cannot help but feel proud of what our Wal-Mart associates have accomplished. Fiscal 1998 was another record year. Every one of...

  • Page 5
    ... triple sales since we acquired 122 Woolco stores four years ago. Profits exceeded even our own estimates, and market share continues to grow. With the tender offer for Cifra shares and merger of the joint ventures in Mexico, we now have a controlling interest in Mexico's largest retailer. Cifra...

  • Page 6
    ... at Wal-Mart, they also let us know how they liked it! Here is a sampling from our mailbox. ery was made. We were so excited wondering what was happening 500 miles away! We called Karen back in two hours and learned the associates had just left the store. She had wrapped the box in plain brown paper...

  • Page 7
    ... Baby Grace, a Children's Miracle Network child, to the Cullman, AL schools, where Distribution Center 6006 raised $15,000 to help replace a building destroyed by fire. This emphasis on giving back has benefited Wal-Mart, as well. It's no coincidence that the top stores in sales generally are the...

  • Page 8
    UP FRONT PEOPLE POWER "Our People Make the Difference" - shareholder value and customer service built on respect for the individual. 8

  • Page 9
    ...percent increase in the stock price, the Profit Sharing plan's assets increased 57 percent in the last year," said Chief Financial Officer John Menzer. That's what can happen when Wal-Mart people, the best in the retail industry, focus on creating value for customers, shareholders and the company as...

  • Page 10
    ..., expansion or relocation alternatives, total capital expenditure, cash-on-cash incremental rate of return and a marketing plan for the existing real estate if the project involves relocation. With about 310 million square feet of property, Wal-Mart Realty is the largest owner and manager of retail...

  • Page 11
    ... centers, all of which help create jobs in the local community. "Wal-Mart will accelerate its aggressive strategy to identify uses for once-occupied properties as it plans a significant number of store relocations in the future," said Jim Vawter, Director of Financial Management for Wal-Mart Realty...

  • Page 12
    ... year in its history, setting another sales record with revenues of $118 billion. Not only did Wal-Mart extend its standing as the largest retailer in the world, but our fiscal 1998 increase in sales ($13.1 billion), by itself, would make Wal-Mart the ninth-largest retailer in the nation. "Pound...

  • Page 13
    ...recent closing price of 50, for an average gain of more than $180,000 per year. In addition, that holding would have paid $27,000 in dividends in 1997. "This is a long-term game," Glass said. "We don't have any shortterm plans at Wal-Mart. Everything we do is designed to build shareholder value over...

  • Page 14
    ... than a paper-based system. Wal-Mart leads the retail industry with its SHORTHAND version of a "just in time" supply sysDespite a 12 percent increase tem in which in sales in 1998, the company computers track saw only a 4 percent increase every product and in inventories, saving about automatically...

  • Page 15
    ...-Mart's value to shareholders. An example of how Wal-Mart's operational improvements build returns to investors: Despite a 12 percent increase in sales in 1998, the company saw only a 4 percent increase in inventories, saving about $1.4 billion. This makes more capital available for other productive...

  • Page 16
    ...and generBy "data-mining" the al merchandise in information on customer the same place. shopping habits that our Those questions technology provides, we have have been anbeen able to refine store swered to the layouts and design. benefit of Wal-Mart shareholders. W Wal-Mart Discount Stores already...

  • Page 17
    ... force Creating shareholder value begins at the top - the 14 members of the Wal-Mart Board of Directors. With a wide variety of top-level international, retail, business and education experience, these leaders are a driving force for Wal-Mart's growth. Right: Dr. Paula Stern, The Stern Group Inc...

  • Page 18
    ... backgrounds. Five years into our international expansion, operating profits from the International division were $24 million in fiscal 1997 and $262 million in fiscal 1998. The division had total revenues of $7.5 billion in the year just completed. Even though Wal-Mart is only a few years into its...

  • Page 19
    ...-digit sales increases and a near doubling of its operating profits. Continued market share gains and improved results made Canada one of the standout divisions of fiscal 1998. Other highlights of fiscal 1998 for the International division: • Wal-Mart has established itself as the premier retailer...

  • Page 20
    ... Current ratio Inventories/working capital Return on assets* Return on shareholders' equity** Other Year-End Data Number of domestic Wal-Mart stores Number of domestic Supercenters Number of domestic SAM'S Club units International units Number of associates Number of shareholders * Net income before...

  • Page 21
    1995 $ 82,494 22 % 7% 914 65,586 12,858 520 186 1,581 4 2,681 1.17 .17 1994 $ 67,344 21 % 6% 645 53,444 10,333 331 186 1,358 (4) 2,333 1.02 .13 1993 $ 55,484 26 % 11 % 497 44,175 8,321 143 180 1,171 4 1,995 .87 .11 1992 $ 43,887 35 % 10 % 404 34,786 6,684 113 153 945 (1) 1,609 .70 .09 1991 $ 32,...

  • Page 22
    ... Statements for additional information on our acquisitions. SAM'S Club sales, as a percentage of total sales, decreased from 18.9% in fiscal 1997 to 17.5% in fiscal 1998. The sales increase in fiscal 1997 when compared to fiscal 1996 was attributable to our expansion program and comparative store...

  • Page 23
    ... Average pay rate - 30-day commercial paper non-financial plus .134% Average receive rate Interest Rate Derivative Financial Instruments Related to Real Estate Investment Trust Obligation Interest rate swaps Pay variable/receive fixed Average pay rate - 30-day commercial paper non-financial Average...

  • Page 24
    .... We operate wholly owned operations in Argentina, Canada, Germany and Puerto Rico, through joint ventures in China and through majority-owned subsidiaries in Brazil and Mexico. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak...

  • Page 25
    ... or expansions of existing Wal-Mart stores. Also planned for next fiscal year are ten new SAM'S Club units and three distribution centers. Internationally, plans are to develop 50 to 60 new retail units. These stores are planned in Argentina, Brazil, Canada, China, Germany, Mexico and Puerto Rico...

  • Page 26
    ... S TAT E M E N T S O F I N C O M E (Amounts in millions except per share data) Fiscal years ended January 31, Revenues: Net sales Other income-net Costs and Expenses: Cost of sales Operating, selling and general and administrative expenses Interest Costs: Debt Capital leases 555 229 113,580 629 216...

  • Page 27
    ... Obligations Under Capital Leases Deferred Income Taxes and Other Minority Interest Shareholders' Equity Preferred stock ($.10 par value; 100 shares authorized, none issued) Common stock ($.10 par value; 5,500 shares authorized, 2,241 and 2,285 issued and outstanding in 1998 and 1997, respectively...

  • Page 28
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Amounts in millions except per share data) Balance - January 31, 1995 Net income Cash dividends ($.20 per share) Purchase of Company stock Foreign currency translation adjustment Stock options exercised and other Balance - January 31, 1996 Net income...

  • Page 29
    ...)/decrease in inventories Increase in accounts payable Increase in accrued liabilities Deferred income taxes Other Net cash provided by operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of photo finishing plants Acquisitions...

  • Page 30
    ...LIFO) method for domestic Wal-Mart discount stores and Supercenters and cost LIFO for SAM'S Clubs. International inventories are on other cost methods. Inventories are not in excess of market value. Long-lived assets In fiscal 1997, the Company adopted Statement of Financial Accounting Standards No...

  • Page 31
    .... 2 Commercial Paper and Long-term Debt Information on short-term borrowings and interest rates is as follows (dollar amounts in millions): Fiscal years ended January 31, Maximum amount outstanding at month-end Average daily short-term borrowings Weighted average interest rate 1998 $ 1,530...

  • Page 32
    ...30-day commercial ($1) paper non-financial January 31, 1997 Notional amount (in millions) $ 630 Maturity 2006 Rate received 6.97% Foreign exchange instruments The Company has entered into a foreign currency swap to hedge its investment in Germany. Under the agreement, the Company will pay $1,960...

  • Page 33
    ...maintains profit sharing plans under which most full-time, and many part-time associates become participants following one year of employment. In fiscal 1998, the Company added 401(k) plans in which the same associates may elect to contribute up to 10% of their earnings. The Company will make annual...

  • Page 34
    ...December 1997, the Company acquired the Wertkauf hypermarket chain in Germany, as well as certain real estate. The 21 hypermarkets are one-stop shopping centers that offer a broad assortment of high-quality general merchandise and food and are similar to the Wal-Mart Supercenter format in the United...

  • Page 35
    ... option valuation model, the weighted average grant date value of options granted during the year ended January 31, 1998, was $13 per option. The effect of applying the fair value method of Statement 123 to the Company's option plan does not result in net income and net income per share that are...

  • Page 36
    ...Company and its subsidiaries are principally engaged in the operation of mass merchandising stores located in all 50 states, Argentina, Brazil, Canada, Germany, Mexico and Puerto Rico, and through joint ventures in China. In June 1997, the Financial Accounting Standards Board (FASB) issued Statement...

  • Page 37
    ...,1997 Revenues from external customers Intercompany real estate charge (income) Depreciation and amortization Operating income Interest expense Income before income taxes and minority interest Total assets Wal-Mart Stores $ 74,840 1,250 628 5,033 SAM'S Club $ 19,785 346 99 557 International $ 5,002...

  • Page 38
    ... results of their operations and their cash flows for each of the three years in the period ended January 31, 1998, in conformity with generally accepted accounting principles. The financial statements and information of Wal-Mart Stores, Inc. and Subsidiaries presented in this Report have been...

  • Page 39
    ... Street Chicago, Illinois 60690 Obligations from Sale/Leaseback Transaction (Wal-Mart Retail Trust I, II, III): State Street Bank & Trust Company of Connecticut 750 Main Street Suite 1114 Hartford, Connecticut 06103 5 1/8% Eurobonds: Royal Bank of Canada 71 Queen Victoria Street London, England...

  • Page 40
    ...-brand items at unheard of prices. That's your SAM'S Club membership at work. â„¢ The Secret To Living Well. Wal-Mart Stores, Inc. shareholders are pre-qualified for membership. Call 1-800-881-9180 for the SAM'S Club location nearest you. Check out our expanded member benefits at www.samsclub.com.