Walmart 2008 Annual Report Download

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2008 Annual Report
We save people money
so they can live better.

Table of contents

  • Page 1
    2008 Annual Report We save people money so they can live better.

  • Page 2
    ... our customers and club members. There are more than 176 million consumers in 13 countries who shop our many formats every week. In their words, they share how Wal-Mart helps improve their lives. "As a person with diabetes, Wal-Mart's $4 prescriptions and low-priced, over-the-counter products make...

  • Page 3
    ... Wal-Mart's performance. We define free cash flow as the cash provided by operating activities, less our payments for property and equipment (capital expenditures). Our priorities for cash remain the same: expansion, strategic acquisitions, payment of dividends and share repurchase. The Company...

  • Page 4
    ... quarter - a first for any global retailer. Sam's Club made a strong contribution to the Company's results and, under Doug McMillon's leadership, had a record year in its own right. Wal-Mart's mission of saving people money so they can live better applies equally to Sam's Club. Small businesses...

  • Page 5
    ... customers save money through our $4 prescription program, opening health clinics in our stores and engaging in the broader public policy debate. It is important for a company like Wal-Mart to step up to make a difference in our communities. Even if governments can't or won't address key issues...

  • Page 6
    ...Mart, you save money so you can live better. The fact that we save our customers money has long been part of our DNA. Living better is simply a result of those savings. Customers are responding to our message and offerings. For fiscal year 2008, net sales increased 5.8 percent at our Wal-Mart Stores...

  • Page 7
    ... and products, including money orders, money transfers, the Wal-Mart MoneyCard SM, check cashing and bill payment. We saved our customers more than $300 million this past fiscal year with our financial services products. Wal-Mart Stores U.S. Highlights for Fiscal 2008 • Increased net sales by...

  • Page 8
    .... New store openings and strong comparable store sales led Wal-Mart China to improve its market position. And, in Japan, the Company concluded the tender offer for Seiyu in December 2007, increasing its ownership to above 95 percent. Wal-Mart International Highlights for Fiscal 2008 • Grew sales...

  • Page 9
    ... home. Better Value Wal-Mart Brazil serves low-income customers efficiently through its Todo Dia stores. Updated Identity Sam's Club refreshed its identity with a new logo. In 2008, Sam's Club celebrates its 25th anniversary of being in business to serve members. Fast, Convenient Service Click...

  • Page 10
    ...to "save people money so they can live better" has never been more relevant than today. The Board, management and our two million associates are aligned behind this mission, and I see how important it is every day in our stores. There is no doubt that our commitment to Wal-Mart's mission contributes...

  • Page 11
    ... for the strength of Wal-Mart's management team. I value their experience, talent, and determination, and appreciate their leadership in the stores and on issues important to our shareholders, customers and associates. Wal-Mart will continue to inspire others from within our Company, to lead the...

  • Page 12
    ...States(1) Cost of sales Operating, selling, general and administrative expenses Interest expense, net Effective tax rate Income from continuing operations Net income Per share of common stock: Income from continuing operations, diluted Net income, diluted Dividends Financial position Current assets...

  • Page 13
    ... amounts in this summary. The acquisition of the Asda Group PLC and the Company's related debt issuance had a significant impact on the fiscal 2000 amounts in this summary. Certain reclassifications have been made to prior periods to conform to current presentations. WAL-MART 2008 ANNUAL REPORT 

  • Page 14
    .... ("Wal-Mart," the "Company" or "we") operates retail stores in various formats around the world and is committed to saving people money so they can live better. We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at every day low prices...

  • Page 15
    ..., 2008. Company Performance Metrics Management uses a number of metrics to assess the Company's performance including: • Total sales and comparable store sales; • Operating income; • Earnings per share; • Return on investment; and • Free cash flow. Wal-Mart Stores Sam's Club International...

  • Page 16
    ... we manage costs and leverage expenses. For fiscal 2008, our operating income increased by 7.3% when compared to fiscal 2007, while net sales increased by 8.6% over the same period. For the individual segments, our Sam's Club segment met this target; however, our Wal-Mart Stores and International...

  • Page 17
    ... associated with our planned slowing of store expansion in the United States. Free cash flow is considered a non-GAAP financial measure under the SEC's rules. Management believes, however, that free cash flow is an important financial measure for use in evaluating the Company's financial performance...

  • Page 18
    ... property-insurance related gains. The remainder of the increase in operating expenses as a percentage of total net sales was due to faster growth rates in our International segment relative to our Wal-Mart Stores and Sam's Club segments and slightly higher corporate-level general and administrative...

  • Page 19
    ..., other income, net, for fiscal 2008 includes pre-tax gains of $188 million from the sale of certain real estate properties. During fiscal 2008, our total Wal-Mart Stores' expansion program added approximately 26 million of store square footage, a 4.8% increase. WAL-MART 2008 ANNUAL REPORT 7

  • Page 20
    ...employee-related costs. Membership and other income, which includes a variety of income categories, increased in fiscal 2008 when compared to fiscal 2007. Sam's Club total expansion program added 2.0 million of additional club square footage, or 2.6%, in fiscal 2008. 8 WAL-MART 2008 ANNUAL REPORT

  • Page 21
    ... exchange rate between the British Pound and U.S. Dollar contributed $2.6 billion and $527 million to ASDA's net sales for fiscal 2008 and 2007, respectively. In fiscal 2008, gross margin increased across most markets leading to an overall 0.2 percentage point increase in the International segment...

  • Page 22
    ... January 31, 2008 and 2007, respectively. We generally have a working capital deficit due to our efficient use of cash in funding operations and in providing returns to shareholders in the form of stock repurchases and payment of dividends. Company Share Repurchase Program From time to time, we had...

  • Page 23
    ... for 165 future locations. These lease commitments have lease terms ranging from 2 to 39 years and provide for certain minimum rentals. If executed, payments under operating leases would increase by $67 million for fiscal 2009, based on current cost estimates. WAL-MART 2008 ANNUAL REPORT 2

  • Page 24
    ...-term obligations under capital leases. Total capitalization is defined as debt plus shareholders' equity. Our ratio of debt to our total capitalization has increased in fiscal 2008 due to increased borrowing to fund our increased share repurchases as well as other business needs. 22 WAL-MART 2008...

  • Page 25
    ... following new, relocated and expanded units: Fiscal Year 2009 Projected Unit Growth Discount Stores Supercenters Neighborhood Markets Total Wal-Mart Stores Segment Sam's Club Segment Total United States Total International Segment Grand Total - 170 25 195 25 220 400 620 WAL-MART 2008 ANNUAL REPORT...

  • Page 26
    ...commercial paper rates in effect at January 31, 2008 and 2007, would have increased annual interest expense on the outstanding balances on those dates by $20 million and $14 million, respectively. We enter into interest rate swaps to minimize the risks and costs associated with financing activities...

  • Page 27
    ... Critical Accounting Policies Management strives to report the financial results of the Company in a clear and understandable manner, although in some cases accounting and disclosure rules are complex and require us to use technical terminology. In preparing our Consolidated Financial Statements, we...

  • Page 28
    ... in an increase in net income per basic and diluted common share of $0.05 for the second quarter of fiscal year 2008. For a summary of our significant accounting policies, please see Note 1 to our Consolidated Financial Statements that appear after this discussion. 26 WAL-MART 2008 ANNUAL REPORT

  • Page 29
    ...shortfall in cash to pay dividends and make capital expenditures through the sale of commercial paper and long-term debt securities, our ability to sell our long-term securities, the anticipated number of new stores and clubs to be opened in the United States and internationally, and the anticipated...

  • Page 30
    ...per share data) 2008 2007 2006 Revenues: Net sales Membership and other income Costs and expenses: Cost of sales Operating, selling, general and administrative expenses Operating income Interest: Debt Capital leases Interest income Interest, net Income from continuing operations before income taxes...

  • Page 31
    ... assets Liabilities and shareholders' equity Current liabilities: Commercial paper Accounts payable Accrued liabilities Accrued income taxes Long-term debt due within one year Obligations under capital leases due within one year Total current liabilities Long-term debt Long-term obligations under...

  • Page 32
    ...tax Cash dividends ($0.67 per share) Purchase of Company stock Stock options exercised and other Balance - January 31, 2007 Comprehensive income: Net income Other comprehensive income: Foreign currency...,087 (3,586) (7,691) 385 (160) $64,608 (166) 8 (17) 1 (190) 384 30 WAL-MART 2008 ANNUAL REPORT

  • Page 33
    ... cash used in investing activities Cash flows from financing activities Increase (decrease) in commercial paper Proceeds from issuance of long-term debt Payment of long-term debt Dividends paid Purchase of Company stock Payment of capital lease obligations Other financing activities Net cash used in...

  • Page 34
    Notes to Consolidated Financial Statements 1 Summary of Significant Accounting Policies General Wal-Mart Stores, Inc. ("Wal-Mart," the "Company" or "we") operates retail stores in various formats around the world and is committed to saving people money so they can live better. We earn the trust of ...

  • Page 35
    ... actual product cost, the cost of transportation to the Company's warehouses, stores and clubs from suppliers, the cost of transportation from the Company's warehouses to the stores and clubs and the cost of warehousing for our Sam's Club segment. Payments from Suppliers Wal-Mart receives money from...

  • Page 36
    ... organization costs, related to new store openings, store remodels, expansions and relocations are expensed as incurred. Share-Based Compensation The Company recognizes expense for its share-based compensation based on the fair value of the awards that are granted. The fair value of stock options...

  • Page 37
    ..., 2008 and 2007, respectively. At January 31, 2008, the Company had committed lines of credit of $8.5 billion with 30 firms and banks, which were used to support commercial paper. The committed lines of credit mature at varying times starting between June 2008 and June 2012, carry interest rates of...

  • Page 38
    ... or better by nationally recognized credit rating agencies. Fair Value Instruments The Company enters into interest rate swaps to minimize the risks and costs associated with its financing activities. Under the swap agreements, the Company pays variable-rate interest and receives fixed-rate interest...

  • Page 39
    ... Long-term debt: Fair value is based on the Company's current incremental borrowing rate for similar types of borrowing arrangements or, where applicable, quoted market prices. Fair value instruments and net investment instruments: The fair values are estimated amounts the Company would receive or...

  • Page 40
    ...): January 31, 2008 2007 Deferred tax liabilities: Property and equipment Inventory Other Total deferred tax liabilities Deferred tax assets: Net operating loss carryforwards Amounts accrued for financial reporting purposes not yet deductible for tax purposes Share-based compensation Other Total...

  • Page 41
    ...about the timing of the tax consequence recognition. Because of the impact of deferred tax accounting the timing would not impact the annual effective tax rate but could accelerate the payment of cash to the taxing authority to an earlier period. Additionally, as of February 1, 2007, the Company had...

  • Page 42
    ... agreement with an Indian subsidiary of Wal-Mart under which it will provide technical support to its retail business. In October 2007, the Company announced the launch of a tender offer to acquire the remaining outstanding common and preferred shares of our Japanese subsidiary, Seiyu. Prior...

  • Page 43
    ...yield is based on the annual dividend rate at the time of grant. The weighted average dividend yield for restricted stock rights granted in fiscal 2008 and 2007 was 8.4% and 6.9%, respectively. A summary of the Company's restricted stock rights activity for fiscal 2008 presented below represents the...

  • Page 44
    ...26 million in costs and attorneys' fees. The Company believes it has substantial factual and legal defenses to the claims at issue, and on January 31, 2007, the Company filed its Notice of Appeal. In another of the class-action lawsuits described above, Braun/Hummel v. Wal-Mart Stores, Inc., a trial...

  • Page 45
    ...: The Company is currently a defendant in two putative class actions pending in federal court in California in which the plaintiffs seek certification of a class of salaried managers who challenge their exempt status under state and federal laws. In one of those cases (Sepulveda v. Wal-Mart Stores...

  • Page 46
    ...contributions made by the Company to the United States and Puerto Rico Profit Sharing and 401(k) Plans are made at the sole discretion of the Company. Expense associated with these plans was $945 million, $890 million and $827 million in fiscal 2008, 2007 and 2006, respectively. 2009 2010 2011 2012...

  • Page 47
    ...the legislative and tax requirements in the countries in which they are established. Annual contributions to foreign retirement savings and profit sharing plans are made at the discretion of the Company, and were $267 million, $274 million and $244 million in fiscal 2008, 2007 and 2006, respectively...

  • Page 48
    ...$11.0 billion at January 31, 2008, 2007 and 2006, respectively. 12 Quarterly Financial Data (Unaudited) Quarters Ended (Amounts in millions except per share data) April 30, July 31, October 31, January 31, Fiscal 2008 Net sales Cost of sales Gross profit Income from continuing operations Loss from...

  • Page 49
    ... the funded status of a benefit plan in the statement of financial position. The Standard also requires recognition in other comprehensive income of certain gains and losses that arise during the period but are deferred under pension accounting rules, as well as modifies the timing of reporting and...

  • Page 50
    ... of Wal-Mart Stores, Inc. as of January 31, 2008 and 2007, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended January 31, 2008. These financial statements are the responsibility of the Company's management. Our...

  • Page 51
    ... balance sheets of Wal-Mart Stores, Inc. as of January 31, 2008 and 2007, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended January 31, 2008 and our report dated March 26, 2008 expressed an unqualified opinion...

  • Page 52
    ... Consolidated Financial Statements. The Audit Committee stays informed of the financial condition of Wal-Mart and regularly reviews management's financial policies and procedures, the independence of our independent auditors, our internal control and the objectivity of our financial reporting. Both...

  • Page 53
    ...8 discount stores, 9 Sam's Clubs and 31 supermarkets (Amigo) • United Kingdom - 29 supercenters (Asda), 298 supermarkets (Asda, Asda Small Town), 13 general merchandise stores (Asda Living) and 12 apparel stores (George). We plan to close the George stores in fiscal 2009. 591 4,141 WAL-MART 2008...

  • Page 54
    ... the corporate Web site. Annual Report on Form 10-K Quarterly Reports on Form 10-Q Current Sales and Earnings Releases Current Reports on Form 8-K Copy of Annual Meeting Proxy Statement Supplier Standards Report Market Price of Common Stock Fiscal year ended January 31, 2008 High Low 1st Quarter...

  • Page 55
    ... is much more news and information at www.walmartstores.com. Go electronic! Help Wal-Mart save money and be sustainable. Click to see our new interactive Annual Report at the investor tab on this Web site. You'll find even more information about your Company! We are committed to save money and be...

  • Page 56
    We save people money so they can live better. "Sam's Club takes extraordinary steps to make sure that we have case-ready goods for our small business customers. It saves them time when they can count on Sam's Click 'n' Pull® service. We keep the shelves full for our members every day." Jeff B. ...