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A Walmart 2011 Annual Report
Building
the Next
Generation
Walmart
2011 Annual Report

Table of contents

  • Page 1
    Building the Next Generation Walmart A Walmart 2011 Annual Report

  • Page 2
    ... closest GAAP measures can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report. A reconciliation of ROI to ROA for fiscal 2009 is reï¬,ected on our website at www.walmartstores.com/investors. © 2011 Wal-Mart Stores...

  • Page 3
    ...T. Duke President and Chief Executive Officer Wal-Mart Stores, Inc. To our shareholders, associates and customers Building the Next Generation Walmart At Walmart, we are proud that we work for a very special company that's based on Sam Walton's vision of saving people money so they can live better...

  • Page 4
    ... transaction in South Africa and continue to work on finalizing our acquisition of the Netto stores in the U.K. Our international leadership teams are accelerating organic growth in emerging markets, including Brazil, China, India and Mexico. I am very pleased with Sam's Club's performance and the...

  • Page 5
    ... continuing operations) $5 4 3 2 1 0 FY07 FY08 FY09 FY10 FY11 2.93 3.15 3.35 3.73 4.18 Dividends (dollars per share) $1.50 1.20 0.90 0.60 0.30 0 FY07 FY08 FY09 FY10 FY11 0.88 0.67 0.95 1.09 1.21 Michael T. Duke President and Chief Executive Officer Wal-Mart Stores, Inc. Walmart 2011 Annual Report...

  • Page 6
    Walmart U.S. FY11 results $260 billion Net sales 3,804 Retail units 617 million Total square footage 4 Walmart 2011 Annual Report

  • Page 7
    ... to millions of customers through more than 3,800 stores and over 617 million square feet of selling space. Improved sales this year. This year, the Walmart U.S. team is implementing a four-point plan to improve comparable store sales. Walmart's commitment is to deliver every day low price on the...

  • Page 8
    Walmart International FY11 results $109 billion International Net sales 4,557 Retail units 287 million Total square footage 6 Walmart 2011 Annual Report

  • Page 9
    ... clicks online through the ASDA price guarantee. Opportunity for leverage. Leveraging the local and global footprint and the scale of Walmart saves our customers money so they can live better. Global sourcing efforts drive merchandise quality and uniqueness. Operational cost efficiencies and various...

  • Page 10
    Sam's Club FY11 results $49 billion Net sales 609 Retail units 81 million Total square footage 8 Walmart 2011 Annual Report

  • Page 11
    ... a kiosk in the club, the Sam's Club smart phone application, or online. We've also improved our scheduling and stocking processes, which provides productivity savings. And there are more initiatives on the way to help us better leverage our expenses this year. Comparable club sales, without fuel...

  • Page 12
    ... more customers In 2010, Walmart consolidated its eCommerce activities around the world in a Global eCommerce Division. This division has three goals: 1) Develop and execute a global eCommerce strategy; 2) Accelerate global online channel growth; and 3) Create technology platforms and applications...

  • Page 13
    ... product compliance. We made a global commitment to sustainable agriculture to help both farmers and customers in all of our markets. And we kicked off a new initiative in the United States to make the food we sell healthier and healthier foods more affordable for our customers. We are also proud of...

  • Page 14
    ... of Wal-Mart Stores, Inc. and is the Chairman of the Executive Committee of the Board of Directors. Gregory B. Penner(e) Mr. Penner is a General Partner at Madrone Capital Partners, an investment management firm. Steven S Reinemund(c) Mr. Reinemund is the Dean of Business and Professor of Leadership...

  • Page 15
    ...shareholder value. Walmart Board members represent varied experiences covering retail, technology, financial, brand management, strategic and global expertise. We encourage frank discussions and debate, gain consensus and provide guidance to management on strategies and plans. Mike Duke's leadership...

  • Page 16
    ... Division 2011 Financial Report 15 16 Five-Year Financial Summary Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows...

  • Page 17
    ...-Year Financial Summary (Dollar amounts in millions, except per share and unit count data) As of and for the Fiscal Years Ended January 31, 2011 2010 As Adjusted 2009 2008 2007 Operating Results (1) Net sales Net sales increase Comparable sales in the United States (2) Walmart U.S. Sam's Club Gross...

  • Page 18
    ... and Analysis of Financial Condition and Results of Operations Overview Wal-Mart Stores, Inc. ("Walmart," 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...

  • Page 19
    ... for improving shareholder value: Growth, Leverage and Returns. The Company's priority of growth focuses on sales through comparable store and club sales and unit square feet growth; the priority of leverage encompasses the Company's objective to increase its operating income at a faster rate than...

  • Page 20
    ... rate than net sales. Our fiscal 2010 operating expenses increased 2.7% when compared to fiscal 2009, while net sales increased 1.0% over the same period. Operating expenses grew at a faster rate than net sales due to higher health benefit costs, restructuring charges and higher advertising expenses...

  • Page 21
    ... increased system capabilities, the Company changed the level at which it applies the retail method of accounting for inventory in these operations from 13 divisions to 49 departments. See "Notes to Consolidated Financial Statements," Note 2. "Accounting Change." (3) Walmart 2011 Annual Report 19

  • Page 22
    ... increase in accounts payable. The increase in free cash flow in fiscal 2010 as compared to fiscal 2009 resulted primarily from improved operating results and relatively low inventory levels at January 31, 2010. Free cash flow is considered a non-GAAP financial measure. Management believes, however...

  • Page 23
    ... and club sales. Net sales in fiscal 2010 increased due to the growth in customer traffic, continued global expansion activities and the acquisition of D&S in January 2009, offset primarily by a $9.8 billion unfavorable currency exchange rate impact in our Walmart International segment and price...

  • Page 24
    ...additional information regarding our acquisitions, refer to Note 15 of the "Notes to Consolidated Financial Statements." Volatility in currency exchange rates may continue to impact the Walmart International segment's net sales in the future. Gross profit margin was relatively flat in fiscal 2011 as...

  • Page 25
    ... and global expansion activities. Generally, some or all of the remaining free cash flow, if any, funds all or part of the dividends on our common stock and share repurchases. Fiscal Years Ended January 31, (Amounts in millions) 2011 2010 2009 Net cash provided by operating activities Payments for...

  • Page 26
    ... short-term borrowing programs to fund our operations, dividend payments, share repurchases, capital expenditures, and for other cash requirements and corporate purposes on an as needed basis. Share repurchases (dollars in billions) $14.8 $7.3 $3.5 FY09 FY10 FY11 24 Walmart 2011 Annual Report

  • Page 27
    ... in the liabilities section of the Consolidated Balance Sheets. Estimated interest payments are based on our principal amounts and expected maturities of all debt outstanding at January 31, 2011 and management's forecasted market rates for our variable rate debt. Walmart 2011 Annual Report 25

  • Page 28
    ... Consolidated Financial Statements for additional discussion on unrecognized tax benefits. Off Balance Sheet Arrangements In addition to the unrecorded contractual obligations discussed and presented above, the Company has made certain guarantees as discussed below for which the timing of payment...

  • Page 29
    ...2, effective May 1, 2010, the Company changed the level at which it applies the retail method for valuing its inventory for its operations in the United States, Canada and Puerto Rico. The retrospective application of this accounting change impacted both segment and consolidated operating income, as...

  • Page 30
    ... acquisitions in fiscal 2012; under the caption "Liquidity and Capital Resources - Cash Flows from Financing Activities - Dividends", as well as in Note 17 to our Consolidated Financial Statements and elsewhere under the caption "Dividends payable per share", regarding the payment of dividends...

  • Page 31
    ...acceptable building sites for new stores, clubs and other formats, competitive pressures, accident-related costs, weather patterns, catastrophic events, storm and other damage to our stores and distribution centers, weather-related closing of stores, availability and transport of goods from domestic...

  • Page 32
    ...except per share data) 2011 2010 2010 As Adjusted 2009 2009 As Adjusted Revenues: Net sales Membership and other income $418,952 2,897 421,849 $405,132 2,953 408,085 $401,087 3,167 404,254 Costs and expenses: Cost of sales Operating, selling, general and administrative expenses Operating income...

  • Page 33
    Consolidated Balance Sheets As of January 31, (Amounts in millions except per share data) 2011 2010 2010 As Adjusted ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories Prepaid expenses and other Current assets of discontinued operations Total current assets Property and ...

  • Page 34
    Consolidated Statements of Shareholders' Equity Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Total Walmart Shareholders' Equity (Amounts in millions) Number of Shares Common Stock Retained Earnings Noncontrolling Interest Total Equity Balances - February 1, ...

  • Page 35
    Consolidated Statements of Cash Flows Fiscal Years Ended January 31, (Amounts in millions) 2011 2010 2010 As Adjusted 2009 2009 As Adjusted Cash flows from operating activities: Consolidated net income Loss (income) from discontinued operations, net of tax Income from continuing operations ...

  • Page 36
    ... at a low price every day so our customers trust that our prices will not change under frequent promotional activity. Our fiscal year ends on January 31. Principles of Consolidation The consolidated financial statements include the accounts of Wal-Mart Stores, Inc. and its subsidiaries. All material...

  • Page 37
    ...The Company has not recorded impairment charges related to goodwill. The following table reflects goodwill activity, by operating segment, for fiscal years 2011 and 2010: Walmart Walmart U.S. International Sam's Club During fiscal 2011, Walmart U.S. completed an immaterial business acquisition that...

  • Page 38
    ... in the calculation of minimum lease payments in the Company's capital lease tests and in determining straight-line rent expense for operating leases. Pre-Opening Costs The costs of start-up activities, including organization costs, related to new store openings, store remodels, expansions and...

  • Page 39
    ... the retail method of accounting for inventory at the departmental level better segregates merchandise with similar cost-to-retail ratios and turnover, as well as providing a more accurate cost of goods sold and ending inventory value at the lower of cost or market for each reporting period. The...

  • Page 40
    ...fiscal 2009, performance shares issued are settled or deferred in stock; therefore, they are accounted for as equity in the accompanying Consolidated Balance Sheets. The fair value of performance share awards accounted for as equity is determined on the date of grant using the stock price discounted...

  • Page 41
    ...2009 was 9.1%, 8.5% and 6.8%, respectively. A summary of the Company's restricted stock rights activity for fiscal 2011 presented below represents the maximum number of shares that could be earned or vested under the Plan (in thousands, except per share prices): WeightedAverage Grant-Date Fair Value...

  • Page 42
    Notes to Consolidated Financial Statements 5 Restructuring Charges In the fourth quarter of fiscal 2010, the Company announced several organizational changes, including the closure of 10 Sam's Clubs, designed to strengthen and streamline our operations. As a result, the Company recorded $260 ...

  • Page 43
    ... the Consolidated Balance Sheets. Annual maturities of long-term debt during the next five years and thereafter are as follows: (Amounts in millions) Fiscal Year Annual Maturity 2012 2013 2014 2015 2016 Thereafter Total $ 4,655 1,744 5,113 2,832 4,662 26,074 $45,080 Walmart 2011 Annual Report 41

  • Page 44
    ...rate swaps designated as fair value hedges Receive fixed-rate, pay fixed-rate cross-currency interest rate swaps designated as net investment hedges (Cross-currency notional amount: GBP 795 at January 31,2011 and 2010) Receive floating-rate, pay fixed-rate interest rate swaps designated as cash flow...

  • Page 45
    ... the floating-rate interest expense. These cash flow instruments will mature on dates ranging from August 2013 to July 2015. The Company is also party to receive fixed-rate, pay fixed-rate cross-currency interest rate swaps to hedge the currency exposure associated with the forecasted payments of...

  • Page 46
    ... to Consolidated Financial Statements As of January 31, 2011 and 2010, our financial instruments were classified as follows in the accompanying Consolidated Balance Sheets: January 31, 2011 (Amounts in millions) Fair Value Instruments Net Investment Hedge Cash Flow Instruments Fair Value Instruments...

  • Page 47
    ...connection with this settlement, the Company recorded a $1.0 billion tax benefit in discontinued operations on our Consolidated Statements of Income (see Note 15) and a reduction of our accrued income tax liability in our Consolidated Balance Sheet at January 31, 2011. Walmart 2011 Annual Report 45

  • Page 48
    Notes to Consolidated Financial Statements Other Taxes Additionally, the Company is subject to tax examinations for payroll, value added, sales-based and other non-income taxes. A number of these examinations are ongoing and, in certain cases, have resulted in assessments from the taxing authorities...

  • Page 49
    ...Dukes v. Wal-Mart Stores, Inc., a class-action lawsuit commenced in June 2001 in the United States District Court for the Northern District of California. The complaint alleges that the Company has engaged in a pattern and practice of discriminating against women in promotions, pay, training and job...

  • Page 50
    ..., also removed the link between past accrual and future pay increases. In return, ASDA will pay £43 million (approximately $70 million) in compensation costs to the plan participants. This curtailment charge will be recorded in expense in the first quarter of fiscal 2012. 2012 2013 2014 2015 2016...

  • Page 51
    ...Service, during the fourth quarter of fiscal 2011, resulting in a $1.0 billion tax benefit recorded in discontinued operations in our Consolidated Statement of Income. See Note 10. During fiscal 2009, the Company initiated a restructuring program for our Japanese subsidiary, The Seiyu Ltd., to close...

  • Page 52
    ...Puerto Rico, Argentina, Brazil, Canada, Japan, the United Kingdom, Chile, Mexico and Central America, China and India. The Company's operations are conducted in three reportable segments: (1) the Walmart U.S. segment; (2) the Walmart International segment; and (3) the Sam's Club segment. The Company...

  • Page 53
    ... and Puerto Rico. The net revenues and long-lived assets of the Company's ASDA subsidiary are significant to the Walmart International segment. ASDA's net sales during fiscal 2011, 2010 and 2009 were $31.8 billion, $31.2 billion and $34.0 billion, respectively. Currency exchange rate fluctuations...

  • Page 54
    ... sold and ending inventory value at the lower of cost or market for each reporting period. The retrospective application of this accounting change impacted both segment and consolidated operating income, as well as consolidated net income for all comparable periods presented. 52 Walmart 2011 Annual...

  • Page 55
    ...30, 2010 and 2009. quarter Ended April 30, 2010 (Amounts in millions except per share data) As Reported Adjustments As Adjusted Quarter Ended April 30, 2009 As Reported Adjustments As Adjusted Condensed Consolidated Statements of Income: Cost of sales (1) Operating income Provision for income taxes...

  • Page 56
    ...2010, the Company has elected to change its method of accounting for inventory under the retail inventory method. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Wal-Mart Stores, Inc.'s internal control over financial reporting...

  • Page 57
    ... in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Wal-Mart Stores, Inc. as of January 31, 2011 and 2010, and related consolidated statements of income, shareholders' equity and cash flows for each of the three years...

  • Page 58
    Management's Report to Our Shareholders Management of Wal-Mart Stores, Inc. ("Walmart", the "company" or "we") is responsible for the preparation, integrity and objectivity of Walmart's Consolidated Financial Statements and other financial information contained in this Annual Report to Shareholders....

  • Page 59
    ... of Canada, are stated as of December 31, 2010 to correspond with their balance sheet date. "Other" consists of restaurants operating under varying banners in Chile, Japan and Mexico. (2) United States 2,907 (1) Neighborhood Markets includes other small formats. Walmart 2011 Annual Report 57

  • Page 60
    ... Listing New York Stock Exchange Stock Symbol: WMT Annual Meeting Our Annual Meeting of Shareholders will be held on Friday, June 3, 2011, at 7:00 a.m. (Central time) in Bud Walton Arena on the University of Arkansas campus, Fayetteville, Arkansas. Communication With Shareholders Wal-Mart Stores...

  • Page 61
    ....com/investors, please also visit walmartstores.com to see how we are becoming a more globally responsible company. Our shareholders can continue to help Walmart become a more sustainable company by registering to receive Annual Shareholders Meeting materials and other company information...

  • Page 62
    Every week around the world, our 2.1 million associates work diligently to help more than 200 million customers save money so they can live better. Wal-Mart Stores, Inc. (NYSE: WMT) 702 S.W. 8th Street Bentonville, Arkansas 72716 USA 479-273-4000 walmartstores.com