Walmart 2012 Annual Report Download - page 20
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Please find page 20 of the 2012 Walmart annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’s Discussion and Analysis of Financial
Condition and Results of Operations
18 Walmart 2012 Annual Report
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 providing a broad assortment of quality merchandise and
services at everyday low prices (“EDLP”), while fostering a culture that
rewards and embraces mutual respect, integrity and diversity. EDLP is our
pricing philosophy under which we price items at a low price every day
so our customers trust that our prices will not change under frequent
promotional activities. Our focus for Sam’s Club is to provide exceptional
value on brand name and private label merchandise at “members only”
prices for both business and personal use. Internationally, we operate
with similar philosophies.
Our fi scal year ends on January 31 for our United States (“U.S.”) and
Canadian operations and on December 31 for all other operations.
We discuss how the results of our various operations are consolidated
for fi nancial reporting purposes in Note 1 in the “Notes to Consolidated
Financial Statements.”
We intend for this discussion to provide the reader with information
that will assist in understanding our fi nancial statements, the changes in
certain key items in those fi nancial statements from year to year, and the
primary factors that accounted for those changes, as well as how certain
accounting principles aff ect our fi nancial statements. We also discuss
certain performance metrics that management uses to assess our per-
formance. Additionally, the discussion provides information about the
fi nancial results of the various segments of our business to provide a
better understanding of how those segments and their results aff ect the
fi nancial condition and results of operations of the Company as a whole.
This discussion should be read in conjunction with our Consolidated
Financial Statements as of and for the fi scal year ended January 31, 2012,
and accompanying notes.
Currently, our operations consist of three reportable business segments:
the Walmart U.S. segment; the Walmart International segment; and the
Sam’s Club segment. The Walmart U.S. segment includes the Company’s
mass merchant concept in the U.S. operating under the “Walmart” or
“Wal-Mart” brand, as well as walmart.com. The Walmart International
segment consists of the Company’s operations outside of the U.S. The
Sam’s Club segment includes the warehouse membership clubs in the
U.S., as well as samsclub.com.
Throughout this Management’s Discussion and Analysis of Financial
Condition and Results of Operations, we discuss segment operating
income and comparable store and club sales. The Company measures
the results of its segments using, among other measures, each segment’s
operating income, including certain corporate overhead allocations.
From time to time, we revise the measurement of each segment’s
operating income, including any corporate overhead allocations, as
dictated by the information regularly reviewed by our chief operating
decision maker. When we do so, the prior period amounts for segment
operating income are reclassifi ed to conform to the current period’s
presentation. The amounts representing “Other unallocated” in the
leverage discussion of the Company Performance Metrics include
unallocated corporate overhead and other items.
Comparable store and club sales is a metric which indicates the
performance of our existing U.S. stores and clubs by measuring the
change in sales for such stores and clubs for a particular period from the
corresponding period in the prior year. Walmart’s defi nition of compa-
rable store and club sales includes sales from stores and clubs open for
the previous 12 months, including remodels, relocations and expansions,
as well as sales initiated online. Changes in format continue to be
excluded from comparable store and club sales when the conversion is
accompanied by a relocation or expansion that results in a change in
square feet of more than fi ve percent. Comparable store and club sales
are also referred to as “same-store” sales by others within the retail
industry. The method of calculating comparable store and club sales
varies across the retail industry. As a result, our calculation of comparable
store and club sales is not necessarily comparable to similarly titled
measures reported by other companies.
In discussing our operating results, we sometimes refer to the impact of
changes in currency exchange rates that we use to convert the operating
results for all countries where the functional currency is not denominated
in the U.S. dollar for fi nancial reporting purposes. We calculate the eff ect
of changes in currency exchange rates as the diff erence between current
period activity translated using the current period’s currency exchange
rates and the comparable prior period’s currency exchange rates. We
exclude the impact of current period acquisitions from our calculation. We
refer to the results of this calculation as currency translation fl uctuations
throughout our discussion. When we refer to constant currency operat-
ing results, we are referring to our operating results without the impact
of the currency translation fl uctuations and without the impact of current
period acquisitions. The disclosure of constant currency amounts or results,
excluding the eff ect of acquisitions, permits investors to understand better
our underlying performance without the eff ects of currency exchange rate
fl uctuations or acquisitions.
We made certain reclassifi cations to prior fi scal year amounts or balances
to conform to the presentation in the current fi scal year. These reclassifi -
cations did not impact consolidated operating income or net income.
Additionally, certain segment asset and expense allocations have been
reclassifi ed among segments in the current period.
The Retail Industry
We operate in the highly competitive retail industry in all of the countries
we serve. We face strong sales competition from other discount, depart-
ment, drug, dollar, variety and specialty stores, warehouse clubs and
supermarkets. Many of these competitors are national, regional or inter-
national chains, as well as internet-based retailers and catalog businesses.