Walmart (NYSE: WMT) — international retailer, which operates America's largest grocery retail chain. Beyond the USA, the company is still operating in Africa, Canada, Central America, Japan, Uk, Chile, China, India and Mexico.
In mid-February, Walmart presented financial results for the fourth quarter, which exceeded the expectations of investors and analysts. Basic moments
- Total revenue increased by 0,5% to $152.871 billion versus the market consensus forecast of $150.240 billion.
- Walmart's E-Commerce Sales in the U.S. Increased by 1% compared to the same quarter last year and on 70% relative to the pre-Covid period.
- Net income per share increased from −0.74 to 1,29 $ due to the strong growth of the wholesale business. At the same time, if you look at the adjusted indicator, then he composed 1,53 $ when forecasting in 1,50 $.
- Since the beginning of the year, Walmart has repurchased its shares from the market in the amount of $ 9.8 billion, which is almost 50% from the previously announced $20 billion buyback.
Sales structure of the company
Walmart's core business is retail and wholesale, which the retailer conditionally divides into three business units: Walmart USA, Walmart International and Sam's Club.
Walmart USA. The main segment of the company, which works in 50 U.S. states and brings almost 70% overall result. The retailer receives the main income in the local market through three formats: Walmart – flagship stores of a large area, Walmart Neighborhood Market – Small Format Outlets, walmart.com — e-commerce direction.
Walmart USA showed neutral results in the last quarter. Net revenue increased by 5,7% from 99.585 billion to 105.279 billion dollars against the background of a high base last year. Revenue from the direction of e-commerce has not changed much, comparable sales added ~ 5,6%: traffic growth was 3,1%, the average check increased by 2,4%.
Walmart International. The second largest segment of the retailer, who earns about 18% of total income. The company operates in total in 26 countries, besides the USA. In addition to Walmart's main brand, many local brands are used in these markets.: for example, in Brazil – Grupo BIG, in the UK - Asda, in Japan, Seiyu, in Central America , Pali and Mas x Menos, in Africa — Massmart, Builders, Game, Makro and others.
Moving on to fourth quarter results, it is worth noting, that they were extremely weak due to the sale of Walmart assets for $ 10.1 billion, the two largest deals are the sale of controlling stakes in the British retailer Asda and in the Japanese network Seiyu. Segment net revenue decreased by 22,6% to $26.997 billion, and operating profit by 13,7% to $0.832 billion.
Sam’s Club. This is an American network of wholesale and small wholesale trade of club type., which works in 44 U.S. states and Puerto Rico. Only customers can make purchases in these stores, who bought an annual membership for 45 $, if you need a standard package, and for 100 $, if additional options are required.
In the fourth quarter, this segment showed the strongest results in comparison with the rest of the company's divisions.: net revenue compared to the same period last year increased by 16,5% from $16.527 billion to $19.249 billion. The main reason is the double-digit growth in comparable sales and e-commerce.. The first indicator increased by 16,3% due to the growth of traffic and the average check, and the second on 21% against the background of strong demand from customers.
Sales structure of the company, billion dollars
| Revenue | 4к2021 | 4к2022 | The change |
|---|---|---|---|
| Walmart USA | 99,585 | 105,279 | 5,7% |
| Walmart International | 34,873 | 26,997 | −22,6% |
| Sam’s Club | 16,527 | 19,249 | 16,5% |
| Other revenue | 1,094 | 1,347 | 23% |
| total revenues | 152,079 | 152,871 | 0,5% |
| Operating profit | 4к2021 | 4к2022 | The change |
|---|---|---|---|
| Walmart USA | 5,168 | 5,183 | 0,3% |
| Walmart International | 0,964 | 0,832 | −13,7% |
| Sam’s Club | 0,389 | 0,549 | 41,1% |
| Corporate expenses | −1,034 | −0,677 | −34,5% |
| Total operating income | 5,487 | 5,887 | 7,3% |
Profit
Walmart's net profit in the fourth quarter increased from -2.091 billion to 3.562 billion dollars compared to the same period last year. The strong difference is explained by the write-off: against the background of the sale of British and Japanese assets, the company recorded a loss in 2,66 $ per share, or approximately $7.5 billion.
At the same time, if you look at the adjusted indicator, then it has grown year-on-year by 10% to $4.2 billion or 1,53 $ on 1 share. Next, we will analyze, for which items the net profit was adjusted:
- Walmart in the fourth quarter earned EPS in the amount of +1,29 $.
- Unrealized and realized investment gains and losses: +0,19 $.
- Business restructuring costs: +0,06 $.
- Final result: +1,53 $.
Walmart's operating cash flow in the fourth quarter decreased by 33% from $36.074 billion to $24.181 billion due to increased inventory values and purchases to support strong sales, as well as in view of the increase in the salaries of employees. Free cash flow decreased even more – by 57% to $11.075 billion on the back of weak operating flow and higher capital expenditures, which year-on-year added 28%.
Key financial results of the company, billion dollars
| 4к2021 | 4к2022 | The change | |
|---|---|---|---|
| Revenue | 152,079 | 152,871 | 0,5% |
| EBITDA | 8,306 | 8,593 | 3% |
| EBITDA margin | 5% | 6% | 1 P. P. |
| Net profit | −2,091 | 3,562 | — |
| FCF | 25,810 | 11,075 | −57% |
| net debt | 26,792 | 23,317 | −13% |
What will shareholders get
Walmart is not fast-growing, and a long-established business: for the latest 5 for years, the retailer's financial performance grew on average by 3%, therefore, investors receive the main income at the expense of dividends and buyback, which leads to a further increase in the exchange value of shares on the stock exchange.
In 2021, the retailer distributed $ 15.9 billion to its shareholders, of which $6.2 billion was paid in dividends, and $9.8 billion by a buyback. Current yield — 4,2%. Next year, the company planned a $10 billion buyback and four quarterly dividend payments in the amount of 0,56 $ Each. Estimated payment date:
- March – April 2022.
- May 2022.
- August – September 2022.
- December 2022 – January 2023.
Management forecasts and comparison with competitors
In addition to publishing financial results, management also announced its forecast for next year.:
- Net revenue will increase by 3% from $567.7 billion to $584.7 billion.
- Comparable sales of the Walmart USA segment will grow by 3% against 6,4% in the current year that has been completed, and 8,6% a year earlier.
- Consolidated operating profit will add 3% from $25.9 billion to $26.7 billion.
- The effective tax rate will be in the region of 25-26%.
- EPS will increase in a single range, T. is. less 10%. Excluding sale of assets growth, according to management forecasts, will be from 5 to 6%.
- Capital expenditures will be in the region of 2.5-3% of net revenue, which corresponds to 14.6-17.5 billion dollars.
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| Walmart | 11,08 | 27,95 | 0,64 |
| Costco Wholesale | 25,29 | 44,01 | −0,60 |
| Target Corporation | 9,15 | 14,44 | 0,61 |
| Dollar General | 12,74 | 18,94 | 0,93 |
| Dollar Tree | 13,20 | 23,35 | 0,96 |
| The Kroger | 8,65 | 33,09 | 2,20 |
What's the bottom line?
Walmart delivered excellent financial results based on the fact that, that the retailer sold its foreign assets worth more than $ 10 billion. In the fourth quarter, the company's revenue increased by 0,5%, EBITDA - on 3%, adjusted net profit — on 10%. Coupled with this, the management announced a good forecast for the next year and announced an increase in dividends.. Investors liked the results: Walmart shares have risen in price by 4,01%.
Is it worth buying shares of this retailer now or is it better to wait for the price to drop? The second option seems to be more preferable.. Attractive can be considered a rating in EV / EBITDA < 10, which Walmart traded on previously, in the pre-Covid periods, T. is. promotions are interesting to buy more 124 $ and below.
