Wal-Mart Is a Huge Opportunity

Wal-Mart Stores (WMT) announced fourth quarter ended January 31, 2016 total revenue of $129.7 million, down 1.4 percent year-over-year from $131.6 million during the same period last year.

Wal-Mart declared fourth quarter of 2016 consolidated net income of $4.6 billion or $1.43 per diluted share, down 7.9 percent year-over-year from $5.0 billion or $1.53 per diluted share in fourth quarter of 2015.

The global retail giant witnessed continued year-over-year decline in both its total sales and net revenue for the quarter, particularly due to unfavorable foreign currency exchange rates and despite a notable reduction in interest and net expenditures during the period.

Importantly, Wal-Mart has returned approximately $4.0 billion to the key stakeholders in the form of dividends and strategic share repurchases during the quarter which is in line with its continued commitment to deliver attractive shareholder returns.
Further, Wal-Mart has recently and uniquely declared a 43rd successive dividend expansion for the year to $2.00 per share from $1.96 announced earlier.

Wal-Mart’s total revenue excluding the foreign exchange impact grew over 2.2 percent year-over-year from the fourth quarter of 2015. However, net income from operations excluding the foreign exchange translations declined 16.4 percent year-over-year to $6.6 billion during the fourth quarter of 2016 from $7.9 billion in the fourth quarter of 2015.

In addition, Wal-Mart has reported $15.9 billion worth of free cash flows for year-ended January 31, 2016 as against $16.4 billion during the same period last year. This significant decline in free cash flows is specifically driven by weaker operating income for the quarter, somewhat offset by weak payment timings and reduced capital expenditures.

Wal-Mart declared 15.5 percent and 16.9 percent ROI for the past one year ended January 31, 2016 and 2015, respectively. This year-over-year reduction in ROI was mainly due to the company’s decline in ongoing capital investments and net income from operations.

Worldwide net sales for Wal-Mart during fourth quarter of 2016 were reported at $32.7 billion. Total sales for the quarter on constant currency basis were recorded at $37.4 billion, up 3.3 percent year-over-year and as a result of robustness in Canada and Walmex. Internationally, on a constant currency basis, GMV and e-commerce sales grew nearly 8% with growth particularly burdened by growth restrictions in major global markets.

The adjusted net company sales for the quarter expanded impressively year-over-year primarily driven by significant growth in customer footfall at the company stores, leading to a notable increase in consolidated company sales. However, ROI declined somewhat year-over-year due to visible expansion in net company expenditures for the quarter.

According to the latest company statement, Wal-Mart currently estimates total sales to remain the same for the year as against an estimated earlier sales growth of nearly 4 percent which includes the impact of unfavorable foreign currency translations.


Overall, the investors are advised to “Hold” their position in Wal-Mart Stores Inc. considering the company’s notably debt-burdened position with significant total debt of $50.03 billion against weaker total cash position of $8.70 billion, restricting the company to make future growth investments. The profit margin of 3.05% seems only satisfactory. The PEG ratio of 416.50 signifies extremely expensive company growth compared to an attractive industry growth average of 1.82.
Published on May 5, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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