Financial
Priorities

CFO Letter

We’re uniquely positioned for
customers and shareholders

It’s a transformative time in retail. With today’s technology, customers have more connected lives and are more empowered than ever before to drive changes in shopping behavior. At Walmart, we’re leveraging our financial strength and making strategic choices to accelerate change so we will win with customers in this new age of retail.

“The strength of our company gives us both the resources to win long term, and the flexibility in how we win and generate shareholder returns.”

Walmart’s exceptionally strong financial position is unique. In fiscal 2017:

• annual revenue approached $486 billion with operating income of approximately $22.8 billion;
• operating cash flow reached a record level of $31.5 billion and return on investment* was 15.2 percent;
• we operated nearly 11,700 stores serving more than 260 million customers a week;
• we made several strategic transactions, including the acquisition of Jet.com and the alliance with JD.com; and
• we returned $14.5 billion to shareholders through dividends and share repurchases.

The strength of our company gives us both the resources to win long term, and the flexibility in how we win and generate shareholder returns.

Our path forward is underpinned by a financial framework with three priorities: strong, efficient growth; operating discipline; and strategic capital allocation.

Strong, Efficient Growth: Historically, new stores have been the key contributor to Walmart’s growth. Going forward, more growth will come from comp sales at existing stores. By leveraging technology, executing more frequent remodels and providing more sophisticated training to our associates, we’ll deliver a better experience to customers. We plan to open fewer stores overall, particularly in the U.S., which should improve our returns on capital over time. We’re also focused on accelerating e‑commerce sales through our growing family of brands and the rapid expansion of marketplace, which can benefit the profitability mix of e‑commerce.

Operating Discipline: We’re keenly focused on being the lowest cost operator. We’ve made good progress in cost of goods efficiencies and working capital productivity with strong inventory management. There’s more work to do in managing SG&A expenses. The strategic investments we made over the past two years in associates and technology were important to the long-term health of the business. We must be more efficient. We’re taking steps to remove excess costs from the system and to change how we work in order to rejuvenate the EDLC culture of our heritage. We’re also investing in technology to deploy resources more efficiently and leaning into shared services to centralize processes where appropriate.

Strategic Capital Allocation: Capital expenditures for new stores and clubs have been meaningfully reduced over the past few years. We’re focused on strategic initiatives that will drive long-term value, including store remodels and customer initiatives. The goal: keep our valuable store fleet fresh and improve our customer proposition, with enhancements to in-store pickup, Online Grocery and the fresh food business. In addition, we’ll continue to invest in e‑commerce and the technology of the future to deliver the convenience customers expect.

We’ve also been opportunistic on the M&A front with acquisitions of Jet.com, ShoeBuy, Moosejaw and ModCloth, as well as the alliance with JD.com, that help accelerate e‑commerce growth in the U.S. and China. We’ll be thoughtful about our portfolio of assets and, where appropriate, we’ll continue to sharpen our focus through divestitures.

We’re confident that over time, these financial priorities will help us drive sustainable top line and bottom line growth, and generate solid returns for shareholders.

In closing, I believe Walmart is uniquely positioned for long-term success. Our financial strength has allowed us to make investments in the right places to provide solutions for busy customers. We’re laser-focused on the customer and moving with speed to position Walmart to win the future of retail for customers and shareholders.

Brett Biggs
Executive Vice President and Chief Financial Officer,
Wal-Mart Stores, Inc.

*Return on investment is a non-GAAP measure. Reconciliations and other information regarding return on investment and its closest GAAP measure, return on assets, can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.