WALMART INC. (WMT) March 11, 2020Walmart to save money during a recessionary setting, which will...

Important disclosures appear on the last page of this report.

The Henry Fund

Henry B. Tippie College of Business Willow Miller [[email protected]] WALMART INC. (WMT) March 11, 2020

Consumer Staples – Retail Stock Rating BUY

Investment Thesis Target Price $132-144 We recommend a BUY rating on Walmart Inc. because the company has experienced double digit growth in eCommerce sales by expanding its online platform and offering more services aimed at increased customer convenience. The company is now better positioned in its international segment from its exit in Brazil and Flipkart acquisition. Additionally, Walmart decided in April (2020) not sell its United Kingdom operations due to increased demand from the COVID-19 pandemic, so this too will better position the international segment.i Overall, international operations should drive revenue growth, however COVID-19 may delay growth in the short term. As of April 2020, our target price represents an upside of 9% on the current price.

Drivers of Thesis • Originally, we forecasted 2.7% sales growth for Walmart in 2020; however, the

COVID-19 pandemic has greatly benefited Walmart’s in-store and online sales, so we now expect a higher revenue growth,

• We anticipate that Walmart will surpass management guidance for 30% eCommerce growth this year since the COVID-19 pandemic has already led to a 20% increase in sales in March (2020). We believe this growth is largely due to more customers utilizing in-store pick up and delivery services.ii

• Initiatives in China, Latin America, and Mexico can generate growth in the international segment since management hopes to open 250 stores in next year in these three international segments.iv

Risks to Thesis • We originally forecasted net profit margins increasing to 2.6% due to the

company’s decreasing costs; however, there has been a significant increase in the workforce (200,000 hires) because of rising demand induced by COVID-19 which will raise Walmart’s expenses driving down margins.iii

• Many international divisions of Walmart, like Chile, Japan, and United Kingdom are under preforming so Walmart may exit these markets in the next five years and cause negative growth. Consequently, we forecast 1.4% long term growth because Walmart’s eCommerce strength will not be able to buffer the potential losses from the Walmart International segment.

Henry Fund DCF $144 Henry Fund DDM $132 Relative Multiple $118 Price Data Current Price $119 52wk Range $96 – 125 Consensus 1yr Target $105-$140 Key Statistics Market Cap (B) $328 Shares Outstanding (M) 2.9 Institutional Ownership 31% Five Year Beta 0.63 Dividend Yield 1.86% Est. 5yr Growth 1.5% Price/Earnings (TTM) 22.35 Price/Earnings (FY1) 22.20 Price/Sales (TTM) 0.55 Price/Book (mrq) 3.80 Profitability Operating Margin 3.93% Net Margin 2.84% Return on Assets (TTM) 3.15% Return on Equity (TTM) 8.87%

Earnings Estimates Year 2017 2018 2019 2020E 2021E 2022E EPS $4.40 $3.29 $2.28 $4.41 $4.40 $4.57

Analysts $4.40 $3.29 $2.29 $4.83 $4.84 $5.02 Growth -2.93% -25.22% -30.40% 110.91% 0.02% 3.72%

12 Month Performance Company Description

Walmart Inc. (WMT) is a retail chain that operates through three mains segments: Walmart U.S, Walmart International and Sam’s Club. The company engages in retail and wholesale business. Walmart Inc. operates approximately 11,300 stores and multiple eCommerce websites in 27 countries. Historically, the retailer has focused on its physical footprint, however; in recent years, Walmart is aggressively expanding its eCommerce platform.

22.020.2

12.1

22.2

18.1

8.9

18.0

25.5

11.9

0

5

10

15

20

25

30

P/E ROE EV/EBITDA

WMT Industry Sector

-10%

0%

10%

20%

30%

M A M J J A S O N D J F

WMT S&P 500

Source: NYU & FactSet

EXECUTIVE SUMMARY

We recommend a BUY on Walmart Inc. because the company is well-positioned to enter a recession if the COVID-19 pandemic causes an economic downturn. Currently, all three segments of Walmart: Walmart U.S., Walmart International, and Sam’s Club are experiencing increased sales due to the pandemic. Below is a graph that shows the distribution of revenues.

Source: Annual report

Before the pandemic, we forecasted that Walmart sales would increase by 2.7%. However, we now anticipate more growth due to the increase in foot traffic and eCommerce orders. As of March, Walmart has experienced a 20% increase in sales, according to the Wall Street Journal.ii This increase in sales positively affects all segments of Walmart, but strengthens the eCommerce division and the international segment the most.

Walmart had been pushing eCommerce onto customers for years prior to the pandemic and the concept had taken off. But due to the pandemic, it has now exploded. We do not know the exact increase of eCommerce; however, we do know that there has been a 160% increase in the app downloads to order groceries, according to Statista. Additionally, Walmart has hired tens of thousands of employees to keep up with the increased demand for eCommerce. Consequently, Walmart’s eCommerce services are highly sought after by shoppers.

The increase in sales due to the pandemic also significantly impacts the international segment. For instance, Walmart has just backed out of its United Kingdom operations sale due to the increase in demand. We expect this increase in demand to affect other international divisions as well since Walmart has stayed

open in geographical areas heavily affected by COVID-19. We anticipate that consumers who shopped around for the lowest price prior to the pandemic are now turning to Walmart more than ever to access its one-stop-shop concept to limit public exposure.

If the pandemic affects the economy in a way that triggers a recession, we expect that Walmart will continue to see increased sales following COVID-19. We believe that price-conscious consumers will turn to Walmart and thereby support other aspects of it like its private label brands and Walmart Health. Private-label brands are products produced by Walmart sold at lower prices than name brands. Over the years, Walmart has increased its private label merchandise mix, so we expect the percentage of private label purchases to increase due to more shoppers who want the lowest prices. Additionally, Walmart recently launched Walmart Health which offers basic medical services at far lower prices to both insured and uninsured persons. We expect more people to use this service to save money. Consequently, we predict that consumers will utilize other aspects besides eCommerce at Walmart to save money during a recessionary setting, which will drive revenue.

As a result, we suggest a target price of $132-$144 since we believe that multiple aspects of Walmart will be positively impacted and thereby increase value due to the current and after-effects of the COVID-19 pandemic.

COMPANY DESCRIPTION

Walmart Incorporation globally operates retail, wholesale, and eCommerce units with the motto “Save Money. Live Better.” iv Every week, Walmart Incorporation serves 275 million customers at “11,300 stores and numerous eCommerce websites under 58 banners in 27 countries.” iv The company is organized into three segments: Walmart U.S., Walmart International, and Sam’s Club. Both in-store and eCommerce sales drive these three segments.

Walmart U.S.

Walmart U.S. is the largest segment of Walmart Inc. and generated $341 billion of the total $524 in 2019.iv We forecast an increase of $11 billion in sales during 2020 for the segment because Walmart’s eCommerce initiatives affect this segment the most. We expect Walmart to continue generating double-digit eCommerce growth since management announced new eCommerce services.

66%

23%

11%

Segment Revenues

Walmart U.S Walmart International Sam's Clubs

Since Walmart U.S. eCommerce contributed approximately 1.7% for fiscal 2020 fiscal year, we expect this contribution to be higher due to the COVID-19 pandemic since more people are shopping online. According to Statista, Walmart’s app that allows people to order groceries experienced a 160% growth in downloads in February and March.v And if all these downloads translated into online orders, then there has been a significant raise in eCommerce sales. And since this statistic does not factor in increased website use, so we believe that Walmart’s online platforms are being used at even higher levels which will translate into more sales.

Overall, we believe that between Walmart’s ongoing eCommerce expansion and the COVID-19 pandemic, online sales will cause the Walmart U.S. segment to obtain a higher revenue growth than the 3% growth that we forecasted for the segment. Besides eCommerce, the domestic segment operates three types of centers: supercenters, discount center, and neighborhood markets. Supercenters are the largest locations with an average of 178,000 square feet while the neighborhood markets are the smallest with an average of 42,000 square feet. Each Walmart store model has its purpose as displayed in the table, below.

Walmart Store Models (2019)

Walmart Super Center

Walmart Discount Stores

Walmart Neighborhood Markets

Walmart Health

Store Count 3570 386 813 21

Store openings in last 5 years

208 3 578 21

Stores closed in last 5 years

20 31 172 0

Average Square Feet

178,000 105,000 42,000 n/a

Employee Count 300 200 95 n/a

Locations Suburban Rural Urban Southern U.S.

Products and Services

General merchandise, grocery, and ancillary stores

General merchandise and limited grocery

Grocery and pharmacy

Health care and services

Source: 2019 Annual Report

According to the table, the Walmart Supermarkets are the most successful store model with the most locations, least closures, and largest product and service offerings. The Discount stores are the least successful because the division is the smallest and has the most closures and least number of openings. Spokespersons of Walmart cite the cause of these closures as underperformance related.vi We believe the rural locations contribute to these closures since same store sales growth is nearly impossible with a limited population. The Walmart neighborhood concept is the freshest grocery store division, introduced in 1998. At first, these stores were a “slow-burn,” but the concept was revamped in 2015 and in the last five years, 578 stores have opened in urban settings.vii Financial information on the individual grocery divisions are not provided by Walmart Inc, however the rapid growth of small format Walmart Neighborhood Markets suggests that this division has had the most recent success. Based on management projections and the Walmart U.S. segment’s plans to increase eCommerce services and remodel stores, we forecasted $11 billion in capital expenditures for the next fiscal year which increases to $12.5 billion by the terminal year (2025).

Walmart International

Walmart International is the second largest segment of Walmart Inc. and generated $120 billion of the total $524 in the 2020 fiscal year.iv Net sales for the Walmart International segment decreased $0.7 billion or 0.6% and increased $2.8 billion or 2.3% for fiscal 2020 and 2019, respectively (2020 10K). Walmart management cites the recent decline in revenue to negative fluctuations in currency exchange rates of $4.1 billion combined with a reduction in sales caused by the 2018 sale of the majority stake in Walmart Brazil. Prior to the COVID-19 pandemic, we forecasted lowers sales growth for this segment compared to the U.S. segment and Sam’s Club segment. As a result, we forecasted a 1.3% increase in this section based on unprofitable stores in Chile, Japan, and the United Kingdom will cause future loses for Walmart. However, due to COVID-19, Walmart states that there has been an increase in sales due to rising demand at international locations. We will not know the specific until Q1 earnings are released in May 2020. Besides COVID-19, ongoing growth in stores located in Africa, China, India, Latin America, and Mexico should help buffer the losses of under-performing stores. On the next page is a table that

shows the number of stores in each international geographic market.

2019 International Geographical Market Retail Wholesale Other Africa 346 90 0 Argentina 92 0 0 Canada 411 0 0 Central America 811 0 0 Chile 363 8 0 China 412 24 0 India 0 25 0 Japan 322 0 0 Mexico 2279 163 0 United Kingdom 615 0 18

Source: Annual Report

Africa:

Walmart has had a controlling stake (of 51%) in the South African Massmart chain for eight years. Last year, management announced that 47 new stores will open between 2019 and 2021 outside of South Africa in Kenya and Zambia. Since Kenya and Zambia have developing economies, we believe that this will lead to revenue growth for Walmart International.viii

Argentina: Walmart has a mix of Walmart Superstores and subsidiaries in Argentina.ix Store formats include Changomas, Changomas Express, Walmart and Walmart Supermercado. The retailer has had to close a couple times due to the country’s financial instability and employee strikes.x xi We do not expect Walmart to open more stores in this country due to previous issues. Canada:

Walmart Canada operates a growing chain of over 400 stores nationwide, serving more than 1.2 million customers each day. The Canadian www.walmart.ca is visited by 750,000 customers daily.xii Over the last five years, Walmart Logistics “has invested over $1 billion in its Canadian store network, including $200 million in 2019 to refurbish and refresh 31 stores.” Additionally, “Walmart is also automating freight and payment data, and the new system is expected to be the world’s largest full production

blockchain solution.” Like the United States, management wants to focus on remodels in Canada rather than building new stores.xiii

Central America:

Walmart has superstores, discount stores, and subsidiaries in central America. In the last five years, 100 Central American stores, ranging from bodegas to supercenters, have been opened in central America. According to Bloomberg, like the United States and Mexico, Walmart’s “everyday low prices” resonates with Central American shoppers and so the market significantly contributes to growth in the international segment.xiv Management plans to open more Walmart stores in Central America next year. Walmart does not provide a specific number; however, in its annual report, management states that this is one off three international locations that the company will focus on opening stores in this year. Consequently, we anticipate that the Central America market will be one of the fastest growing segments moving forward.

Chile:

Walmart owns and we believe, will soon sell, its subsidiaries in Chile. In the past year, alone, Walmart owned stores have experienced 1,200 episodes of lootings and fires at a quarter of its 371 stores. 17 of these stores were completely destroyed. This violence is a result of protests sweeping the nation due to governmental corruption.xv Consequently, Walmart is caught in crossfire of Chile’s turmoil. In the fourth quarter earnings report, the company reported $110 million in decreased operating income in Chile.xvi And so, we believe that there will be very limited growth for this international market since due to copious amounts of damaged properties.xvii We believe that If the country’s socioeconomical instability worsens, due to governmental corruption, that Walmart will exit from Chile in the next few years.

China:

Walmart operates Walmart Supercenters and Sam’s Clubs in China. Currently the retailer has 412 supercenters and 24 Sam’s Clubs. In 2019, Walmart management announced that 500 new Walmart supercenters and 24 Sam’s Clubs in China are planned to open in the next five to seven years. We believe these expansion goals are aggressive due to the decreasing GDP in China and COVID-19.xviii However, Walmart sales in China grew 6.3% last quarter compared to the 2.5% growth worldwide.xix As a

result, there is evidence that store openings could be successful. Management states that this market, like the Latin America market, will have the most capital expenditure allocated to it in the international segment. As a result, we anticipate that the Chinese market will experience stronger growth compared to other markets in the international division. However, we believe that the growth will be stunted due to the COVID-19 pandemic.

India:

Walmart owns India Private Limited and operates 25 Best Price Modern Wholesale stores in India. Best Price is a membership-based cash and carry wholesale business similar to Sam’s Club.xx In January of 2020, 56 employees, many being upper management, were laid off at Walmart’s cash and wholesale stores in India. We believe that this signals that Walmart’s Best Price Modern Wholesale stores are experiencing financial difficulties. Operations in India are further negatively affected by Flipkart.com which Walmart Inc. owns 81.3%. Due to the COVID-19 pandemic, as of April (2020) Flipkart can only sell items the government of India considers as essential like groceries, healthcare and hygiene products, etc. xxi The government has yet to release a timeline of how long Flipkart cannot sell non-essential items. We believe that the restrictions will cause a decrease in revenue in Walmart’s Indian market.

Japan:

Walmart international is the holding company of the wholly-owned subsidiary, Seiyu. Seiyu is one of the largest supermarket chains in Japan. The store chain has superstores, hypermarkets and general merchandise configurations. As of 2018, the retailer partnered with the eCommerce company called Rakuten. This partnership has enabled a grocery delivery.

Since the pandemic, we believe that eCommerce services have been more utilized by consumers, which is beneficial for Seiyu since it has struggled in the past few years as indicated by Walmart closing 100 Seiyu stores since 2014.xxii The reason why Walmart is struggling in Japan is due to its “every day low price” strategy because the Japanese consumers will go to multiple stores to buy their groceries at the lowest prices possible. Additionally, the company does not have enough local produce which Japanese consumers prefer over foreign produce. We anticipate that this consumer behavior may change, as a

result of the pandemic, since consumers will feel less safe in public settings and will want to limit their exposure by shopping at one grocery store.

However, if operations do not pick up from eCommerce for Seiyu, Walmart will sell the subsidiary. Multiple unofficial reports indicate that Walmart has looked into selling the chain before.xxiii As a result, we believe that Walmart will go through with a sale after the pandemic if the subsidiary does not perform better.

Mexico:

Walmart is successful in Mexico because the “everyday low prices” strategy works for local consumers. Walmart is the largest chain retailer in Mexico Walmart has 3,407 stores in Mexico, more stores than any other international location.xxiv Mexico houses Superama, a subsidiary of Walmart; Bodega Aurrera, a subsidiary of Walmart; Walmart hypermarkets; and Sam’s Club. Last year, 134 stores were opened in Mexcio.xxv Most of these new units were Bodega Aurrera stores which are a small with no-frill formats, like ALDI. As a result, this store model is cheaper and quicker to build than Walmart’s bigger format hypermarkets. Additionally, this store model emphases the “everyday low prices” more so to compete with informal marketplaces and win over lower-income shoppers.” Besides a focus on lower costs and lower prices, the retailer has made efforts to provide delivery to shopper in Mexico.

As of 2019, select Walmart stores in Mexico provide delivery with a new service called On Demand. Customers also have the option of in-store pick up at 277 locations. Consequently, we believe that Walmart de México will continue to implement eCommerce services that the retailer already offers in the United States. Consequently, like the Central America and China locations, we believe that Mexico will experience the most growth in the international segment since management has budgeted capital expenditures to open up more Walmart stores as well as logistics eCommerce warehouses in Mexico.xxvi

United Kingdom:

In the United Kingdom, Walmart owns and operates Asda supercenters, superstores, and supermarkets.xxvii These various formats offer different store models, products, and merchandise to customers. The United Kingdom operations have the same issues as the now sold Brazilian operations, prices are too high. To get a hold on margins

by lowering costs, Walmart tried to merge Asda with another competitor called Sainsbury in April (2019), but the merge was blocked my anti-monopoly regulators.xxviii If the merge had occurred, it would have created the UK's biggest supermarket chain surpassing Tesco and accounting for £1 in every £3 spent on groceries. However, the deal did not go through, so Walmart decided to sell because it was losing money. Below is a graph showing the negative growth Asda has recently experienced.

Source: Statista

As reported by Bloomberg, “Apollo Global Management Inc., Lone Star Funds and TDR Capital [have] each submitted first-round offers for Asda and have been invited to join the next round of bidding.”xxix According to an undisclosed source, the sale should be around $8.6 billion USD. As of April (2020), the sale has paused due to the dramatic increase in demand at Asda due to the COVID-19 pandemic. Once the pandemic is over, we believe that Walmart may decide not to sell the chain if sales continue to generate positive growth. We believe that this will be good for the company, as if Walmart sells Asda, the international segment will take a long-term revenue hit.

Sam’s Club

Sam’s Club is the smallest segment of Walmart Inc. and generated $59 billion of the total $524 in the 2020 fiscal year.iv Net sales for the Sam's Club segment increased $1.0 billion or 1.6% for fiscal 2020 and decreased $1.4 billion or 2.3% for fiscal 2019. Membership and other income increased 4.7% for fiscal 2020. Sam’s Club opened the greatest number of stores in the past two years by opening 61.iv These openings do not out-pace closures, however. In

2019 and 2018, 63 aged stores were closed.xxx Three of these stores, so far, have been converted into fulfillment centers for Sam’s Club, which will help fulfill this segment's growing eCommerce platform. According to the most recent press release, Sam’s Club’s online sales have increased 0.9% in the fourth quarter. This percentage will continue to grow as Sam’s Club realizes more eCommerce initiatives. Additionally, Walmart, as of April (2019), announced that it plans to add 16 Sam’s Clubs to the Chinese mainland by 2020. We believe that this goal may not be possible due to the COVID-19 pandemic.xxxi Overall, we believe Sam’s Club growth, in the long-term will be driven by store openings and eCommerce sales.

Company Analysis

Costs

Walmart, inc. is subject to many expenses as the largest retailer in the world. Cost of sales includes product costs, the cost of the transportation of goods, and the cost of warehousing for the Sam's Club segment and import distribution centers. Over the last 5 years, the costs of sales as a percentage of sales has decreased. So, we forecasted costs of sales based on the decreasing growth of the account. We believe that Walmart has experienced decreasing cost of sales as a percentage of sales due to better pricing with suppliers and private label initiatives.

Another cost Walmart has is selling, general, and administrative expenses. We forecasted Walmart’s SG&A expense as a decreasing percentage of sales since the company has experienced decreasing SG&A as a percentage of sales over the past 5 years. Per the annual report, increased sales and increased productivity have led to a lower SG&A as a percentage of sales. Walmart does not specify how the company has increased productivity, but we believe that the company did this by incorporating technology into all parts of their business.xxxii For instance, the company now uses robotics to clean, to unload merchandise from trucks, to scan and to sort inventory based on priority and department. Technology like this speeds up Walmart’s day to day operations which leads to increased productivity. However, due to COVID-19 pandemic, we now expect SG&A costs to increase since Walmart hired 200,000 works to meet the increased demand.iii

Another reoccurring expense Walmart has is capital expenditures. In the past, most of capital expenditures

were allocated to building new Walmart stores; however, now Walmart allocates more money to technology, eCommerce, and store remodels.iv Walmart is still building new stores, but mostly ones in the international segment. We forecasted capital expenditures based on management guidance for fiscal years 2020 and 2021. For fiscal years 2022-2025, we forecasted capital expenditures as the average three-year growth of revenue growth (1.6% to 2.7%).

Under Performing International Operations

Walmart has a track record of failing internationally, as Walmart Inc. does not understand culture well outside of North America. This is exampled by its failure in Germany, South Korea, and Brazil. This lack of cultural adaption is still relevant in current international divisions such as Chile, Japan, and United Kingdom divisions.

Walmart’s inability to tap into international local cultures is coming at a cost. Over the past five years, three of the years (2016,2017,2020) growth rate in revenue per square feet have been negative. Last fiscal year (2020), Walmart international experienced a 0.6% decrease in net sales.

We believe this is a result of hasty expansion and inability to adapt to local cultures internationally. For example, Walmart Superstores have been mildly successful in China, and management, as of 2019, has already announced plans for 500 store openings in the next 5-7 years. This is very similar to what happened in Brazil. During a ten-year period, the retailer opened and acquired 471 stores between 1995 and 2005.xxxiii This rapid expansion, in addition to Walmart Inc. failing to adapt and innovate outside of the United States is what led to Walmart existing Brazil in 2018, Korea in 2006, Germany in 2006, United Kingdom soon, maybe Chile soon, and maybe Japan sale. This systematic failure is mostly a result of the retailer trying to force its large format, “everyday low prices” model onto locations and so failing to cater to the needs of local consumer demographics and economic factors.

Even though Walmart does not have success with global expansion. Other American companies have been successful. An American based company that has gone successfully global is McDonalds. This was a result of adapting to the “social setting of every country they entered via franchising to local entrepreneurs.”xxxiv We realize the business model of franchising will never be adopted by Walmart, for a multitude of reasons; however,

the key to McDonalds success are local people in positions of power who understand the cultural landscape and consumer’s needs and wants.

As a result, we believe that Walmart Inc. needs to change its approach as it focuses on emerging markets such as China. We believe that if the retailer properly addresses demographical based needs, as well as invests heavily in processing, refrigeration, storage, and information systems to open and operate stores it can be successful.

RECENT DEVELOPMENTS

FY Q4 Earnings and FY 2019 Annual Report

Walmart released Q4 earnings on February 18, 2020 and its 10-K on March 20,, 2020. Walmart reported fourth quarter revenue at $141.7 billion, which was a 2.1% increase from the previous Q4 revenue.xvi As a result, Walmart did not meet expectations since $142.49 billion was anticipated by analysts.

Total revenue for the fiscal year was reported as $524 billion, which is an increase of $9.6 billion, or 1.9%. Below are the segments and the corresponding growths.

Segments Revenue (B) Growth Walmart U.S. $341 2.7% Walmart International

$120 -0.6%

Sam’s Club $59 1.6% eCommerce N/A 37%

Walmart did not beat earnings estimates and reported an EPS of $1.38 per share which is $0.05 below the analyst consensus which was $1.43 per share. Management cites that holiday sales resulted in a lower than expected volume which adversely affected sales. Since the lower sales were tied with in-store sales, we anticipate that Walmart will focus more on eCommerce to drive sales, next holiday season. Guidance for the next fiscal year includes 3% sales growth, 30% growth in eCommerce, operating income constant, 25% in effective tax, 1.5% increase in EPS, and $11 billion in capital expenditures. We decomposed revenue and forecast 2.7% in growth in sales since we believed that the international segment would not grow as well as management predicts due to multiple under-performing segments like Chile, Japan, and United Kingdom. As a

result, we do not predict an increase in EPS like management. We forecast a slight growth in operating income; however, with COVID-19, the operating income may decrease due to increased expenses form expanding the workforce. Lastly, we use capital expenditure guidance in our model.

Walmart Health

The newest Walmart store, that may eventually turn into a segment was launched in 2018, is Walmart Health. Walmart Health has 21 locations in Georgia, South Carolina, and Texas.xxxv According to the website, the clinics specialize in primary care medicine and offer “diagnoses and treatments of chronic and acute illnesses, as well as preventative services, such as immunizations, physicals and additional health screening.” The target demographic appears to be low income and uninsured persons. The brochures on the website list that the centers offer checkups, internal and external tests, vaccinations, injections, counseling services, dental services, and optometry services priced between $4-$246.18. This price range is lower than paying for a service, without insurance, at a standard doctor’s clinic. For example, a physical at Walmart is $30 while at a doctor’s office, it may be $50 -$200 without insurance and CVS minute clinic is $89.xxxvi Sexual and reductive health services cost the most at Walmart; however. this could be a source of revenue since Southern states like Georgia and South Carolina only have 6 Planned Parenthoods, in total, that serve uninsured persons.xxxvii

At this point in time we are unsure if this segment will be successful since management does not provide revenue details for Walmart Health. However, there have been 21 Walmart Health’s built in the last 2 years, so the concept seems to be successful if more are being build. At this point in time, management does not provide guidance on how many more clinics will be built or the predicted costs to build the clinics. Overall, as the store model matures, we expect more transparency on from Walmart on Walmart Health.

As of April 2020, Walmart health clinics are still open during the COVID-19 pandemic. We believe that this decision was made by management since many Walmart Health clinics are located within Walmart. As a result, since the Walmart is open, so are the ancillary services within the store.

eCommerce

Walmart eCommerce sales contributed approximately 1.7% and 1.3% to comparable sales for fiscal 2020 and 2019. In recent years, Walmart has aggressively expanded eCommerce services. Last year, Walmart eCommerce grow 37%. And the year prior, eCommerce grew by 44% according to the annual report.iv

To stimulate more eCommerce growth, Walmart management announced that 3,100 grocery pickup locations and 1,600 grocery delivery locations will be added by the end of 2020. Walmart also announced, in 2020, that it will be merging its Walmart and Walmart grocery app. Previously, the Walmart grocery app is where customers cloud place grocery orders, whereas the Walmart app was for all other orders. According to data from Sensor Tower, Walmart’s main app has been downloaded 103+ million times since January 2014 across both iOS and Android,” whereas Walmart grocery only has “16 million downloads across iOS and Android during that same time period.”xxxviii As a result, we believe the consolidation of the apps are beneficial because the merge will expose more costumers to more product and merchandise which could positively affect revenue.

The walmart.com website and app enable Walmart’s online presence and delivery offerings. That is, eCommerce orders are fulfilled by Walmart via delivery and in-store pick up. Pick-up in store is offered at all supercenters for free. Delivery is available at select Walmart’s in 46 states. The delivery fee ranges from $7.95-$9.95 depending on the location.iv Due to the COVID-19 pandemic, in-store pick up and delivery has significantly increased. We believe that many of the new employee’s hired will be responsible for in-store pick-up and delivery orders.

In 2019 and 2020, Walmart has been testing InHome, a service where the delivery person unloads groceries into the customers kitchen. InHome will soon provide customers the service “to return walmart.com items just by leaving them on your kitchen counter–no labels, boxes or return fees.” The service, albeit invasive, should allow increased customer convenience if customers feel conformable with using the service. Walmart will need to test the service in more cities and provide customer reassurance before InHome becomes as popular as in-store-pick-up.iv

Another eCommerce strategy that Walmart is working on is Walmart Plus, a service that was unveiled in late February of 2020. At this point in time, management has not released a launch date. The predicted price is $89 annually which is lower cost than Amazon Prime.xxxix The launch should happen this year and the service will provide unlimited delivery and other perks, such as discounted prescriptions. Since all the details have yet to be released to the public, we believe it is difficult to determine, at this point, how innovative this program. Based on the available details, we believe that this program will be enticing to consumers, since more shoppers are using Walmart for grocery delivery due to the COVID-19 pandemic. However, since there is a charge associated with this service, we believe the service will be under-utilized by customers who hold a $55-$100 warehouse club memberships or Amazon. Ultimately, we are skeptical about Walmart Plus since as the price not be worth it for shoppers.

Private Label Growth

Grocery store and wholesale clubs are benefiting from private label brands that differentiate competition. Some grocery stores like ALDI and Trader Joes are primarily comprised of private label products and merchandise while retailers like Walmart Inc. and Target Corp. are not. Even more, some retailers like Costco have one all-encompassing private label line while some, retailers like Walmart, have 24. We believe that separating the brands into grocery and other brands is a negative because it stunts the consumer brand recognition and hype that Costco Wholesale has achieved with its Kirkland Signature Line. Private labels are important because private label brands help lower costs, differentiate merchandise offerings from other retailers, and earn higher margins. Typically, private label items sell for at least 20% less than the branded items.xl We believe that private label growth will drive margins up and increase revenue. Below is a graph of the increase in private label sales that Walmart has experienced online. According to Nielsen, 48% percentage of online purchases are private label at Walmart now. This percentage has increased tremendously over the last two years. Below is a graph that shows the increase in online private label sales at Walmart.

Source: Statista

Overall, private label products are important for Walmart as private label sales are contributing more to total sales more than ever before.

COVID-19

COVID-19 has affected all segments of Walmart since December 2019. As of March 2020, the effect has amplified due to the wide spread of the virus. Walmart and grocery store subsidiaries have remained opened in locations where social distancing has been mandated by the government. In a public release, management announced that starting “Thursday, March 19, Walmart stores and Neighborhood Markets will be open 7 a.m. to 8:30 p.m. until further notice.”xli If the restricted hours end up being beneficial for Walmart’s operations, we anticipate that the company will maintain decreased hours at many locations. Below is a graph that show the increase in foot traffic at stores compared to the corresponding weeks of 2019.

Foot Traffic Increase at Walmart Supercenters in February to March

The second, third, and fourth weeks of March show elevated shopping activity.

To support hardworking employees during the pandemic, Walmart announced, on March 19th, plans to provide a special cash bonus for hourly associates. The bonus will be $300 for full-time hourly associates and $150 for part-time hourly associates and will add up to more than $365 million.xlii Regular bonuses, amounting to $145 million will be paid early to employees on top of the special bonus. We do not anticipate that Walmart will provide or maintain an increased pay for employees after COVID-19.

Since the COVID-19 pandemic has led to customers stocking up due to stay-at-home orders, Walmart has experienced a tremendous increase in demand. As a result, Walmart has hiring 200,000 new associates through the end of May or June to work in stores, clubs, distribution centers and fulfillment centers.xliii This initiative should support local economies since many hourly workers are facing financial hardships as a result of the pandemic.

On top of the many store changes, Walmart and the Walmart Foundation announced a $25 million commitment to support organizations on the frontlines responding to COVID-19. Overall, we believe that the recent alterations and public service announcements will translate into revenue increases. Unlike many other retailers that are struggling in 2020, we believe that Walmart is navigating these challenging times well. Even though Walmart’s stock price may be negatively affected, we believe that revenue will at least be maintained.

INDUSTRY TRENDS

Rising Costs

Volatile commodity and energy costs can drive increases in food prices. US producer prices rose between 1% and 2% in 2018, according to the USDA. Increase in cost of goods sold drives up price, so the industry will have to lower costs in other places to keep prices locked in.xliv We believe that private labels could offer financial relief to companies with the rising costs of food. As of April (2020), the pandemic has affected the cost of meat. We expect meat costs to increase as COVID-19 negatively affects meat processing plants.

Delivery

Online grocery shopping makes up a small portion of the grocery shopping industry. According the NPD, an analytics group, 10% of U.S. customers shop for groceries online. This percentage is increasing, due to the shift in consumer preferences for “to save time, avoid lengthy checkout lines and have more flexibility with grocery shopping. “However, the convenience comes with logistical challenges which prevent customers from online grocery shopping. Barriers include inability to hand-select fresh produce and costly and limited delivery.xlv Third parties like Instacart assist grocery retailers like Walmart’s Sam’s Clubs and Kroger’s and deliver same-day groceries for $3.99 to $5.99 per trip. The service is limited to large cities, however as coverage expands, there may be an increase demand for online shopping delivery. An option currently available nation-wide for consumers is buy-online and pick-up-in-store. Retailers like Walmart Inc, Kroger, Costco, Target, and many more retailers offer buy-online and pick-up-in-store. According to the financial firm Cowen, Kroger and Walmart’s grocery pickup is on track to become a $35 billion business in 2020. Overall, we believe growth will continue for retailers as more delivery options. In the short term, at least, we expect grocery delivery to increase drastically due to COVID-19.

Lawsuits and Investigations

Bribes:

Walmart Inc. has been ordered to pay $282 million to in lawsuits relating to its poor practices oversees. The retailer was held accountable for bribing Brazilian and Mexican officials for permits. Per associated press, this legal battle

has cost the corporate giant $900 million since 2012 when the investigation started.xlvi Of the $282 million, Walmart will be paying $138 million to avoid prosecution in the U.S., and its Brazilian subsidiary has plead guilty to violating the Foreign Corrupt Practices Act. The retailer is also paying $144 million to the SEC for a settlement due to “failing to operate a sufficient anti-corruption compliance program” in Brazil, China, India and Mexico, according to AP. We believe that Walmart needs to end this problematic behavior as it continues to expand internationally.

Opioids:

As of March 25 2020, there are reports of Walmart working with the Department of Justice to dismiss a criminal case about how Walmart Inc. has handled opioids.xlvii Per the recently accounted 2018 investigation, Walmart Inc. was investigated for its opioid dispensing practices. The investigation is led by Joe Brown, the U.S. attorney for the Eastern District of Texas, and Heather Rattan, a specialist in prosecuting members of drug cartels. Per reports medical professionals “were running pill mills” in Texas and filled prescriptions killed customers who overdosed. The Walmart pharmacies filled the prescriptions even though it was known the scripts were suspicious. Evidence in the investigation shows that Walmart corporate headquarters has inadequate protocols on how to handle suspicious prescriptions. Even though criminal charges were not filed, we believe that this investigation is problematic for Walmart Incorporation’s image given that the company is trying to expand into the Healthcare sector with Walmart health.

MARKETS AND COMPETITION

Barriers to Entry

The initial capital investment is very high to open a supermarket or wholesale club. Startup costs for land, a 100,000+ square foot building, and inventory amount to millions of dollars.xlviiiAs a result, profit margins may be difficult to control and thereby make it near impossible to compete with established warehouse stores that have mature logistics. Additionally, 90% of the U.S. population lives within a 10-mile radius from a Walmart or Sam's Club store. Consequently, a new supermarket or wholesale club would be challenged to find a location that could support new stores.xlix

Threat of Substitutes

Everyone needs to buy groceries to survive, so the threat of substitution is very low. We believe the only possible substitution is ordering groceries exclusively from Amazon through the Amazon Fresh program available in select locations. The ordered food and goods are stored in an Amazon's warehouse which is not considered a supermarket or wholesale club. Another possible substitute are online food subscriptions like Hello Fresh which provide meal-kits. These subscriptions are priced at $69-$129 per week for three to four meals, so could not replace grocery shopping entirely.l

Competition

Competition is moderate to high in both the supermarkets and grocery industry as well as the wholesale club industry. Since supermarkets and wholesale clubs have diverse product and merchandise, competition stems from other supermarkets and wholesale clubs, department stores, specialty stores, and online retailers like Amazon.xliv

Peer Comparison

Walmart Inc. offers diverse products, merchandise, and services. As a result, the company is a part of multiple markets and industries and has a plethora of competitors. Since every competitor cannot be analyzed in this report, we include grocery store, wholesale store, and Walmart Health competitors.

On the next page is a table that shows performance, capital structure, and leverage metrics for grocery store competitors. Walmart has the highest net sales for a store with a significant physical presence, while Amazon has the highest net sales for a store with a significant online presence. Walmart has the second highest market cap and Amazon has the largest. Walmart has been expanding its eCommerce platform while Amazon has been expanding its physical footprint, so we believe the key for success in the supermarket/grocery industry is both an offline and an online presence to reach more customers. With that being said, privately-owned companies such as ALDI lacks an online presence and are successful with only physical stores due to their unique private-label oriented business models that serve a niche.li

Grocery Store Comparison:

Source: FactSet

Walmart and ALDI have the most physical stores at 11501 and 11324, respectively. Only 2000 of the ALDI stores are in the United States.lii Competitors like Target and Kroger have roughly a third of the store amount. While Amazon has the least number of stores since its primary business is eCommerce. Walmart generates the second lowest revenue per square feet at $464 per square feet, while Target generates the lowest amount at $324. Kroger and ALDI generate the most revenue per square feet at $677 and $503, respectively.

Overall, supermarket chains like Walmart, Target, and Kroger have lower revenue growth compared to ALDI and Amazon. We believe ALDI’s growth is due to the company’s focus on store expansion over the past few years. A lot of Amazon’s growth is from AWS, the cloud computing service of Amazon. If AWS were to be split off from Amazon, we believe that Amazon would show less growth. Even though Target is not growing as fast as the other chains, the company has the highest net margins. Kroger, which is growing the slowest growing chain, has the lowest net margins. Walmart and ALDI are in the middle of the pack.

Target and Walmart have the highest ROA metrics while Kroger has the lowest. The metric is unavailable for ALDI since the company is privately-owned. Amazon has a similar ROA as Walmart, but a higher ROE which suggests that Amazon is more leveraged. Amazon has the second

highest leverage at 124.9 while Kroger’s has approximately twice that leverage. Walmart has the lowest leverage as a grocery store at 84.3. Out of the five main players, Walmart, Target, and Kroger pay dividends. Walmart pays the least.

Overall, based on the metrics and the assumption that ALDI is not highly leveraged, ALDI and Target are better positioned. We cannot determine how well Amazon is positioned relative to the other grocery stores since the financial statements do not break out its grocery and merchandise operations from other operations like AWS.

Even though Walmart is not positioned as well as Target or ALDI, based on the metrics, the company has the strongest eCommerce services. With the COVID-19 pandemic, we anticipate Walmart to experienced increased sale due to eCommerce. And once the pandemic calms down, we believe that more consumers will be reliant on in-store pick up and delivery, so they will continue to use the service. Additionally, if a recession occurs, Walmart may experience an increase in new customers looking to cut costs with their “everyday low prices.” Consequently, we believe that Walmart is the best positioned grocery store even though it is in the middle of the pack with ratio analysis.

Wholesale Comparison:

Sam’s Club (2020)

Costco (2019)

BJ’s (2020)

Market Cap (B) $374 (WMT)

$140

$3

Store Count 599 785 216 Sales (B) $57 $152 $13 Revenue/Square Foot

$675 $1340 $540

Growth 1.60% 7.83% 15.09% Net Margins 2.84%

(WMT) 2.39% 1.42%

ROE 20.22% (WMT)

24.80% 15.09%

ROA 6.43% (WMT)

8.25% 4.41%

D/E 84.30 (WMT)

47.50 -6955.10

Dividend Yield 1.63% (WMT)

0.80% 0.00%

Source: FactSet

Walmart (2020)

Target (2020)

Kroger (2020)

ALDI (2020)

Amazon (2019)

Market Cap (B)

$374 $57

$25

N/A $1 (T)

Store Count

11501 1868

2999 11324 526

Sales (B) $523 $78 $122 $57 $280

Revenue/Square Foot

$464 $324 $677 $503 n/a

Growth 1.95% 3.36% 0.09% 6.2% 20.68% Net Margins

2.84% 4.19% 1.36% 2-3% 4.13%

ROE 20.22% 28.27% 20.16% N/A 21.95% ROA 6.43% 7.78% 3.96% N/A 5.97% D/E 84.30 118.10 246.20 N/A 124.90 Dividend Yield

1.63% 2.40% 2.30% 0.00% 0.00%

Costco Wholesale is the best positioned among the three major wholesale retailers in the United States. Costco has the most store, highest revenue, second highest sales growth, highest ROE, highest, ROA, and lowest leverage. Sam’s Club is in the middle of the pack by coming in second in all the metrics besides net margins and dividend yield which for the company has the highest metrics. The biggest problem Sam’s Club has its lowest revenue growth.

We use most of the same metrics as Walmart, inc. since the company owns and operates Sam’s Club as a segment. The store count, sales, revenue per square foot, and growth are specific to Sam’s Club. BJ Wholesale is the worse positioned relative to Costco and Sam’s Club by having the lowest metrics besides the highest sales growth. We believe that BJ is leveraged to an alarming extent at -6955.1. Since BJ’s, like the other warehouse clubs, are experiencing increased sales due to the COVID-19 pandemic, we believe that it will weather the economic downturn.

Overall, Walmart is not the best positioned in warehouse club industry since Costco outperforms Sam’s Club. However, we the company is in a better position than BJ’s Wholesale Club.

Below are competitors to Walmart that have pharmacies and health clinics.

Retail Pharmacy and Quick Clinics:

Walmart CVS Walgreens Market Cap (B) $374 $82 $39 Store Count 4619 9987 9277 Sales (B) $523 $256 $138 Revenue/Square Foot

$464 $3188 $926

Growth 1.95% 31.20% 3.38% Net Margins 2.84% 2.58% 2.69% ROE 20.22% 10.86% 15.03% ROA 6.43% 3.14% 4.61% D/E 84.30 139.40 76.30 Dividend Yield 1.63% 2.70% 3.50%

Source: FactSet

Recently, Walmart has further entered the health market with its launch of Walmart Healthliii. So, the company has 4,600 pharmacies and 19 quick clinics, now. This division of Walmart is in competition with CVS’s pharmacies and Minute Clinics, and Walgreen pharmacies and Healthcare

Clinics. Walmart distinguishes itself with lower costs compared to CVS and Walgreen clinics, as Walmart offers a $4 prescription program for generic medications. CVS and Walgreens do not offer programs with this much savings, as both companies only provide 10%-20% savings on generic prescriptions.liv Walmart offers lower prices at its walk-in clinics. For example, a physical at Walmart Health is $30 compared to $89 at a MinuteClinic or $75 at a Walgreen’s Healthcare Clinic.

CVS and Walgreens have roughly double more pharmacies and quick clinics than Walmart. Walmart generates more money at $524 billion than CVS and Walgreens; however, we cannot position the companies based on revenue, since the three companies have many differences outside of pharmacies and clinics. CVS and Walgreens generate higher revenue per square feet compared to Walmart at $3188 and $926, respectively. The companies also have stronger growth than Walmart at 31.30% growth and 3.38% growth. Additionally, CVS and Walgreens have higher dividend yields. Walmart has a higher margins, ROE, and ROA than two pharmacies. Walmart also has less leverage at 84.3 than CVS with D/E ratio of 139.3. Overall, it is had to compare the three companies based on metrics since Walmart does not break out its pharmacy operations.

Additionally, none of the three companies break out the walk-in clinic operations. We believe that CVS and Walgreens are better positioned in terms of pharmacy. However, Walmart is better positioned in the quick clinics section than Walgreens, since Walgreens closed 40% of locations due to underperformance.lv CVS is in the process of expanding its clinic options by adding 1,500 HealthHUBs that are smaller than clinics in its stores by the end of 2021. Since CVS has more clinic options the company may be better positioned than Walmart. However, Walmart’s concept is only a couple of years old and has a target demographics of uninsured persons. As a result, the two companies may be successful in the long term since they cater to different demographics.

ECONOMIC OUTLOOK

GDP

Source: U.S. Bureau of Economic Analysis The chart above shows the historical real GDP in the US. For the past four quarters, growth has been between 3.1% to 2.0%.lvi We believe that for a mature economy, as the United States, a real GDP around 2% is sustainable long term. As for short term GDP, we believe that the next few quarters of GDP will be negatively affected as a result of the coronavirus affecting China and other nearby nations.lvii Due to the widespread of the coronavirus, U.S. equity markets have experienced mercurial trade. As of December 2019, to March 2020, the coronavirus has already incited panic buying among consumers and investors who have flocked toA downturn in the GDP during the last recession translated into more sales for Walmart, due to an increase in value-conscious shoppers. As a result, we believe that a decrease in GDP, due to the COVID-19 pandemic could signal more sales at Walmart.

Source: Trading Economics and U.S. Bureau of Economic Analysis

Retail Sales

The Census Bureau released retail sales in April (2020). Grocery stores has increased sales of 26.9%.lviii As a result, the COVID-19 pandemic is positively affecting Walmart’s sales. However, retail sales in apparel decreased by 50%, so we anticipate Walmart to experience decreases in sales for non-essential items. At the present we believe Walmart is experiencing a net positive increase in sales and will continue to even as demand cools off since the retailer is a necessity to shoppers.

Unemployment

In the February release by the U.S. Bureau of Economic Analysis, the unemployment was reported at 3.6%.lix The low unemployment positively affects grocery stores and warehouse clubs as small businesses and households with secure cash flows have higher demand for items sold at warehouse clubs. Since February, unemployment has increased due to the COVID-19 pandemic. Currently, Walmart is hiring more employees as a result of increased demand for its services. We believe this increase in the workforce will drive expenses up and negatively affect margins in the short term. Below is a chart of the unemployment rate. We expect it to spike in the May release.

Source: FRED

Interest Rates

Due to economic hardship, interest rates have been slashed by the United States government to almost 0%. We believe that Walmart may utilize low interest rates to secure more short-term borrowings since management cites that short-term borrowing and long-term debt are affected by interest rates and is used as liquidity to provide funding for operations, dividend payments, share repurchases, capital expenditures and other cash.

CATALYSTS FOR GROWTH & INVESTMENT POSITIVES

• Walmart Inc. should withstand the negative effects of the COVID-19 pandemic. We believe the pandemic will contribute to increased sales as well as increased consumer dependency on eCommerce, which will better position Walmart after the pandemic. Consequently, expect eCommerce to increase more than management guidance of 30% this year.

• If Walmart Health turns out to be successful, the store model diversifies Walmart and further pushes the company into the Healthcare sector. We believe that it and the pharmacy and can generate growth for the Walmart U.S. segment.

• Initiatives in China, Latin America, and Mexico can generate growth in the international segment since management hopes to open 250 stores in the three international segments this year.iv

INVESTMENT NEGATIVES

• The COVID-19 pandemic may negatively affect day-to-day operations at Walmart and may adversely affect supply chains. As of March (2020), this has not happened yet.

• Many international divisions of Walmart, like Chile, Japan, and United Kingdom, are under performing so Walmart may exit these markets in the next five years and cause negative growth.

VALUATION

Revenue growth was forecasted by revenue per square foot growth for each segment. The starting revenue per square foot for each segment is below.

Segment Revenue per Square Foot

Walmart U.S. $470 Walmart International $354

Sam’s Club $675 Source: Company Annual Reports

Each segment: Walmart U.S., Walmart International, and Sam’s Club, was forecasted based on different growth rates. The three segments were then multiplied by the corresponding square feet for the segment and summed up to produce a total net sale.

The domestic division of Walmart was forecasted by 2.85% since it is unlikely that store openings can stimulate robust revenue growth as it had in the past. The percentage was calculated with a three-year average of the growth rate in revenue per square foot because the growth fluctuated. We believe that Walmart’s eCommerce expansion is the This growth is based on the previous three years in which eCommerce has taken off for Walmart.

The international segment of Walmart is more difficult to forecast as a result of the recent closures in Brazil in 2018 and 2019 and the failed 2019 Asda merger with Sainsbury due to British governmental interference. A modified five- year average (0.9%) of the growth rate in revenue per square foot was used to forecast the international division since the division has only experienced positive growth once in the past 5 years. Note, an outlier year, 2019, was not used in the average since the acquisition of Flipkart massively inflated the growth for the fiscal year. Overall, we believe that international growth will fluctuate from negative to positive over the next five years due to damage control initiatives in the segment.

Sam’s Club has had 61 openings in the last two years compared to 63 closures in the last year. eCommerce dales grew by almost 1 % last year, however membership income decreased by 22.4%. The club has room for growth in international market, like China, but COVID-19 will affect the timeline of store openings. As a result, a three-year historical average (3.45%) of the growth rate in revenue per square foot was used since 2017 and 2018 experienced growth and 2019 experienced negative growth. We believe that Sam’s Club should not have to close more stores in the near future, so we expect positive growth over the next five years.

The long-term (CV) growth rate for Walmart was forecasted at 1.4%, which is under United States inflation since the company is mature. We believe that in the next five years the eCommerce cash inflow will cease rapid increased growth since we do not predict near future innovations in technology that will translate into eCommerce initiatives that drive revenue.

Operating assumptions like cost of sales have decreased over the last 5 years. So, we forecasted the costs of sales as a decreasing percentage of sales. The percentage decreased from 57.83% in 2020 to 57.20% in 2025.

We believe that this decreasing cost of sales could be due to private label items that lower costs of products and Walmart’s ever-increasing leverage with suppliers since the retailer dominates the grocery industry. Like the cost of sales, the SG&A expense was forecasted as a percentage of sales. Over the past 5 years, the account has decreased as a percentage of sales, so we forecasted a decreasing SG&A expense. The percentage starts out as 20.89% in 2020 and decreases to 20.81% in 2025. Per the annual report, increased sales and increased productivity have led to a lower SG&A as a percentage of sales. We believe that the COVID-19 pandemic affects this account, as over 200,000 works have been hired at the event of increased demand for groceries at Walmart. As a result, we anticipate Walmart to have a temporary spike in SG&A expenses. Since Walmart increased its workforce, we expect temporary decreased margins. In the long term, we anticipate increased margins.

Capital expenditure was forecasted based on management guidance for fiscal years 2020 and 2021, $11 billion for both years. For fiscal years 2022-2025, we forecasted capital expenditures as the average three-year growth of revenue growth (1.6% to 2.7%). Currently, Walmart is less reliant on opening stores to drive revenue. We believe that in the next five years, Walmart will allocate an increasing amount of capital expenses to fulfill eCommerce plans, store remodels and Walmart Health expansion. We used the capital expenditure account to grow the Property Plant & Equipment.

According to Walmart’s debt table, the company is not having any very large debt come to maturity in the next few years. Below is the debt maturity table.

Source: Annual Report

We believe that Walmart will be able to service debt. We forecast cash as growing from $6 billion to $33 billion, not factoring in spending. As a result, we believe that Walmart will be able to pay off debts coming to maturity. And with the COVID-19 pandemic, the company is experiencing more sales which should make it easier to pay debts.

Consensus EPS values are approximately 10% higher than the forecasted EPS values. We believe this is due share repurchase forecasts.

As a result of historically low interest free rates, the discount rate, WACC, was calculated at 4.03%, a value that affected the DCF and EP model and thereby yielded a high share price of $144. Since Walmart shares are trading at $119 as of March 11, 2020, a $144 valuation is on the higher side. However, we believe that due to COVID-19 Walmart’s shares will increase in price due to increased spending at Walmart. As a result, decided to include it in our target range.

The DDM model produced a target price of $132 and the relative P/E model produced a target price of $118. The P/E model was not used in the target range due to the recent volatility in share prices when we produced the model. Overall, we believe that the DCF and DDM model represent the target range of the model. The DDM model is on the lower side, while the DCF model is on the higher side.

KEYS TO MONITOR

COVID-19

The most important thing to monitor is the spread of COVID-19 and its effects on the global economy. We believe the pandemic will trigger a recession in the United States. As of mid-March (2020), a record 3.28 million workers applied for unemployment.lix Additionally, the largest U.S. relief package ($2 Trillion) is in the house about to be passed to aide citizens, small businesses, and large businesses.lx If the COVID-19 pandemic causes a recession, we anticipate that Walmart will experience an increase in sales as well as surpass management guidance for eCommerce growth.

Walmart International Segment

The international segment of Walmart inc. has experienced more annual losses than gains in the past five years. Multiple divisions of Walmart International are underperforming, and regardless of a possible global recession, Walmart International may have to sell or close stores in Chile, Japan, and the United Kingdom. If Walmart exits any of these countries like it did Brazil in 2018, the financial statements will be negatively affected for the next three years.

IMPORTANT DISCLAIMER

Henry Fund reports are created by graduate students enrolled in the Applied Securities Management program at the University of Iowa’s Tippie College of Business. These reports provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of our students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold an investment position in the companies mentioned in this report.

REFERENCES

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xxvii Walmart – United Kingdom, https://corporate.walmart.com/our-story/our-business/international/uk

xxviii BCC - Sainsbury's-Asda merger blocked by regulator, https://www.bbc.com/news/business-48048596

xxix Bloomberg - Buyout Firms Bid for Walmart’s U.K. Grocery Chain Asda, https://www.bloomberg.com/news/articles/2020-03-16/buyout-firms-said-to-bid-for-walmart-s-u-k-grocery-chain-asda

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xxxiiiReuters – Walmart Sells Majority of Brazil Unit, https://www.reuters.com/article/us-walmart-brazil/walmart-sells-majority-of-brazil-unit-takes-4-5-billion-charge-idUSKCN1J01L xxxiv Day Translations – How Mcdonald’s Adapts Around the World, https://www.daytranslations.com/blog/how-mcdonalds-adapts-around-the-world/

xxxv Walmart – Care Clinics, https://www.walmart.com/cp/care-clinics/1224932

xxxvi CVS – Minute Clinics, https://www.cvs.com/minuteclinic/services/price-lists xxxvii Planned Parent Hood, https://www.plannedparenthood.org xxxviii ICrowdNewswire xxxix Vox - Walmart is quietly working on an Amazon Prime competitor called Walmart+ , https://www.vox.com/recode/2020/2/27/21154357/walmart-plus-walmart-grocery-delivery-unlimited-membership-amazon-prime xl BJ’s Wholesale 2019 Annual Report xli Walmart - Temporary Changes to Our Hours to Better Serve Customers , https://corporate.walmart.com/newsroom/2020/03/14/temporary-changes-to-our-hours-to-better-serve-customers

xlii Walmart - Walmart Announces Special Cash Bonus and Early Payment of Q1 Bonuses Totaling Nearly $550 Million for Hourly Associates, https://corporate.walmart.com/newsroom/2020/03/19/walmart-announces-special-cash-bonus-and-early-payment-of-q1-bonuses-totaling-nearly-550-million-for-hourly-associates

xliii Sky News - Coronavirus: 'I applied and got a job three hours later' applicant says as supermarkets hire thousands, https://news.sky.com/story/coronavirus-tesco-becomes-latest-supermarket-to-create-jobs-to-meet-surge-in-demand-11961035

xliv First Research by Mergent “Warehouse Clubs & Superstores,” Sep 9th 3019. (NAICS CODES: 452311) xlv NPD - U.S. Consumers Take an Omnichannel Approach When It Comes to Grocery Shopping, https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/us-consumers-take-an-omnichannel-approach-when-it-comes-to-grocery-shopping xlvi AXIOS – Walmart Agrees to $282 Million Settlement in Corruption Lawsuit, https://www.axios.com/walmart-pay-282-million-corruption-lawsuit-a13fcb67-d4f7-4991-bc8a-48823fb4e1ee.html

xlvii PROPUBLICA - Walmart Was Almost Charged Criminally Over Opioids, https://www.propublica.org/article/walmart-

was-almost-charged-criminally-over-opioids-trump-appointees-killed-the-indictment

xlviii Fernandez, Cecilia, “Warehouse Clubs & Supercenters in the US, December 2019. IBISWorld xlix Agnes, Joseph. “Food and Staples Retailers,” Dec.6th 2019. CFRA Equity Research. l Hello Fresh, Subscriptions, https://www.hellofresh.com/plans?dm=meals&c=FQ-GGATEQAHJ&HFSEM02&gclid=Cj0KCQjw9ZzzBRCKARIsANwXaeL3eqzM8EU3p1FLVk3bSj88eRua68IcfqafAiO4GNqKy0rZWDUPyL8aAvnjEALw_wcB li ALDI.com lii Store Brands - ALDI will begin 2020 with nearly 2,000 stores, https://storebrands.com/aldi-will-begin-2020-nearly-2000-stores

liii Bloomberg - ALDI will begin 2020 with nearly 2,000 stores https://www.bloomberg.com/news/articles/2020-02-25/walmart-takes-on-cvs-amazon-with-low-price-health-care-clinics?srnd=premium liv Walgreens, https://www.walgreens.com/psc/prescription-savings-club & CVS, https://www.cvs.com/content/prescription-savings

lv Forbes - Walgreens Closes Nearly 160 Walk-In Clinics – What It Means for Retail Healthcare,

https://www.forbes.com/sites/ritanumerof/2019/11/22/walgreens-closes-nearly-160-walk-in-clinics--what-it-means-for-retail-healthcare/#46fc5bbd6fad

lvi BEA – GDP, https://www.bea.gov/system/files/2020-01/gdp4q19_adv_0.pdf lvii CNN - Walmart is doubling down on China with 500 new stores, https://www.cnn.com/2019/11/21/business/walmart-china-stores/index.html lviii The Census Bureau - ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, MARCH 2020, https://www.census.gov/retail/marts/www/marts_current.pdf lix Wall Street Journal - Record Rise in Unemployment Claims Halts Historic Run of Job Growth, https://www.wsj.com/articles/the-long-run-of-american-job-growth-has-ended-11585215000

lx Wall Street Journal - Trump Signs $2 Trillion Coronavirus Stimulus Bill After Swift Passage by House https://www.wsj.com/articles/house-lawmakers-race-to-washington-to-ensure-coronavirus-stimulus-passes-11585318472

FactSet, Bloomberg, FINRA and U.S. Treasury databases were used to build model.

Walmart Inc. 11,048 ########### 1E+09Revenue Decomposition 77.102 2.009E+10 11,048

(In Bllions Except Revenue Per Sq. Ft. and Store Unit Count) Steady StateFiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E

Sales DecompositionWalmart U.S.Net Sales 307.83 318.48 331.67 344.93 357.01 367.72 378.38 389.24 400.33Unit Count 4672.00 4761.00 4769.00 4777.00 4785.00 4793.00 4801.00 4809.00 4817.00Retail Sq. Ft. 0.70 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71Average Square Feet Per Store 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Revenue Per Square Foot 440.39 451.74 470.45 483.87 497.67 511.87 526.48 541.50 556.95Growth Rate in Revenue Per Square Foot 0.02 0.03 0.04 0.03 0.03 0.03 0.03 0.03 0.03Projected Revenue (Rev/sq. ft. * sq ft.) 307.83 318.48 331.67 341.70 352.04 362.69 373.66 384.96 396.60

0.03

Walmart InternationalWalmart International 23.00Net Sales 116.12 118.07 120.82 123.24 125.71 128.35 131.04 133.86 136.79Store Unit Count 6363.00 6360.00 5993.00 6016.00 6039.00 6062.00 6085.00 6108.00 6131.00Retail Sq. Ft. 0.38 0.37 0.34 0.35 0.35 0.35 0.35 0.35 0.35Average Square Feet Per Store 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Revenue Per Square Foot 308.01 316.54 351.23 354.40 357.60 360.82 364.07 367.36 370.67Growth Rate in Revenue Per Square Foot -0.07 0.03 0.11 0.01 0.01 0.01 0.01 0.01 0.01Projected Revenue (Rev/sq. ft. * sq ft.) 116.12 118.07 120.82 122.38 123.96 125.55 127.16 128.80 130.45

0.022-0.06 1.29%

Sam's ClubTotal Sales 57.37 59.22 57.84 58.42 59.59 61.08 62.75 64.64 66.74Store Unit Count 660.00 597.00 599.00 604.00 609.00 614.00 619.00 624.00 629.00Retail Sq. Ft. 0.09 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08Average Square Feet Per Store 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Revenue Per Square Foot 605.56 680.70 654.15 675.43 697.41 720.09 743.52 767.71 792.69Growth Rate in Revenue Per Square Foot 0.02 0.12 -0.04 0.03 0.03 0.03 0.03 0.03 0.03Projected Revenue (Rev/sq. ft. * sq ft.) 53.29 54.46 52.33 54.49 56.72 59.05 61.47 63.98 66.59

0.03

Membership and Other Income 4.56 4.58 4.08 3.98 3.88 3.78 3.68 3.58 3.48

Total Forecasted Revenue 485.87 500.34 514.41 522.54 536.59 551.06 565.96 581.31 597.11Total Forecasted Growth 0.78% 2.98% 2.81% 1.58% 2.69% 2.70% 2.70% 2.71% 2.72%

Walmart Inc.Income Statement(In Billions, except EPS and Dividends per Common Share)Fiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ERevenues:Net Sales: 485.87 500.34 514.41 522.54 536.59 551.06 565.96 581.31 597.11Cost of Goods Sold -284.31 -290.36 -298.13 -302.18 -309.63 -317.28 -325.14 -333.22 -341.53

Expenses:Accumulated Depreciation (expense on input) -71.78 -77.48 -81.49 -85.33 -89.00 -92.51 -95.86 -99.07 -102.14Accumulated Amorization (expense on input) -5.17 -5.56 -5.68 -5.80 -5.91 -6.02 -6.12 -6.22 -6.31SG&A Expense -101.85 -106.51 -107.15 -109.14 -111.88 -114.49 -117.93 -121.03 -124.27EBIT (Operating Income) 22.76 20.44 21.96 20.10 20.18 20.76 20.91 21.77 22.87

Interest Net -2.27 -2.18 -2.13 -1.02 -1.04 -1.07 -1.10 -1.14 -1.38

One Time Other Gains and Loses 0.00 -3.14 -8.37 0.00 0.00 0.00 0.00 0.00 0.00Provision Income Taxes -6.20 -4.60 -4.28 -4.47 -4.62 -4.74 -4.90 -5.96 -6.14Consolidated Net Income Attributed to Noncontrolling Interest -0.65 -0.66 -0.51 -0.52 -0.54 -0.55 -0.57 -0.58 -0.60Net Income 13.64 9.86 6.67 14.08 13.98 14.40 14.34 14.09 14.75

Basic: -0.02 -0.11 outlierWeighted Average Shares Outstanding - Basic 3.10 3.00 2.93 2.91 2.89 2.87 2.85 2.82 2.81EPS: Net Income (Loss) per Share - Basic 4.40 3.29 2.28 4.837 4.838 5.02 5.03 5.00 5.25Dividends Declared per Common Share 2.00 2.04 2.08 2.12 2.16 2.20 2.24 2.28 2.32

Walmart Inc.Balance Sheet (large cash balances are okay profitable companies like walmart, acquistions spend down cash not reflected)(In Billions)Fiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025EASSETS:Cash and cash equivalents 6.87 6.76 7.72 5.95 8.36 10.96 12.48 25.65 33.57Receivables, Net 5.84 5.61 6.28 6.16 6.33 6.50 6.68 6.86 7.05Inventories 43.05 43.78 44.27 44.19 44.59 44.99 45.40 45.82 46.25Prepaid Expenses and Other Current Assets and Discontinued Operations 1.94 3.51 3.62 3.68 3.78 3.88 3.99 4.09 4.21Total Current Assets 57.69 59.66 61.90 59.98 63.06 66.33 68.55 82.43 91.07PPE, Gross 179.49 185.15 185.81 196.81 208.11 219.71 231.62 243.86 256.43Accumulated Depreciation -71.78 -77.48 -81.49 -85.33 -89.00 -92.51 -95.86 -99.07 -102.14PPE, Net 107.71 107.68 104.32 111.48 119.11 127.20 135.76 144.79 154.29Goodwill 17.04 18.24 31.18 31.18 31.18 31.18 31.18 31.18 31.18Other Long Term Assets 9.92 11.80 14.82 14.71 14.59 14.49 14.39 14.29 14.20Accumulated Amortization -5.17 -5.56 -5.68 -5.80 -5.91 -6.02 -6.12 -6.22 -6.31Property Under Capital lease and Financing Obligations, Net 6.47 7.14 7.08 7.39 7.82 8.25 8.70 9.16 9.63TOTAL ASSETS 198.83 204.52 219.30 224.74 235.76 247.45 258.58 281.84 300.37

LIABILITIES:Short Term Borrowings 1.10 5.26 5.23 5.29 5.36 5.42 5.49 5.56 5.63Accounts Payable 41.43 46.09 47.06 47.99 49.28 50.61 51.98 53.39 54.84Current Accrued Liabilities 20.65 22.12 22.16 23.39 24.92 26.51 28.18 29.92 31.74Accrued Income Taxes 0.92 0.65 0.43 0.58 0.60 0.61 0.64 0.77 0.80Long-term Debt Due Within One Year 2.26 3.74 1.88 4.21 4.21 3.72 3.72 13.82 13.82Capital Lease and Financing Obligations Due Within One Year 0.57 0.67 0.73 0.92 0.83 0.83 0.63 0.63 6.07Total Current Liabilities 66.93 78.52 77.48 82.38 85.19 87.71 90.64 104.09 112.89Long-term Debt 36.02 30.05 43.52 41.86 43.51 45.25 47.08 49.02 51.05Long-Term Capital Lease and Financing Obligations 6.00 6.78 6.68 6.80 7.39 8.57 8.71 10.07 10.23Deferred Income Taxes and Other 9.34 8.35 11.98 8.10 8.37 8.57 8.87 10.78 11.11Accrued Liabilities Excluding Current Liabilities of Discontinued Operations 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00TOTAL LIABILITIES 118.29 123.70 139.66 139.13 144.45 150.09 155.30 173.96 185.28

EQUITY:Common Stock and Capital in Excess of Par Value 2.68 2.94 3.25 3.25 3.25 3.25 3.25 3.25 3.25Retained earnings 89.35 85.11 80.79 86.76 92.48 98.53 104.46 109.07 116.29ACOI, Loss -14.23 -10.18 -11.54 -11.54 -11.54 -11.54 -11.54 -11.54 -11.54Nonredeemable Noncontrolling Interest 2.74 2.95 7.14 7.13 7.12 7.12 7.11 7.10 7.10TOTAL EQUITY 80.54 80.82 79.63 77.51 83.04 89.02 94.87 98.42 107.56TOTAL LIABILITIES + EQUITY 198.83 204.52 219.30 224.74 235.76 247.45 258.58 281.84 300.37

Walmart Inc.Historical Cash Flow Statement(In Millions)Fiscal Years Ending Jan. 31 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Cash FlowNet cash provided by operating activities 26249.00 23643.00 24255.00 25591.00 23257.00 28564.00 27389.00 31530.00 28337.00 27753.00Net cash provided by operating activities of continuing operations 26249.00 23643.00 24255.00 25591.00 23257.00 28564.00 27389.00 31530.00 28337.00 27753.00Income from continuing operations 14927.00 15959.00 16454.00 17756.00 16551.00 16814.00 15080.00 14293.00 10523.00 7179.00Consolidated net income 14848.00 16993.00 16387.00 17756.00 16695.00 17099.00 15080.00 14293.00 10523.00 7179.00Income / loss from discontinued operations, net of income taxes 79.00 -1034.00 67.00 0.00 -144.00 -285.00 0.00 0.00 - -Adjustments to reconcile consolidated net income to net cash provided by operating activities 11322.00 7684.00 7801.00 7835.00 6706.00 11750.00 12309.00 17237.00 17814.00 20574.00Depreciation and amortization 7157.00 7641.00 8130.00 8501.00 8870.00 9173.00 9454.00 10080.00 10529.00 10678.00Unrealized gains and losses - - - - - - - - - 3516.00Gains and losses for disposal of business operations - - - - - - - - - 4850.00Total other operating activities -203.00 1738.00 1448.00 394.00 659.00 282.00 738.00 967.00 4042.00 1235.00Deferred income taxes -0.50 0.65 1.05 -0.13 -0.28 -0.50 -0.67 0.76 -0.30 -0.50Other operating activities excluding deferred income taxes 301.00 1087.00 398.00 527.00 938.00 785.00 1410.00 206.00 4346.00 1734.00Loss on extinguishment of debt - - - - - - - - 3136.00 0.00Other operating activities - - - - - - - - 1210.00 1734.00Changes in certain assets and liabilities 4368.00 -1695.00 -1777.00 -1060.00 -2823.00 2295.00 2117.00 6190.00 3243.00 295.00Receivables, net -297.00 -733.00 -796.00 -614.00 -566.00 -569.00 -19.00 -402.00 -1074.00 -368.00Inventories 2265.00 -3086.00 -3727.00 -2759.00 -1667.00 -1229.00 -703.00 1021.00 -140.00 -1311.00Accounts payable 1052.00 2557.00 2687.00 1061.00 531.00 2678.00 2008.00 3942.00 4086.00 1831.00Accrued liabilities 1348.00 -433.00 59.00 1252.00 -1121.00 1415.00 831.00 1629.00 371.00 143.00Accrued liabilities excluding accrued income taxes - - - 271.00 103.00 1249.00 1303.00 1137.00 928.00 183.00Accrued income taxes - - - 981.00 -1224.00 166.00 -472.00 492.00 -557.00 -40.00Net cash used in operating activities of discontinued operations - - - - - - - - - -Net cash used in investing activities -11620.00 -12193.00 -16609.00 -12611.00 -12298.00 -11125.00 -10675.00 -13987.00 -9060.00 -24036.00Gross ppe 148584.00 155002.00 165825.00 173089.00 177395.00 176958.00 179492.00 185154.00 185810.00Net cash used in investing activities of continuing operations -11620.00 -12193.00 -16609.00 -12611.00 -12298.00 -11125.00 -10675.00 -13987.00 -9060.00 -24036.00Payments for property and equipment (CAPEX: p.76 of 10k) -12184.00 -12699.00 -13510.00 -12898.00 -13115.00 -12174.00 -11477.00 -10619.00 -10051.00 -10344.00Other investing activities 564.00 506.00 -3099.00 287.00 817.00 378.00 556.00 334.00 320.00 88.00Proceeds from the disposal of property and equipment 1002.00 489.00 580.00 532.00 727.00 570.00 635.00 456.00 378.00 519.00Other investing activities excluding proceeds from the disposal of property and equipment -438.00 17.00 -3679.00 -245.00 90.00 -192.00 -79.00 -122.00 -58.00 -431.00Investments and business acquisitions, net of cash acquired 0.00 -202.00 -3548.00 -316.00 -15.00 - - - - -Other investing activities excluding investments and business acquisitions, net of cash acquired -438.00 219.00 -131.00 71.00 105.00 - - - - -Proceeds from / payments for disposal of certain operations 0.00 0.00 - - - 671.00 246.00 662.00 1046.00 876.00Purchase of available for sale securities - - - - - - - -1901.00 0.00 0.00Investment and business acquisitions, net of cash acquired - - - - - - - -2463.00 -375.00 -14656.00Net cash used in / provided by financing activities -14191.00 -12028.00 -8458.00 -11972.00 -11017.00 -15071.00 -16122.00 -18929.00 -19875.00 -2537.00Net change in short-term borrowings -1033.00 503.00 3019.00 2754.00 911.00 -6288.00 1235.00 -1673.00 4148.00 -53.00Proceeds from issuance of long-term debt 5546.00 11396.00 5050.00 211.00 7072.00 5174.00 39.00 137.00 7476.00 15872.00Payments of long-term debt -6033.00 -4080.00 -4584.00 -1478.00 -4968.00 -3904.00 -4432.00 -2055.00 -16120.00 -3784.00Repayments of long-term debt - - - - - - - - -13061.00 -3784.00Payment for debt extinguishment or debt prepayment cost - - - - - - - - -3059.00 0.00Dividends paid -4217.00 -4437.00 -5048.00 -5361.00 -6139.00 -6185.00 -6294.00 -6216.00 -6124.00 -6102.00Purchase of company stock -7276.00 -14776.00 -6298.00 -7600.00 -6683.00 -1015.00 -4112.00 -8298.00 -8296.00 -7410.00Dividends paid to noncontrolling interest - - - - - -600.00 -719.00 -479.00 -690.00 -431.00Purchase of noncontrolling interest -436.00 0.00 0.00 - - -1844.00 -1326.00 -90.00 -8.00 0.00Other financing activities -742.00 -634.00 -597.00 -498.00 -1210.00 -409.00 -513.00 -255.00 -261.00 -629.00Dividends paid to and stock purchases of noncontrolling interest -346.00 -363.00 -355.00 - -722.00 - - - - -Other financing activities excluding dividends paid to and stock purchases of noncontrolling interest -396.00 -271.00 -242.00 - -488.00 - - - - -Effect of exchange rates on cash and cash equivalents 194.00 66.00 -33.00 223.00 -442.00 -514.00 -1022.00 -452.00 487.00 -438.00Net increase / decrease in cash and cash equivalents 632.00 -512.00 -845.00 1231.00 -500.00 1854.00 -430.00 -1838.00 -111.00 742.00Cash and cash equivalents at beginning of period 7275.00 7907.00 7395.00 6550.00 7781.00 7281.00 9135.00 8705.00 6867.00 7014.00Cash and cash equivalents at end of period 7907.00 7395.00 6550.00 7781.00 7281.00 9135.00 8705.00 6867.00 6756.00 7756.00Supplemental disclosureIncome taxes paid -7389.00 -6984.00 -5899.00 -7304.00 -8641.00 -8169.00 -8111.00 -4507.00 -6179.00 -3982.00Interest paid -2141.00 -2163.00 -2346.00 -2262.00 -2362.00 -2433.00 -2540.00 -2351.00 -2450.00 -2348.00Capital lease obligations incurred 61.00 49.00 - - - - - - - -Net cash provided by operating activities 13.40 -9.93 2.59 5.51 -9.12 22.82 -4.11 15.12 -10.13 -2.06Net cash provided by operating activities of continuing operations 13.40 -9.93 2.59 5.51 -9.12 22.82 -4.11 15.12 -10.13 -2.06Income from continuing operations 12.62 6.91 3.10 7.91 -6.79 1.59 -10.31 -5.22 -26.38 -31.78Consolidated net income 10.81 14.45 -3.57 8.35 -5.98 2.42 -11.81 -5.22 -26.38 -31.78Income / loss from discontinued operations, net of income taxes - -1408.86 - -100.00 - -97.92 - - - -Adjustments to reconcile consolidated net income to net cash provided by operating activities 14.44 -32.13 1.52 0.44 -14.41 75.22 4.76 40.04 3.35 15.49Depreciation and amortization 6.20 6.76 6.40 4.56 4.34 3.42 3.06 6.62 4.45 1.42Total other operating activities -110.98 - -16.69 -72.79 67.26 -57.21 161.70 31.03 317.99 -69.45Deferred income taxes -186.75 - 61.29 -112.67 -109.77 -80.29 -33.60 - -139.95 -64.14Other operating activities excluding deferred income taxes -76.26 261.13 -63.39 32.41 77.99 -16.31 79.62 -85.39 2009.71 -60.10Loss on extinguishment of debt - - - - - - - - - -100.00Other operating activities - - - - - - - - - 43.31Changes in certain assets and liabilities 234.71 -138.80 -4.84 40.35 -166.32 - -7.76 192.39 -47.61 -90.90Receivables, net -194.06 -146.80 -8.59 22.86 7.82 -0.53 96.66 -2015.79 -167.16 65.74Inventories - -236.25 -20.77 25.97 39.58 26.27 42.80 - -113.71 -836.43Accounts payable - 143.06 5.08 -60.51 -49.95 404.33 -25.02 96.31 3.65 -55.19Accrued liabilities -33.79 -132.12 - 2022.03 -189.54 - -41.27 96.03 -77.23 -61.46Accrued liabilities excluding accrued income taxes - - - - -61.99 1112.62 4.32 -12.74 -18.38 -80.28Accrued income taxes - - - - -224.77 - -384.34 - -213.21 92.82Net cash used in operating activities of discontinued operations - - - - - - - - - -Net cash used in investing activities -8.17 -4.93 -36.22 24.07 2.48 9.54 4.04 -31.03 35.23 -165.30Net cash used in investing activities of continuing operations -8.17 -4.93 -36.22 24.07 2.48 9.54 4.04 -31.03 35.23 -165.30Payments for property and equipment -5.96 -4.23 -6.39 4.53 -1.68 7.17 5.73 7.48 5.35 -2.92Other investing activities - -10.28 -712.45 - 184.67 -53.73 47.09 -39.93 -4.19 -72.50Proceeds from the disposal of property and equipment 40.34 -51.20 18.61 -8.28 36.65 -21.60 11.40 -28.19 -17.11 37.30Other investing activities excluding proceeds from the disposal of property and equipment 44.91 - -21741.18 93.34 - -313.33 58.85 -54.43 52.46 -643.10Investments and business acquisitions, net of cash acquired - - -1656.44 91.09 95.25 - - - - -Other investing activities excluding investments and business acquisitions, net of cash acquired -156.08 - -159.82 - 47.89 - - - - -Proceeds from / payments for disposal of certain operations -100.00 - - - - - -63.34 169.11 58.01 -16.25Purchase of available for sale securities - - - - - - - - - -Investment and business acquisitions, net of cash acquired - - - - - - - - 84.77 -3808.27Net cash provided by / used in investing activities of discontinued operations - - - - - - - - - -Net cash used in / provided by financing activities -43.08 15.24 29.68 -41.55 7.98 -36.80 -6.97 -17.41 -5.00 87.24Net change in short-term borrowings 72.42 - 500.20 -8.78 -66.92 -790.23 - -235.47 - -101.28Proceeds from issuance of long-term debt -15.53 105.48 -55.69 -95.82 3251.66 -26.84 -99.25 251.28 5356.93 112.31Payments of long-term debt -11.99 32.37 -12.35 67.76 -236.13 21.42 -13.52 53.63 -684.43 76.53Repayments of long-term debt - - - - - - - - - 71.03Dividends paid -12.57 -5.22 -13.77 -6.20 -14.51 -0.75 -1.76 1.24 1.48 0.36Purchase of company stock -106.65 -103.08 57.38 -20.67 12.07 84.81 -305.12 -101.80 0.02 10.68Dividends paid to noncontrolling interest - - - - - - -19.83 33.38 -44.05 37.54Purchase of noncontrolling interest - - - - - - 28.09 93.21 91.11 -Other financing activities -772.94 14.56 5.84 16.58 -142.97 66.20 -25.43 50.29 -2.35 -141.00Dividends paid to and stock purchases of noncontrolling interest 1.70 -4.91 2.20 - - - - - - -Other financing activities excluding dividends paid to and stock purchases of noncontrolling interest -248.31 31.57 10.70 - - - - - - -Effect of exchange rates on cash and cash equivalents - -65.98 -150.00 - -298.21 -16.29 -98.83 55.77 - -189.94Net increase / decrease in cash and cash equivalents -62.95 -181.01 -65.04 - -140.62 - -123.19 -327.44 93.96 -Cash and cash equivalents at beginning of period 30.63 8.69 -6.48 -11.43 18.79 -6.43 25.46 -4.71 -21.11 2.14Cash and cash equivalents at end of period 8.69 -6.48 -11.43 18.79 -6.43 25.46 -4.71 -21.11 -1.62 14.80Supplemental disclosureIncome taxes paid -12.02 5.48 15.54 -23.82 -18.31 5.46 0.71 44.43 -37.10 35.56Interest paid -19.81 -1.03 -8.46 3.58 -4.42 -3.01 -4.40 7.44 -4.21 4.16Capital lease obligations incurred -78.52 -19.67 - - - - - - - -

43 accounts for microsoft so redo wmt set up!!!, jk since we wont use it, attached for reporting purpuses

Walmart Inc. add packs and subtractions!Forecasted Cash Flow StatementFiscal Years Ending Jan. 31 2020E 2021E 2022E 2023E 2024E 2025E

Net Income 14.08 13.98 14.40 14.34 14.09 14.75Cash Flow From Operating Acivitiesadd depreciation expense 3.84 3.67 3.51 3.35 3.21 3.07add amortization expense 0.12 0.11 0.11 0.10 0.10 0.09change A/R 0.13 -0.17 -0.17 -0.18 -0.18 -0.19change inventory 0.08 -0.40 -0.41 -0.41 -0.42 -0.43change prepaid expenses -0.06 -0.10 -0.10 -0.10 -0.11 -0.11change A/P 0.93 1.29 1.33 1.37 1.41 1.45change current accrued liabilities 1.23 1.53 1.60 1.67 1.74 1.82change accrued income tax 0.15 0.02 0.01 0.02 0.14 0.02change deferred tax -3.89 0.27 0.21 0.30 1.91 0.33NET O 16.61 20.20 20.49 20.46 21.88 20.81

Cash Flows from investingchange goodwill - - - - - -change gross PPE -11.00 -11.30 -11.60 -11.91 -12.24 -12.57change other assets (intangibles) 0.00 0.00 0.00 0.00 0.00 0.00change in property under capital lease and financing obligations, net -0.32 -0.42 -0.44 -0.45 -0.46 -0.47NET I -11.32 -11.72 -12.04 -12.36 -12.70 -13.04

Cash Flows from Financingchange long term debt due within one year 2.34 0.00 -0.49 0.00 10.10 0.00change long term debt -1.66 1.65 1.74 1.84 1.93 2.03change capital lease and financing obligations due within one year 0.19 -0.09 0.00 -0.20 0.00 5.44change long-term capital lease and financing obligations 0.11 0.59 1.18 0.14 1.36 0.16change short-term borrowings 0.06 0.07 0.07 0.07 0.07 0.07change common stock excess of par 0 0 0 0 0 0change accumulated other comprehensive income / loss 0 0 0 0 0 0change in nonredeemable controlling interest -0.01 -0.01 -0.01 -0.01 -0.01 -0.01dividends (in retained earnings) -6.17 -6.24 -6.31 -6.38 -6.43 -6.52share repurchases (In retained earnings) -1.93 -2.03 -2.03 -2.03 -3.04 -1.01

NET F -7.06 -6.07 -5.86 -6.57 3.99 0.16

Net increase (decrease) in cash & equivalents -1.77 2.41 2.59 1.53 13.16 7.92Beginning of year cash 7.72 5.95 8.36 10.96 12.48 25.65End of year cash 5.95 8.36 10.96 12.48 25.65 33.57

Walmart Inc.Common Size Income Statement

Fiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ERevenues:Net Sales: 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Cost of Goods Sold -58.51% -58.03% -57.96% -57.83% -57.70% -57.58% -57.45% -57.32% -57.20%

Expenses:A. Depreciation (expense on input tab) -14.77% -15.49% -15.84% -16.33% -16.59% -16.79% -16.94% -17.04% -17.10%A. Amorization (expense on input tab) -1.06% -1.11% -1.10% -1.11% -1.10% -1.09% -1.08% -1.07% -1.06%SG&A Expense -20.96% -21.29% -20.83% -20.89% -20.85% -20.78% -20.84% -20.82% -20.81%EBIT (Operating Income) 4.69% 4.08% 4.27% 3.85% 3.76% 3.77% 3.69% 3.74% 3.83%

One Time Other Gains and Loses 0.00% -0.63% -1.63% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Provision Income Taxes -1.28% -0.92% -0.83% -0.86% -0.86% -0.86% -0.87% -1.02% -1.03%Consolidated net income attrib. to noncontrolling interest -0.13% -0.13% -0.10% -0.10% -0.10% -0.10% -0.10% -0.10% -0.10%Net Income 3.27% 2.41% 1.71% 2.89% 2.80% 2.81% 2.73% 2.62% 2.70%

Walmart Inc.Balance Sheet(In Billions)Fiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025EASSETS:Cash and Cash Equivalents 1.42% 1.35% 1.50% 1.14% 1.56% 1.99% 2.21% 4.41% 5.62%Receivables, Net 1.20% 1.12% 1.22% 1.18% 1.18% 1.18% 1.18% 1.18% 1.18%Inventories 8.87% 8.76% 8.61% 8.46% 8.31% 8.16% 8.02% 7.88% 7.75%Prepaid Expenses and Other Current Assets and Discontinued Operations 0.40% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%Total Current Assets 11.89% 11.93% 12.03% 11.48% 11.75% 12.04% 12.11% 14.18% 15.25%PPE, Gross 37.00% 37.04% 36.12% 37.66% 38.78% 39.87% 40.92% 41.95% 42.94%Accumulated Depreciation -14.80% -15.50% -15.84% -16.33% -16.59% -16.79% -16.94% -17.04% -17.10%PPE, Net 37.00% 37.04% 36.12% 37.66% 38.78% 39.87% 40.92% 41.95% 42.94%Goodwill 3.51% 3.65% 6.06% 5.97% 5.81% 5.66% 5.51% 5.36% 5.22%Other Long Term Assets 2.04% 2.36% 2.88% 2.81% 2.72% 2.63% 2.54% 2.46% 2.38%Accumulated Amortization -1.07% -1.11% -1.10% -1.11% -1.10% -1.09% -1.08% -1.07% -1.06%Property Under Capital lease and Financing Obligations, Net 1.33% 1.43% 1.38% 1.41% 1.46% 1.50% 1.54% 1.58% 1.61%TOTAL ASSETS 40.98% 40.91% 42.63% 43.01% 43.94% 44.90% 45.69% 48.48% 50.30%

LIABILITIES:Short Term Borrowings 0.23% 1.05% 1.02% 1.01% 1.00% 0.98% 0.97% 0.96% 0.94%Accounts Payable 8.54% 9.22% 9.15% 9.18% 9.18% 9.18% 9.18% 9.18% 9.18%Current Accrued Liabilities 4.26% 4.43% 4.31% 4.48% 4.64% 4.81% 4.98% 5.15% 5.32%Accrued Income Taxes 0.19% 0.13% 0.08% 0.11% 0.11% 0.11% 0.11% 0.13% 0.13%Long-term Debt Due Within One Year 0.47% 0.75% 0.36% 0.81% 0.79% 0.67% 0.66% 2.38% 2.31%Capital Lease and Financing Obligations Due Within One Year 0.12% 0.13% 0.14% 0.18% 0.15% 0.15% 0.11% 0.11% 1.02%Total Current Liabilities 13.80% 15.71% 15.06% 15.76% 15.88% 15.92% 16.01% 17.91% 18.91%Long-Term Capital Lease and Financing Obligations 1.24% 1.36% 1.30% 1.30% 1.38% 1.55% 1.54% 1.73% 1.71%Deferred Income Taxes and Other 1.93% 1.67% 2.33% 1.55% 1.56% 1.56% 1.57% 1.85% 1.86%Accrued Liabilities Excluding Current Liabilities of Discontinued Operations 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%TOTAL LIABILITIES 24.38% 24.74% 27.15% 26.63% 26.92% 27.24% 27.44% 29.92% 31.03%

EQUITY:Common Stock and Capital in Excess of Par Value 0.55% 0.59% 0.63% 0.62% 0.61% 0.59% 0.57% 0.56% 0.54%Retained earnings 18.42% 17.02% 15.70% 16.60% 17.23% 17.88% 18.46% 18.76% 19.48%ACOI, Loss 0.56% 0.59% 1.39% 1.36% 1.33% 1.29% 1.26% 1.22% 1.19%Nonredeemable Noncontrolling Interest 0.56% 0.59% 1.39% 1.36% 1.33% 1.29% 1.26% 1.22% 1.19%TOTAL EQUITY 16.60% 16.17% 15.48% 14.83% 15.48% 16.15% 16.76% 16.93% 18.01%TOTAL LIABILITIES + EQUITY 40.98% 40.91% 42.63% 43.01% 43.94% 44.90% 45.69% 48.48% 50.30%

Walmart Inc.Value Driver Estimation

Fiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E

Net Operating Profit Less Adjusted Taxes (NOPLAT): 20.10 20.18 20.76 20.91 21.77 22.87Net Sales 485.87 500.34 514.41 522.54 536.59 551.06 565.96 581.31 597.11Less Cost of Goods Sold -284.31 -290.36 -298.13 -302.18 -309.63 -317.28 -325.14 -333.22 -341.53Less Depreciation and Amortization -76.95 -83.04 -87.18 -91.13 -94.91 -98.52 -101.98 -105.28 -108.44Less SG&A -101.85 -106.51 -107.15 -109.14 -111.88 -114.49 -117.93 -121.03 -124.27Plus Implied Interest on Operating Lease 0.33 0.28 0.26 0.27 0.29 0.30 0.32 0.34 0.35Equals EBITDA 23.09 20.71 22.21 20.37 20.47 21.07 21.23 22.10 23.22

Marginal Tax Rate 0.32 0.29 0.21 0.21 0.21 0.21 0.21 0.21 0.21

Non-operating IS Accounts:Provision for Taxes 6.20 4.60 4.28 4.47 4.62 4.74 4.90 5.96 6.14Add Interest, net 0.73 0.64 0.44 0.21 0.22 0.22 0.23 0.24 0.29Add Loss of Extinguishment of Debt - 0.99 - - - - - - -Add Other Losses - - 1.74 - - - - - -Plus Tax Operating Lease Interest 0.10 0.08 0.05 0.06 0.06 0.06 0.07 0.07 0.07Equals Adjusted Tax 7.04 6.31 6.52 4.74 4.90 5.02 5.20 6.26 6.50

Change in Deferred Tax 0.76 -0.30 -0.50 -3.89 0.27 0.21 0.30 1.91 0.33

NOPLAT 16.81 14.10 15.20 11.74 15.84 16.25 16.33 17.74 17.05

Invested Capital (IC):Normal cash 6.87 6.76 7.72 7.84 8.05 8.27 8.49 8.72 8.96Receivables, net 5.84 5.61 6.28 6.16 6.33 6.50 6.68 6.86 7.05Inventories 43.05 43.78 44.27 44.19 44.59 44.99 45.40 45.82 46.25Prepaid Expenses and Other 1.94 3.51 3.62 3.68 3.78 3.88 3.99 4.09 4.21Other Current Assets - - - - - - - - -Equals Current Operating Assets 57.69 59.66 61.90 61.86 62.75 63.64 64.56 65.50 66.46

Accounts Payable 41.43 46.09 47.06 47.99 49.28 50.61 51.98 53.39 54.84Current Accrued Liabilities 20.65 22.12 22.16 23.39 24.92 26.51 28.18 29.92 31.74Accrued Income Taxes 0.92 0.65 0.43 0.58 0.60 0.61 0.64 0.77 0.80Equals Current Liabilities 63.01 68.86 69.65 71.96 74.80 77.74 80.80 84.08 87.37

Net Operating Working Capital -5.32 -9.19 -7.75 -10.09 -12.05 -14.10 -16.24 -18.58 -20.91

Plus Net PPE 107.71 107.68 104.32 111.48 119.11 127.20 135.76 144.79 154.29

Plus Net Other Operating AssetsProperty under Capital Lease and Financing Obligations, net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Other Long Term Assets 9.92 11.80 14.82 14.71 14.59 14.49 14.39 14.29 14.20Operating Lease 16.11 13.72 12.63 13.38 14.15 14.94 15.75 16.58 17.44Less Other Operating Liabilities - - - - - - - - -

IC 128.42 124.01 124.03 129.47 135.80 142.53 149.66 157.07 165.01

Free cash flow (FCF):NOPLAT 16.81 14.10 15.20 11.74 15.84 16.25 16.33 17.74 17.05Less Change in IC -14.70 -4.41 0.02 5.45 6.33 6.73 7.13 7.42 7.94FCF 31.51 18.52 15.18 6.29 9.51 9.52 9.20 10.33 9.12

Return on invested capital (ROIC):NOPLAT 16.81 14.10 15.20 11.74 15.84 16.25 16.33 17.74 17.05/ Beg. IC 143.12 128.42 124.01 124.03 129.47 135.80 142.53 149.66 157.07ROIC 11.75% 10.98% 12.25% 9.46% 12.23% 11.97% 11.46% 11.86% 10.86%

Economic profit (EP):Beg. IC 143.12 128.42 124.01 124.03 129.47 135.80 142.53 149.66 157.07x (ROIC - WACC) 0.08 0.07 0.08 0.05 0.08 0.08 0.07 0.08 0.07EP 11.08 8.96 10.23 6.75 10.63 10.78 10.59 11.72 10.73

Walmart Inc.Key Management Ratios

Fiscal Years Ending Jan. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E

Liquidity Ratios: Working Capital (Current assets / Current liabilities) -9.24 -18.86 -15.58 -22.40 -22.13 -21.37 -22.08 -21.66 -21.82

Current Ratio (Current assets / Current liabilities) 0.76 0.67 0.70 0.66 0.64 0.63 0.62 0.55 0.51Quick Ratio ((Cash + Marketable securities + Accounts receivable) / Current liabilities) 0.86 0.76 0.80 0.73 0.74 0.76 0.76 0.79 0.81

Asset-Management Ratios:Inventory Turnover Ratio (Costs of Goods Sold/Average Inventory) 6.50 6.69 6.77 6.83 6.98 7.08 7.19 7.31 7.42Receivables Turnover Ratio (Sales/Average Account Receivables) 84.80 87.40 86.48 84.01 85.93 85.87 85.88 85.88 85.88Account Payable Turn Over Ratio (Costs of Goods Sold/Average Account Payables) 7.11 6.63 6.40 6.36 6.37 6.35 6.34 6.32 6.31Cash Conversion Cycle (365/Inventory Turnover Ratio + 365/Receivables Turnover - 365/Account Payable Turnover) 9.18 3.74 1.10 0.36 -0.76 -1.68 -2.59 -3.49 -4.38Total Asset Turnover (Sales/Total Assets) 1.08 1.08 1.04 1.04 1.01 0.99 0.98 0.91 0.87

Financial Leverage Ratios:Debt Ratio (Total Liabilities/Total Assets) 0.26 0.27 0.28 0.28 0.27 0.27 0.27 0.27 0.27Debt-to-equity ratio 1.47 1.53 1.75 1.63 1.58 1.54 1.50 1.61 1.61

Profitability Ratios:Gross Margin (Sales-Cost of Goods Sold/Sales) 41.49% 41.97% 42.04% 42.17% 42.30% 42.42% 42.55% 42.68% 42.80%Net Profit Margin (Net Income/Sales) 2.81% 1.97% 1.30% 2.69% 2.61% 2.61% 2.53% 2.42% 2.47%ROA (Net Income/Total Assets) 3.03% 2.13% 1.35% 2.79% 2.64% 2.59% 2.47% 2.20% 2.15%ROE (Net Income/Shareholder's Equity) 16.94% 12.20% 8.38% 18.16% 16.84% 16.18% 15.11% 14.31% 13.71%

Payout Policy Ratios:Dividend Payout Ratio (Dividend/EPS) 45.45% 62.01% 91.23% 43.83% 44.65% 43.84% 44.52% 45.64% 44.20%Total Payout Ratio ((Dividends + Repurchases)/Net Income) 33.35% 47.07% 9.03% -30.14% -30.14% -29.76% -30.37% -24.04% -37.32%

Type Company Name Here FirstWeighted Average Cost of Capital (WACC) Estimation

Cost of Equity: ASSUMPTIONS:Risk-Free Rate 1.13% 10 year treasury bondBeta 0.65 3 year weekly BetaEquity Risk Premium 5.15% Henry Fund consensusCost of Equity 4.48%

Cost of Debt:Risk-Free Rate 1.13% 10 year treasury bondImplied Default Premium 0.89%Pre-Tax Cost of Debt 2.02% YTM on WMT 2030 Corporate Bond Marginal Tax Rate 20.80%After-Tax Cost of Debt 1.60%

Market Value of Common Equity: MV WeightsTotal Shares Outstanding 2.84Current Stock Price 119.26 march 17thMV of Equity 338.70 84.26%

Market Value of Debt:Short-Term Debt 5.23Current Portion of LTD 1.88Long-Term Debt 43.52PV of Operating Leases 12.63MV of Total Debt 63.26 15.74%

Estimated WACC 4.03%

Walmart Inc.Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation ModelsIRKey Inputs: CV Growth of NOPLAT 1.40% (Low growth due to stores under performing and slow transitions to other avenues of cash flows) and next year growth 2% (FIND SOURCE) so farther out lower CV Year ROIC 10.86% WACC 4.03% (Low wacc from very small Rf rate) Cost of Equity 4.48%

Fiscal Years Ending Jan. 31 2020E 2021E 2022E 2023E 2024E 2025E

DCF Model:Free Cash Flow (FCF) 6.29 9.51 9.52 9.20 10.33 9.12Continuing Value (CV) 295.9 307.5 306.7 304.9 306.3 565.85PV of FCF 6.0 8.8 8.5 7.9 8.5 464.5

Value of Operating Assets: 504.15Non-Operating Adjustments:Vdebt Adjustment and PV Lease -63.26ESOPS Adjustment 0.00less capital leases -14.19less non-controlling interest* -7.13 *(BV proxy, no MV figure in 10-K)

Adjusted Out Non-Equity Claim 419.58 -84.58Shares Outstanding 2.91Intrinsic Value of Last FYE 144.18$ Implied Price as of Today 144.52$

EP Model:Economic Profit (EP) 6.75 10.63 10.78 10.59 11.72 10.73Continuing Value (CV) 408.77PV of EP 6.49 9.82 9.58 9.05 9.62 335.58

Total PV of EP 380.13Invested Capital (last FYE) 124.03

Value of Operating Assets: 504.15 operating assets need t match: modeling error on work sheer in FCF- PV line itemsNon-Operating Adjuatments:Vdebt Adjustment -63.26ESOPS Adjustment 0.00less capital leases -14.19less non-controlling interest -7.13 -84.58

Adjusted Out Non-Equity Claim 419.58Shares Outstanding 2.91Intrinsic Value of Last FYE 144.18$ Implied Price as of Today 144.52$

Walmart Inc.Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Jan. 31 2020E 2021E 2022E 2023E 2024E 2025E

EPS 4.84 4.84 5.02 5.03 5.00 5.25

Key Assumptions CV growth of EPS 1.40% CV Year ROE 13.71% Cost of Equity 4.48%

Future Cash Flows P/E Multiple (CV Year) 29.18 EPS (CV Year) 5.25 Future Stock Price 153.14 Dividends Per Share 2.12 2.16 2.20 2.24 2.28 2.32 Discounted Cash Flows 2.03 1.98 1.93 1.88 1.83 123.02

Intrinsic Value as of Last FYE 132.67$ Implied Price as of Today 132.98$

Walmart Inc.Relative Valuation ModelsSource: FactSet, Estimate Summary Tab

EPS EPS EPSTicker Company Price 2020E 2021E 2023E P/E 20 P/E 21COST Costco Wholesale $281.14 $8.19 $8.70 $12.45 34.33 32.31 AMZN Amazon.com, Inc. $1,883.75 $28.57 $40.08 $73.38 65.93 47.00 TGT Target $103.00 $6.36 $6.88 $7.95 16.19 14.97 BBY Best Buy $75.65 $6.07 $6.30 $7.16 17.43 12.01 WBA Walgreens $45.76 $5.84 $6.03 $5.89 7.84 7.59 BJ BJ's Wholesale Club, Inc. $27.00 $1.72 $1.83 $2.05 15.70 14.75 DG Dollar General Corporation $182.11 $7.52 $8.30 $9.27 24.22 21.94 KR Kroger Co. $31.93 $2.19 $2.50 $2.59 14.58 12.77

Average 24.53 20.42

WMT Walmart Inc. $119.00 $4.84 $4.84 24.6 24.6

Implied Relative Value: P/E (EPS20) $ 118.64 P/E (EPS21) 98.78$

Walmart Inc.Present Value of Operating Lease Obligations

Fiscal Years Ending Jan. 31 2011 2012 2013 2014 2015 2016 2017 2018 2019Year 1 1.41 1.64 1.72 1.73 1.76 2.06 2.27 1.93 1.86Year 2 1.34 1.59 1.60 1.63 1.62 1.99 1.79 1.72 1.66Year 3 1.27 1.53 1.48 1.46 1.48 1.79 1.68 1.53 1.42Year 4 1.21 1.43 1.38 1.31 1.35 1.70 1.52 1.38 1.23Year 5 1.12 1.31 1.25 1.19 1.24 1.53 1.34 1.16 1.06Thereafter 7.79 8.92 9.37 9.84 10.46 12.44 9.54 7.64 6.89Total Minimum Payments 14.12 16.42 16.80 17.17 17.91 21.51 18.14 15.37 14.12Less: Cumulative Interest 1.63 1.87 1.99 2.11 2.25 2.66 2.03 1.64 1.48PV of Minimum Payments 12.49 14.55 14.81 15.06 15.66 18.85 16.11 13.72 12.63

Implied Interest in Year 1 Payment 26.13 0.25 0.29 0.30 0.30 0.32 0.38 0.33 0.28

Pre-Tax Cost of Debt 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02Years Implied by Year 6 Payment 6.95 6.80 7.52 8.25 8.47 8.13 7.11 6.60 6.48Expected Obligation in Year 6 & Beyond 1.12 1.31 1.25 1.19 1.24 1.53 1.34 1.16 1.06

Present Value of Lease PaymentsPV of Year 1 1.38 1.61 1.69 1.70 1.72 2.02 2.22 1.89 1.82PV of Year 2 1.28 1.53 1.54 1.57 1.55 1.91 1.72 1.65 1.59PV of Year 3 1.20 1.44 1.39 1.38 1.40 1.69 1.58 1.44 1.34PV of Year 4 1.11 1.32 1.28 1.21 1.25 1.57 1.41 1.27 1.14PV of Year 5 1.01 1.19 1.13 1.08 1.12 1.38 1.21 1.05 0.96PV of 6 & beyond 6.51 7.47 7.79 8.12 8.62 10.28 7.96 6.41 5.79Capitalized PV of Payments 12.49 14.55 14.81 15.06 15.66 18.85 16.11 13.72 12.63

Walmart Inc.Sensitivity Tables

144.52 0.45 0.55 0.65 0.75 0.85 0.95 1.05 4.70% 263.01 203.16 163.26 134.77 113.42 96.82 83.54 4.85% 252.64 195.04 156.60 129.12 108.52 92.49 79.67 5.00% 242.96 187.46 150.36 123.84 103.93 88.44 76.05 5.15% 233.91 180.35 144.52 118.88 99.62 84.63 72.64 5.30% 225.43 173.68 139.03 114.22 95.57 81.06 69.44 5.45% 217.47 167.42 133.87 109.83 91.76 77.69 66.42 5.60% 209.97 161.51 129.00 105.69 88.16 74.51 63.57

144.52 1.20% 1.30% 1.40% 1.50% 1.60% 1.70% 1.80%-0.37% 276.72 293.45 312.64 334.88 360.95 391.93 429.36 0.13% 210.00 219.51 230.08 241.90 255.23 270.35 287.65 0.63% 166.70 172.64 179.11 186.20 193.99 202.60 212.17 1.13% 136.34 140.28 144.52 149.10 154.05 159.44 165.30 1.63% 113.87 116.61 119.52 122.63 125.96 129.53 133.37 2.13% 96.59 98.54 100.61 102.80 105.12 107.59 110.22 2.63% 82.88 84.31 85.81 87.39 89.06 90.82 92.68

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Walmart U.S. Growth Revenue/Square Feet144.52 2.25% 2.45% 2.65% 2.85% 3.05% 3.25% 3.45%1.69% 125.79 137.06 148.44 159.93 171.53 183.24 195.07 1.89% 129.84 141.11 152.49 163.98 175.58 187.29 199.12 2.09% 133.93 145.20 156.58 168.07 179.67 191.38 203.20 2.29% 138.05 149.33 160.71 172.20 183.80 195.51 207.33 2.49% 142.22 153.49 164.87 176.36 187.96 199.68 211.50 2.69% 146.43 157.70 169.08 180.57 192.17 203.88 215.70 2.89% 150.67 161.95 173.33 184.82 196.42 208.13 219.95

144.52 2.25% 2.45% 2.65% 2.85% 3.05% 3.25% 3.45%2.95% 107.30 118.57 129.95 141.44 153.04 164.75 176.58 3.05% 108.25 119.53 130.91 142.40 154.00 165.71 177.53 3.15% 109.21 120.48 131.87 143.35 154.95 166.66 178.49 3.25% 110.17 121.45 132.83 144.32 155.92 167.63 179.45 3.35% 111.14 122.41 133.79 145.28 156.88 168.59 180.41 3.45% 112.11 123.38 134.76 146.25 157.85 169.56 181.39 3.55% 113.09 124.36 135.74 147.23 158.83 170.54 182.36

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WALMART INC. (WMT) March 11, 2020Walmart to save money during a recessionary setting, which will...

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