EX-99.1 2 earningsrelease-7312019.htm PRESS RELEASE Exhibit


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Walmart U.S. Q2 comp sales1 grew 2.8% and Walmart U.S. eCommerce sales grew 37%,
Company reports Q2 FY20 GAAP EPS of $1.26; Adjusted EPS2 of $1.27, led by strength at Walmart U.S.,
Walmart raises expectations for fiscal 2020 U.S. comp sales, operating income and EPS3 

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Total revenue was $130.4 billion, an increase of $2.3 billion, or 1.8%. Excluding currency2, total revenue was $131.7 billion, an increase of $3.7 billion, or 2.9%.
 
"Our hearts continue to be with our associates in El Paso and Southaven, and we are focused on the safety of our associates and customers in all our stores and clubs.
"From a performance point of view, we're pleased with the strength we see in the business. Customers are responding to the improvements we're making, the productivity loop is working, and we're gaining market share. We're on track to exceed our original earnings expectations for the year, and that's possible because of the work our associates do every day."

Doug McMillon
President and CEO, Walmart
 
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Walmart U.S. comp sales increased on a two-year stacked basis by 7.3%, which is the strongest growth in more than 10 years. Segment operating income increased 4%, marking the fifth consecutive quarter of growth.
 
 
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Walmart U.S. eCommerce sales growth of 37% includes strong growth in online grocery.
 
 
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Sam's Club comp sales1 increased 1.2%, and eCommerce sales grew 35%. Reduced tobacco sales negatively affected comp sales by 300 basis points.
 
 
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Net sales at Walmart International were $29.1 billion, a decrease of 1.1%. Excluding currency2, net sales were $30.4 billion, an increase of 3.3%. Strength in Walmex and China were offset by softness in the U.K. and Canada.
 
 
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Operating income declined 2.9%, or 2.4% in constant currency2, which was better than planned with strong results in the U.S. businesses. As expected, the inclusion of Flipkart this quarter negatively affected profit results.
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Adjusted EPS2 excludes an unrealized loss, net of tax, of $0.01 on the company's equity investment in JD.com for the second quarter of FY20.
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FY20 adjusted EPS4 is now expected to range between a slight decrease and a slight increase compared with FY19 adjusted EPS2.
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Walmart U.S. surpassed 1,100 grocery delivery locations and has more than 2,700 pickup locations.
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The company's NextDay delivery service from Walmart.com now covers about 75% of the U.S. population.
Key results
(Amounts in billions, except as noted. Dollar and percentage changes may not recalculate due to rounding.)
 
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Q2 FY20
Q2 FY19
Change
 
 
Revenue
$130.4
$128.0
$2.3
1.8%
 
Revenue (constant currency)2
$131.7
$128.0
$3.7
2.9%
 
Operating income
$5.6
$5.8
-$0.2
-2.9%
 
Operating income (constant currency)2
$5.6
$5.8
-$0.1
-2.4%


1 13-week period ended July 26, 2019 compared to 13-week period ended July 27, 2018, and excludes fuel. See Supplemental Financial Information for additional information.  
2 See additional information at the end of this release regarding non-GAAP financial measures.
3 Includes GAAP EPS and adjusted EPS.
4 FY20 GAAP EPS to increase significantly compared to FY19. For FY20, adjusted EPS guidance excludes an unrealized gain of $0.19, net of tax, related to the company's investment in JD.com recorded through the six months ended July 31, 2019.
NYSE: WMT
August 15, 2019
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2

Free Cash Flow1
YTD FY20
$ Change
 
Returns to Shareholders
Q2 FY20
% Change
Operating cash flow
$11.2
$0.1
 
Dividends
$1.5
-1.2%
Capital expenditures
$4.9
$0.6
 
Share repurchases2
$1.6
20.5%
Free cash flow1
$6.3
-$0.5
 
Total
$3.1
8.8%

Guidance
The following guidance reflects the company’s expectations for fiscal year 2020. Assumptions in the guidance include that economic conditions, currency rates and the tax and regulatory landscape in our largest markets remain generally consistent. Additionally, the guidance assumes no further change in fair value of the Company's equity investment in JD.com.
Metric
Updated FY20 Guidance
Original FY20 Guidance
Consolidated net sales growth
Around 3% in constant currency
At least 3% in constant currency
Comp sales growth
•
Walmart U.S.: towards the upper-end of +2.5% to +3%, excluding fuel
•
Sam’s Club: no change
•
Walmart U.S.: +2.5 % to +3%, excluding fuel
•
Sam’s Club: around +1%, excluding fuel; around +3%, excluding fuel and tobacco
Walmart U.S. eCommerce net sales growth
No change
Around 35%
Walmart International net sales growth
Between 3% and 4% in constant currency
Around 5% in constant currency
Consolidated Operating Income
•
Slight decrease to slight increase, including Flipkart
•
Increase by a low to mid single-digit percentage range, excluding Flipkart
•
Decline by a low single-digit percentage range, including Flipkart
•
Increase by a low single-digit percentage range, excluding Flipkart
Adjusted EPS3
•
Slight decrease to slight increase compared with FY19 adjusted EPS, including Flipkart
•
Increase by a mid to high single-digit percentage range compared with FY19 adjusted EPS, excluding Flipkart
•
Expectations for the dilution from Flipkart remain unchanged
•
Decline by a low single-digit percentage range compared with FY19 adjusted EPS, including Flipkart
•
Increase by a low to mid single-digit percentage range compared with FY19 adjusted EPS, excluding Flipkart
Effective tax rate
Approximately 26% to 27%
Approximately 26.5% to 27.5%
Expense leverage
At least 20 bps
Approximately 20 bps
Capital expenditures
No change
Approximately $11 billion






1 See additional information at the end of this release regarding non-GAAP financial measures.
2 $7.7 billion remaining of $20 billion authorization approved in October 2017. The company repurchased approximately 15 million shares in the second quarter of fiscal 2020.  
3 FY20 GAAP EPS to increase significantly compared to FY19. For FY20, adjusted EPS guidance excludes an unrealized gain of $0.19, net of tax, related to the company's investment in JD.com recorded through the six months ended July 31, 2019.
NYSE: WMT
August 15, 2019
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3

Segment results
(Amounts in billions, except as noted. Dollar and percentage changes may not recalculate due to rounding.)
image58.jpg
U.S.
Q2 FY20
Q2 FY19
Change
Net sales
$85.2
$82.8
$2.4
2.9%
Comp sales (ex. fuel)1
2.8%
4.5%
-170 bps
N/A
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Transactions2
0.6%
2.7%
-210 bps
N/A
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Ticket2
2.2%
1.8%
40 bps
N/A
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eCommerce
~140 bps
~100 bps
~40 bps
N/A
Operating income
$4.7
$4.5
$0.2
4.0%

 
image61.jpg
Q2 FY20
Q2 FY19
Change
 
 
Net sales
$29.1
$29.5
-$0.3
-1.1%
 
Net sales (constant currency)3
$30.4
$29.5
$1.0
3.3%
 
Operating income
$0.9
$1.3
-$0.4
-29.6%
 
Operating income (constant currency)3
$0.9
$1.3
-$0.3
-27.3%

 
image56.jpg
Q2 FY20
Q2 FY19
Change
 
 
Net sales
$15.0
$14.8
$0.2
1.8%
 
Comp sales (ex. fuel)1
1.2%
5.0%
-380 bps
N/A
 
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Transactions
5.0%
6.7%
-170 bps
N/A
 
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Ticket
-3.8%
-1.7%
-210 bps
N/A
 
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eCommerce
~180 bps
~110 bps
~70 bps
N/A
 
Operating income
$0.5
$0.4
$0.1
19.4%













1 13-week period ended July 26, 2019 compared to 13-week period ended July 27, 2018, and excludes fuel. See Supplemental Financial Information for additional information.
2 Beginning with the first quarter of FY20, we updated our definition of traffic as a component of comparable sales to be all sales transactions in our stores as well as for eCommerce.  Traffic will now be called transactions. For comparability, we revised this metric for FY19 and have provided a quarterly summary on our website at http://www.stock.walmart.com.
3 See additional information at the end of this release regarding non-GAAP financial measures.
NYSE: WMT
August 15, 2019
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4

Additional highlights for the second quarter
•
Announced the appointment of Suresh Kumar as new Chief Technology Officer and Chief Development Officer.
•
Walmart U.S. ended the quarter with more than 2,700 grocery pickup locations and more than 1,100 delivery locations in the U.S.
•
Announced Walmart InHome Delivery to help customers save time by having their fresh groceries and everyday essentials delivered directly into their homes.
•
The company's NextDay delivery service from Walmart.com now covers about 75% of the U.S. population.
•
Announced new wireless experience online and in stores making it easier for customers to upgrade their mobile device.
•
Launched new Sam's Garage app nationwide at Sam's Club.
•
Launched same-day pickup nationwide at Sam's Club.
•
Launched new ordering service through WhatsApp for Superama customers in Mexico.
•
Opened two new eCommerce fulfillment centers in Mexico.
•
Launched new Walmart Daojia delivery app in China.
•
Announced plans to invest $1.2 billion to upgrade logistics network in China.
•
Launched blockchain traceability platform for Walmart China.
•
Added 14 tech degrees and certificates to Live Better U college offering.
•
Expanded debt-free college to high schoolers and created graduation bonuses.
•
Announced new collaboration with other major companies as part of the FDA's program to evaluate the use of blockchain to protect pharmaceutical product integrity.
•
Walmart and U.S. Solar announce agreement for 36 community solar gardens.
•
Electrify America and Walmart announce completion of more than 120 car charging stations at Walmart stores nationwide with plans for expansion.
•
Walmart Transportation received 2019 SMARTWAY Excellence Award from EPA for environmental performance and leadership.

About Walmart
Walmart Inc. (NYSE: WMT) helps people around the world save money and live better - anytime and anywhere - in retail stores, online, and through their mobile devices. Each week, nearly 275 million customers and members visit our more than 11,300 stores under 58 banners in 27 countries and eCommerce websites. With fiscal year 2019 revenue of $514.4 billion, Walmart employs over 2.2 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity. Additional information about Walmart can be found by visiting http://corporate.walmart.com, on Facebook at http://facebook.com/walmart and on Twitter at http://twitter.com/walmart.
Investor Relations contact
Dan Binder, CFA (479) 258-7172

 
 
 
Media Relations contact
Randy Hargrove (800) 331-0085

 

NYSE: WMT
August 15, 2019
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5

Forward-Looking Statements
This release contains statements as to Walmart management's guidance regarding earnings per share, adjusted earnings per share, consolidated net sales growth, Walmart U.S. eCommerce net sales growth, Walmart International net sales growth, consolidated operating income, capital expenditures, expense leverage, Walmart's effective tax rate for the fiscal year ending January 31, 2020, and comparable sales (excluding fuel) for Walmart U.S. and Sam's Club for the 53 weeks ending January 31, 2020. Walmart believes such statements are "forward-looking statements" as defined in, and are intended to enjoy the protection of the safe harbor for forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Assumptions on which such forward-looking statements are based are also forward-looking statements. Walmart's actual results may differ materially from the guidance provided as a result of changes in circumstances, assumptions not being realized or other risks, uncertainties and factors including:
•
economic, geo-political, capital markets and business conditions, trends and events around the world and in the markets in which Walmart operates;
•
currency exchange rate fluctuations, changes in market interest rates and commodity prices;
•
unemployment levels; competitive pressures; inflation or deflation, generally and in particular product categories;
•
consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels and demand for certain merchandise;
•
consumer enrollment in health and drug insurance programs and such programs' reimbursement rates;
•
the amount of Walmart's net sales denominated in the U.S. dollar and various foreign currencies;
•
the impact of acquisitions, investments, divestitures, store or club closures, and other strategic decisions;
•
Walmart's ability to successfully integrate acquired businesses, including within the eCommerce space;
•
Walmart's effective tax rate and the factors affecting Walmart's effective tax rate, including assessments of certain tax contingencies, valuation allowances, changes in law, administrative audit outcomes, impact of discrete items and the mix of earnings between the U.S. and Walmart's international operations;
•
changes in existing tax, labor and other laws and regulations and changes in tax rates, trade agreements, trade restrictions and tariff rates;
•
customer transaction and average ticket in Walmart's stores and clubs and on its eCommerce platforms;
•
the mix of merchandise Walmart sells, the cost of goods it sells and the shrinkage it experiences;
•
the amount of Walmart's total sales and operating expenses in the various markets in which it operates;
•
transportation, energy and utility costs and the selling prices of gasoline and diesel fuel;
•
supply chain disruptions and disruptions in seasonal buying patterns;
•
consumer acceptance of and response to Walmart's stores, clubs, digital platforms, programs, merchandise offerings and delivery methods;
•
cyber security events affecting Walmart and related costs;
•
developments in, outcomes of, and costs incurred in legal or regulatory proceedings to which Walmart is a party;
•
casualty and accident-related costs and insurance costs;
•
the turnover in Walmart's workforce and labor costs, including healthcare and other benefit costs;
•
changes in accounting estimates or judgments;
•
the level of public assistance payments; and
•
natural disasters, public health emergencies, civil disturbances, and terrorist attacks.

Such risks, uncertainties and factors also include the risks relating to Walmart’s strategy, operations and performance and the financial, legal, tax, regulatory, compliance, reputational and other risks discussed in Walmart’s most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the SEC. Walmart urges you to consider all of the risks, uncertainties and factors identified above or discussed in such reports carefully in evaluating the forward-looking statements in this release. Walmart cannot assure you that the results reflected or implied by any forward-looking statement will be realized or, even if substantially realized, that those results will have the forecasted or expected consequences and effects for or on Walmart’s operations or financial performance. The forward-looking statements made in this release are as of the date of this release. Walmart undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.











NYSE: WMT
August 15, 2019
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6

Walmart Inc.
Condensed Consolidated Statements of Income
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
July 31,
 
July 31,
(Amounts in millions, except per share data)
 
2019

2018
 
Percent Change
 
2019

2018

Percent Change
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
129,388


$
127,059

 
1.8
 %
 
$
252,337


$
248,689


1.5
 %
Membership and other income
 
989


969

 
2.1
 %
 
1,965


2,029


(3.2
)%
Total revenues
 
130,377


128,028

 
1.8
 %
 
254,302


250,718


1.4
 %
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
 
97,923


95,571

 
2.5
 %
 
190,957


187,278


2.0
 %
Operating, selling, general and administrative expenses
 
26,871


26,707

 
0.6
 %
 
52,817


52,536


0.5
 %
Operating income
 
5,583


5,750

 
(2.9
)%
 
10,528


10,904


(3.4
)%
Interest:
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
558


460

 
21.3
 %
 
1,146


897


27.8
 %
Finance, capital lease and financing obligations
 
83


94

 
(11.7
)%
 
168


187


(10.2
)%
Interest income
 
(56
)

(51
)
 
9.8
 %
 
(104
)

(94
)

10.6
 %
Interest, net
 
585


503

 
16.3
 %
 
1,210


990


22.2
 %
Other (gains) and losses
 
85

 
4,849

 
(98.2
)%
 
(752
)
 
6,694

 
NM

Income before income taxes
 
4,913


398

 
1,134.4
 %
 
10,070


3,220


212.7
 %
Provision for income taxes
 
1,233


1,125

 
9.6
 %
 
2,484


1,671


48.7
 %
Consolidated net income (loss)
 
3,680


(727
)
 
NM

 
7,586


1,549


NM

Consolidated net income attributable to noncontrolling interest
 
(70
)

(134
)
 
(47.8
)%
 
(134
)

(276
)

(51.4
)%
Consolidated net income (loss) attributable to Walmart
 
$
3,610


$
(861
)
 
NM

 
$
7,452


$
1,273


NM

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per common share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share attributable to Walmart
 
$
1.27


$
(0.29
)
 
 
 
$
2.60


$
0.43


 
Diluted net income (loss) per common share attributable to Walmart
 
$
1.26


$
(0.29
)
 
 
 
$
2.59


$
0.43


 
 
 
 
 
 
 
 
 








Weighted-average common shares outstanding:
 
 
 
 
 
 
 








Basic
 
2,853


2,946

 
 
 
2,861


2,948


 
Diluted
 
2,869


2,946

 
 
 
2,878


2,963


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
—

 
$
—

 
 
 
$
2.12


$
2.08


 

NM = not meaningful

7

Walmart Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
 
 
 
 
July 31,
 
January 31,
 
July 31,
(Amounts in millions)
 
2019
 
2019
 
2018
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
9,283

 
$
7,722

 
$
15,840

Receivables, net
 
5,382

 
6,283

 
5,002

Inventories
 
44,134

 
44,269

 
41,985

Prepaid expenses and other
 
2,572

 
3,623

 
3,543

Total current assets
 
61,371

 
61,897

 
66,370

 
 
 
 
 
 
 
Property and equipment, net
 
104,674

 
104,317

 
104,019

Operating lease right of use assets, net
 
17,239

 
—

 
—

Finance lease right of use assets, net
 
3,949

 
—

 
—

Property under capital lease and financing obligations, net
 
—

 
7,078

 
6,998

Goodwill
 
31,454

 
31,181

 
17,840

Other long-term assets
 
16,174

 
14,822

 
10,835

Total assets
 
$
234,861

 
$
219,295

 
$
206,062

 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Short-term borrowings
 
$
3,681

 
$
5,225

 
$
444

Accounts payable
 
45,871

 
47,060

 
43,128

Dividends payable
 
3,023

 
—

 
3,057

Accrued liabilities
 
20,691

 
22,159

 
22,846

Accrued income taxes
 
387

 
428

 
424

Long-term debt due within one year
 
4,396

 
1,876

 
1,090

Operating lease obligations due within one year
 
1,795

 
—

 
—

Finance lease obligations due within one year
 
439

 
—

 
—

Capital leases and financing obligations due within one year
 
—

 
729

 
694

Total current liabilities
 
80,283

 
77,477

 
71,683

 
 
 
 
 
 
 
Long-term debt
 
44,404

 
43,520

 
44,958

Long-term operating lease obligations
 
16,079

 
—

 
—

Long-term finance lease obligations
 
3,915

 
—

 
—

Long-term capital lease and financing obligations
 
—

 
6,683

 
6,610

Deferred income taxes and other
 
13,049

 
11,981

 
8,999

 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
Common stock
 
285

 
288

 
294

Capital in excess of par value
 
2,880

 
2,965

 
2,710

Retained earnings
 
78,432

 
80,785

 
80,810

Accumulated other comprehensive loss
 
(11,270
)
 
(11,542
)
 
(12,629
)
Total Walmart shareholders’ equity
 
70,327

 
72,496

 
71,185

Noncontrolling interest
 
6,804

 
7,138

 
2,627

Total equity
 
77,131

 
79,634

 
73,812

Total liabilities and equity
 
$
234,861

 
$
219,295

 
$
206,062







The Company adopted ASU 2016-02, Leases (Topic 842), and related amendments as of February 1, 2019 under the modified retrospective approach and, therefore, has not revised comparative periods.

8

Walmart Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) 
 
 
 
 
 

 
Six Months Ended

 
July 31,
(Amounts in millions)
 
2019

2018
Cash flows from operating activities:
 
 
 
 
Consolidated net income
 
$
7,586


$
1,549

Adjustments to reconcile consolidated net income to net cash provided by operating activities:
 



Depreciation and amortization
 
5,436


5,332

Unrealized (gains) and losses
 
(731
)
 
1,939

(Gains) and losses for disposal of business operations
 
—

 
4,755

Deferred income taxes
 
241


(117
)
Other operating activities
 
348


469

Changes in certain assets and liabilities, net of effects of acquisitions:
 



Receivables, net
 
978


257

Inventories
 
220


441

Accounts payable
 
(1,242
)

(1,588
)
Accrued liabilities
 
(1,657
)

(1,702
)
Accrued income taxes
 
6


(240
)
Net cash provided by operating activities
 
11,185


11,095

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Payments for property and equipment
 
(4,871
)

(4,282
)
Proceeds from the disposal of property and equipment
 
128


205

Proceeds from disposal of certain operations
 
833

 
—

Payments for business acquisitions, net of cash acquired
 
(56
)
 
—

Other investing activities
 
142


(351
)
Net cash used in investing activities
 
(3,824
)

(4,428
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Net change in short-term borrowings
 
(1,564
)

(4,761
)
Proceeds from issuance of long-term debt
 
4,020


15,851

Repayments of long-term debt
 
(407
)

(3,050
)
Dividends paid
 
(3,036
)

(3,067
)
Purchase of Company stock
 
(3,707
)

(1,844
)
Dividends paid to noncontrolling interest
 
(259
)

(171
)
Other financing activities
 
(578
)

(478
)
Net cash (used in) provided by financing activities
 
(5,531
)

2,480

 
 





Effect of exchange rates on cash, cash equivalents and restricted cash
 
(266
)

(299
)
 
 





Net increase (decrease) in cash, cash equivalents and restricted cash
 
1,564

 
8,848

Cash, cash equivalents and restricted cash at beginning of year
 
7,756

 
7,014

Cash, cash equivalents and restricted cash at end of period
 
$
9,320

 
$
15,862











9

Walmart Inc.
Supplemental Financial Information
(Unaudited)

Net sales and operating income
 
Net Sales
 
Operating Income
 
Three Months Ended
 
Three Months Ended
 
July 31,
 
July 31,
(dollars in millions)
2019
2018
Percent Change

2019
2018
Percent Change
Walmart U.S.
$
85,200

$
82,815

2.9
 %
 
$
4,659

$
4,479

4.0
 %
Walmart International
29,139

29,454

-1.1
 %
 
893

1,269

-29.6
 %
Sam's Club
15,049

14,790

1.8
 %
 
480

402

19.4
 %
Corporate and support
—

—

N/A

 
(449
)
(400
)
12.3
 %
Consolidated
$
129,388

$
127,059

1.8
 %
 
$
5,583

$
5,750

-2.9
 %

U.S. comparable sales results
 
 
With Fuel
 
Without Fuel
 
Fuel Impact
 
 
13 Weeks Ended
 
13 Weeks Ended
 
13 Weeks Ended
 
 
7/26/2019

7/27/2018
 
7/26/2019
 
7/27/2018
 
7/26/2019
 
7/27/2018
Walmart U.S.
 
2.8%
 
4.7%
 
2.8%
 
4.5%
 
0.0%
 
0.2%
Sam's Club
 
1.8%
 
7.7%
 
1.2%
 
5.0%
 
0.6%
 
2.7%
Total U.S.
 
2.6%
 
5.2%
 
2.6%
 
4.6%
 
0.0%
 
0.6%

Comparable sales is a metric that indicates the performance of our existing stores and clubs and it is important to review in conjunction with the Company's financial results reported in accordance with GAAP.  Comparable sales excluding fuel is also an important, separate metric that indicates the performance of our existing stores and clubs without considering fuel, which is volatile and unpredictable. Other companies in our industry may calculate comparable sales differently, limiting the comparability of the metric.

10

Walmart Inc.
Reconciliations of and Other Information Regarding Non-GAAP Financial Measures
(Unaudited)

The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.
Constant Currency
In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for countries where the functional currency is not the U.S. dollar into U.S. dollars or for countries experiencing hyperinflation. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. Additionally, no currency exchange rate fluctuations are calculated for non-USD acquisitions until owned for 12 months.
Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. When we refer to constant currency operating results, this means operating results without the impact of the currency exchange rate fluctuations. The disclosure of constant currency amounts or results permits investors to better understand Walmart's underlying performance without the effects of currency exchange rate fluctuations.
The table below reflects the calculation of constant currency for total revenues, net sales and operating income for the three and six months ended July 31, 2019.
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
Walmart International
 
Consolidated
 
Walmart International
 
Consolidated
(Dollars in millions)
2019
Percent Change1
 
2019
Percent Change1
 
2019
Percent Change1
 
2019
Percent Change1
Total revenues:
 
 
 
 
 
 
 
 
 
 
 
As reported
$
29,445

-1.1
 %
 
$
130,377

1.8
 %
 
$
58,518

-3.1
 %
 
$
254,302

1.4
 %
Currency exchange rate fluctuations
1,311

N/A

 
1,311

N/A

 
3,164

N/A

 
3,164

N/A

Constant currency total revenues
$
30,756

3.3
 %
 
$
131,688

2.9
 %
 
$
61,682

2.1
 %
 
$
257,466

2.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
 
 
 
 
As reported
$
29,139

-1.1
 %
 
$
129,388

1.8
 %
 
$
57,914

-3.0
 %
 
$
252,337

1.5
 %
Currency exchange rate fluctuations
1,301

N/A

 
1,301

N/A

 
3,139

N/A

 
3,139

N/A

Constant currency net sales
$
30,440

3.3
 %
 
$
130,689

2.9
 %
 
$
61,053

2.2
 %
 
$
255,476

2.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
As reported
$
893

-29.6
 %
 
$
5,583

-2.9
 %
 
$
1,631

-35.6
 %
 
$
10,528

-3.4
 %
Currency exchange rate fluctuations
29

N/A

 
29

N/A

 
81

N/A

 
81

N/A

Constant currency operating income
$
922

-27.3
 %
 
$
5,612

-2.4
 %
 
$
1,712

-32.4
 %
 
$
10,609

-2.7
 %
1 Change versus prior year comparable period.


11

Free Cash Flow
We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We had net cash provided by operating activities of $11.2 billion for the six months ended July 31, 2019, which was relatively flat when compared to $11.1 billion for the six months ended July 31, 2018. We generated free cash flow of $6.3 billion for the six months ended July 31, 2019, which declined when compared to $6.8 billion for the six months ended July 31, 2018 due primarily to $0.6 billion in increased capital expenditures.
Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
Additionally, Walmart's definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures, due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows.
Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by Walmart's management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.
The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities.
 
 
Six Months Ended
 
 
July 31,
(Dollars in millions)
 
2019

2018
Net cash provided by operating activities
 
$
11,185


$
11,095

Payments for property and equipment (capital expenditures)
 
(4,871
)

(4,282
)
Free cash flow
 
$
6,314


$
6,813

 
 





Net cash used in investing activities1
 
$
(3,824
)

$
(4,428
)
Net cash (used in) provided by financing activities
 
(5,531
)

2,480

1 "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.




12

Adjusted EPS
Adjusted diluted earnings per share attributable to Walmart (Adjusted EPS) is considered a non-GAAP financial measure under the SEC's rules because it excludes certain amounts not excluded in the diluted earnings per share attributable to Walmart calculated in accordance with GAAP (EPS), the most directly comparable financial measure calculated in accordance with GAAP. Management believes that Adjusted EPS is a meaningful measure to share with investors because it best allows comparison of the performance for the comparable period. In addition, Adjusted EPS affords investors a view of what management considers Walmart's core earnings performance and the ability to make a more informed assessment of such core earnings performance.

We have calculated Adjusted EPS for the three months by adjusting EPS for the unrealized gains and losses on the company's equity investment in JD.com. We adjust for these unrealized gains and losses because although the Company's investment in JD.com was a strategic decision for the company's retail operations in China, management's measurement of that strategy is primarily focused on the Walmart China financial results rather than the investment value of JD.com. Additionally, management does not forecast changes in fair value of its equity investments. Accordingly, management adjusts EPS for the unrealized JD.com investment gains and losses.

 
Three Months Ended July 31, 2019
Diluted earnings per share:
 
 
 
 
 
 
Reported EPS
 
 
 
 
 
$
1.26


 
 
 
 
 

Adjustments:
 
Pre-Tax Impact
 
Tax Impact1
 
Net Impact
Unrealized (gains) and losses on JD.com investment
 
$
0.02

 
$
(0.01
)
 
$
0.01


 
 
 
 
 
 
Adjusted EPS
 
 
 
 
 
$
1.27

1 Calculated based on nature of item, including any realizable deductions, and statutory rate in effect for relevant jurisdictions.

As previously disclosed in our second quarter ended July 31, 2018 press release, we have calculated Adjusted EPS for the three months ended July 31, 2018 by adjusting EPS for the following: (1) the loss on sale of the majority stake in Walmart Brazil, (2) an adjustment to the provisional amount recorded in the second quarter of fiscal 2019 related to Tax Reform and (3) unrealized gains and losses on our JD.com investment. The provisional measurement period related to Tax Reform ended in the fourth quarter of fiscal 2019. The most directly comparable financial measure calculated in accordance with GAAP is EPS for the three months ended July 31, 2018.
 
 
Three Months Ended July 31, 2018
Diluted earnings per share:
 
 
 
 
 
 
Reported EPS
 
 
 
 
 
$
(0.29
)
 
 
 
 
 
 
 
Adjustments:
 
Pre-Tax Impact
 
Tax Impact1
 
Net Impact
Loss on sale of majority stake in Walmart Brazil
 
$
1.61

 
$
(0.10
)
 
$
1.51

Adjustment to provisional amount for Tax Reform
 
—

 
0.04

 
0.04

Unrealized (gains) and losses on JD.com investment
 
0.03

 
—

 
0.03

Net adjustments
 
 
 
 
 
$
1.58

 
 
 
 
 
 
 
Adjusted EPS
 
 
 
 
 
$
1.29

1 Calculated based on nature of item and statutory rate in effect for relevant jurisdictions.