Final Valuation Junichi Hara

1. Final ValuationJunichi Hara

2. Agenda • Assumptions • Results • Sensitivity Analysis

3. 1. Assumptions

4. Focus on… • Revenue

5. As stated: Revenue

6. As adjusted: Revenue

7. Growth rate

8. Further analysis

9. Q4 2014 Press Release • Currency negatively impacted net sales by approximately $5.1 billion • Currency effects distorting sales and g

10. Q4 2014 Press Release • On a constant currency basis, Walmart International’s net sales for the year would have been $140.9 billion, an increase of 4.6 percent over last year.

11. WMT International Growth Collect from analyst calls/press releases Growth smoother w/o currency effects

12. WMT Int. Organic Growth Growth falling

13. Further analysis

14. Fuel price impact

15. Sam’s Club Growth

16. Excluding fuel

17. Growth rate excluding fuel

18. Sales growth projections <- Trend -> Organic rates The plan: Find appropriate terminal gand trend growth linearly to it

19. USA Segments

20. Terminal growth = Inflation • Amazon won’t replace Walmart completely • Confident Walmart won’t stagnate

21. USA Segments The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.87 percent.

22. USA Segments Do a linear trend Implication: Walmart U.S. will pick up its game Sam’s Club will completely mature

23. International Segment

24. Terminal growth = World Inflation • Walmart Int. will eventually mature as well • But how to estimate?

26. Weight by % of world GDP in 2050 Result: 3.89%

27. International Segment

28. International Segment Terminal g: 2.50%

29. Projected growth Historical Forecasted

30. Focus on… • Revenue • Cost of Goods Sold

31. CoGS % of Sales

32. Analyst Call • Our gross profit rate [went] down 41 basis points, driven primarily by a commitment to price leadership. • Our customers rely on us to deliver low prices on the items they want most. We believe our price investment was a material driver to accelerated share gains and positive comps during the holiday season.

33. Analyst Call • Our gross profit rate [went] down 41 basis points, driven primarily by a commitment to price leadership. • Our customers rely on us to deliver low prices on the items they want most. We believe our price investment was a material driver to accelerated share gains and positive comps during the holiday season.

34. Analyst Call • Comp sales improvement is a key priority, and we’ll use a combination of price investment and enhanced service to accomplish this.

35. CoGS Forecast Historical Forecasted

36. Focus on… • Revenue • Cost of Goods Sold • SG&A

37. SG&A % of Sales

38. Analyst call • Sluggish sales, our stepped up investment in Global eCommerce, as well as ongoing investments in our leverage and compliance organizations, made it difficult to leverage operating expenses as a company.

39. Analyst call • We’re committed to operating expense leverage across our businesses. We will continue to focus on being best-in-class operators, which will allow us to invest heavily in price and deliver stronger top-line results.

40. My thoughts • Walmart to increase smaller stores • Diseconomies of scale • Walmart to become more global • Could result in economies of scale • But would require investments and admin. • Track record makes me skeptical! • But trust they will improve

41. Forecast Historical Forecasted

42. Focus on… • Revenue • Cost of Goods Sold • SG&A • Accounts Receivable • Inventory

43. AR as % of Sales

44. Inv as % of Sales

45. Analyst call • Improved operating results and better management of working capital, including inventory, will drive stronger cash flow. We plan to be very focused on our working capital this year to ensure we maximize our free cash flow in the future.

46. My thoughts • Skeptical because of track record • Assume average of last two years • Trend linearly

47. Forecast – AR

48. Forecast – Inv

49. 2. Results

50. FCF Model