UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended October 31, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______to______.
Commission file number 1-6991
WAL-MART STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware ___________71-0415188__________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
702 S.W. Eighth Street
Bentonville, Arkansas ____________72716______________
(Address of principal executive offices) (Zip Code)
(501) 273-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter periods that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by the court.
Yes _____ No _____
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.10 Par Value -- 2,223,453,506 shares as of October 31,
1998.
<PAGE 2>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
<CAPTION>
October 31, January 31,
1998 1998
ASSETS (Unaudited) (*Note)
<S> <C> <C>
Cash and cash equivalents $ 1,009 $ 1,447
Receivables 1,401 976
Inventories 20,620 16,497
Other current assets 488 432
Total current assets 23,518 19,352
Property, plant and equipment 30,071 27,376
Less accumulated depreciation 7,030 5,907
Net property, plant and equipment 23,041 21,469
Property under capital leases 3,248 3,040
Less accumulated amortization 998 903
Net property under capital leases 2,250 2,137
Other assets and deferred charges 2,430 2,426
Total assets $ 51,239 $45,384
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper $ 1,976 $ -
Accounts payable 11,424 9,126
Accrued liabilities 4,969 3,628
Other current liabilities 984 1,706
Total current liabilities 19,353 14,460
Long-term debt 6,953 7,191
Long-term obligations under capital leases 2,637 2,483
Deferred income taxes and other 771 809
Minority Interest 1,811 1,938
Common stock and capital in excess of par value 805 809
Retained earnings 19,437 18,167
Other accumulated comprehensive income ( 528) ( 473)
Total shareholders' equity 19,714 18,503
Total liabilities and shareholders'
equity $ 51,239 $45,384
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements
<F2>
*Note: The balance sheet at January 31, 1998, has been derived from the
audited financial statements at that date, and condensed.
<PAGE 3>
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in millions except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Net sales $33,509 $28,777 $96,849 $82,572
Other income - net 415 350 1,112 954
33,924 29,127 97,961 83,526
Costs and expenses:
Cost of sales 26,380 22,680 76,328 65,285
Operating, selling
and general and
administrative
expenses 5,691 4,958 16,341 14,058
Interest costs:
Debt 135 142 380 413
Capital leases 67 56 201 166
32,273 27,836 93,250 79,922
Income before income taxes,
minority interest and
equity in unconsolidated
subsidiaries 1,651 1,291 4,711 3,604
Provision for income taxes 611 483 1,743 1,333
Income before minority
interest and equity in
unconsolidated
subsidiaries 1,040 808 2,968 2,271
Minority interest and
equity in unconsolidated
subsidiaries ( 31) ( 16) ( 97) ( 32)
Net income $ 1,009 $ 792 $ 2,871 $ 2,239
Net income per share -
Basic and dilutive $ .45 $ .35 $ 1.28 $ .99
Dividends per share $ .0775 $ .0675 $ .2325 $ .2025
Average shareholders'
equity $19,629 $17,409 $19,109 $17,349
Return for the period
on average
shareholders' equity 5.18% 4.55% 15.13% 12.91%
Average number of common shares:
Basic 2,231 2,253 2,235 2,262
Dilutive 2,246 2,263 2,251 2,266
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements.
<PAGE 4>
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
<CAPTION>
Nine Months Ended October 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,871 $ 2,239
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,400 1,178
Increase in inventories ( 4,136) ( 3,221)
Increase in accounts payable 2,304 2,405
Increase in accrued liabilities 741 1,027
Noncash items and other ( 505) ( 647)
Net cash provided by operating activities 2,675 3,248
Cash flows from investing activities:
Payments for property, plant & equipment ( 2,652) ( 1,894)
Acquisitions ( 47) ( 770)
Other investing activities 69 72
Net cash used in investing activities ( 2,630) ( 2,592)
Cash flows from financing activities:
Increase in commercial paper 1,890 1,523
Proceeds from issuance of long-term debt 521 -
Dividends paid ( 520) ( 459)
Payment of long-term debt ( 1,046) ( 523)
Purchase of Company stock ( 1,117) ( 1,367)
Other financing activities ( 212) 15
Net cash used in financing activities ( 484) ( 811)
Net decrease in cash and cash equivalents ( 438) ( 155)
Cash and cash equivalents at beginning
of year 1,447 883
Cash and cash equivalents at end of
period $ 1,009 $ 728
Supplemental disclosure of cash flow information:
Income tax paid $ 2,227 $ 1,396
Interest paid 581 598
Capital lease obligations incurred 203 176
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements.
<PAGE 5>
WAL-MART STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
The condensed consolidated balance sheet as of October 31, 1998, and
the related condensed consolidated statements of income for the three and
nine month periods ended October 31, 1998, and 1997, and the statements
of cash flow for the nine month periods ended October 31, 1998, and 1997,
are unaudited. In the opinion of management, all adjustments necessary
for a fair presentation of the financial statements have been included.
The adjustments consisted only of normal recurring items. Interim results
are not necessarily indicative of results for a full year. Certain
reclassifications have been made to the prior year's income statements to
conform to current presentation.
The financial statements and notes are presented in accordance with
the rules and regulations of the Securities and Exchange Commission and
do not contain certain information included in the Company's annual
report. Therefore, the interim statements should be read in conjunction
with the Company's annual report for the fiscal year ended January 31,
1998.
NOTE 2. Inventories
The Company uses the retail last-in, first-out (LIFO) method for the
Wal-Mart Stores segment, cost LIFO for the Sam's Club segment, and other
cost methods for the International segment. Inventories are not in excess
of market value. Quarterly inventory determinations under LIFO are
partially based on assumptions as to inventory levels at the end of the
fiscal year, sales and the rate of inflation for the year. If the first-
in, first-out (FIFO) method of accounting had been used by the Company,
inventories at October 31, 1998, would have been $428 million higher than
reported, an increase in the LIFO reserve of $80 million from January 31,
1998, and an increase of $25 million from July 31, 1998. If the FIFO
method had been used at October 31, 1997, inventories would have been
$344 million higher than reported, an increase in the LIFO reserve of $48
million from January 31, 1997, and an increase of $30 million from July
31, 1997.
NOTE 3. Net Income Per Share
The Company presents basic and dilutive net income per share
according to guidance established in Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Statement 128 replaces primary
and fully dilutive net income per share with basic and dilutive net
income per share. Unlike primary net income per share, basic net income
per share excludes any dilutive effect of stock options. Basic and
dilutive net income per share for all periods presented are the same as
previously reported. Basic net income per share is based on the weighted
average outstanding common shares. Dilutive net income per share is based
on the weighted average outstanding common shares reduced by the dilutive
effect of stock options.
<PAGE 6>
NOTE 4. Segments
The Company is principally engaged in the operation of mass
merchandising stores that serve customers primarily through the operation
of three segments. The Company identifies its segments based on
management responsibility within the United States and geographically for
all international units. The Wal-Mart Stores segment includes the
Company's discount stores and Supercenters in the United States. The
Sam's Club segment includes the warehouse membership clubs in the United
States. The International segment includes all operations in Argentina,
Brazil, Canada, China, Germany, Korea, Mexico and Puerto Rico. The
revenues in the "Corporate and Other" category result from sales to third
parties by McLane Company, Inc., a wholesale distributor.
Revenues by operating segment were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Wal-Mart Stores $23,244 $20,495 $67,214 $59,089
Sam's Club 5,589 5,062 16,316 14,824
International 2,961 1,781 8,514 4,555
Corporate and Other 1,715 1,439 4,805 4,104
Total Revenues $33,509 $28,777 $96,849 $82,572
</TABLE>
Operating profit and reconciliation to income before income taxes,
minority interest and equity in unconsolidated subsidiaries are as
follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Wal-Mart Stores $ 1,640 $ 1,347 $ 4,827 $ 3,863
Sam's Club 172 138 471 398
International 109 52 315 85
Corporate and Other ( 68) ( 48) (321) (163)
Operating profit 1,853 1,489 5,292 4,183
Interest expense 202 198 581 579
Income before income taxes,
minority interest and
equity in unconsolidated
subsidiaries $ 1,651 $ 1,291 $ 4,711 $ 3,604
</TABLE>
<PAGE 7>
NOTE 5. Comprehensive Income
As of February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This
statement establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is net
income, plus certain other items that are recorded directly to
shareholders' equity, bypassing net income. The only such item currently
applicable to the Company is foreign currency translation adjustments.
Comprehensive income was $986 million and $766 million for the
quarters ended October 31, 1998 and 1997, respectively, and was $2,816
million and $2,193 million for the nine months ended October 31, 1998 and
1997, respectively.
The adoption of this Statement had no effect on the Company's
results of operations or financial position.
NOTE 6. Acquisition
In July 1998, the Company extended its presence in Asia with an
investment in Korea. The Company acquired a majority interest in four
units as well as six undeveloped sites for approximately $179 million.
The four units were previously operated by Korea Makro. The purchase
price included $130 million for newly issued shares in the acquired
company. The proceeds were used to reduce debt and to provide for
working capital needs. The transaction has been accounted for as a
purchase. The net assets and liabilities acquired are recorded at fair
value. The Company is evaluating the useful life of the resulting
goodwill and will amortize the goodwill over that period. The results of
operations since the effective date of the acquisition have been included
in the Company's results. The transaction should not have a material
impact on the fiscal 1999 consolidated operating results. Pro forma
results of operations are not presented due to the insignificant
differences from the historical results.
NOTE 7. Pre-opening costs
During the second quarter, the Company adopted Statement of Position
(SOP) 98-5, "Reporting on the Costs of Start-Up Activities". The SOP
requires that the costs of start-up activities, including organization
costs, be expensed as incurred. The impact of the adoption of SOP 98-5
was $8 million net of taxes. Due to the immateriality to the Company's
results of operations, the initial application was not reported as a
cumulative effect of a change in an accounting principle.
NOTE 8. Subsequent event
On December 9, 1998, the Company announced that it had reached an
agreement to purchase 74 units of the Interspar hypermarket chain in
Germany. Pending government approval, the agreement is expected to be
final by the end of December. The units are being acquired from Spar
Handels AG, a German company that owns multiple retail formats and
wholesale operations throughout Germany. If consummated, the transaction
<PAGE 8>
should not have a material impact on the fiscal 1999 consolidated
operating results.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The Company had a 16% sales increase for the quarter and a 17% sales
increase for the nine-month period ended October 31, 1998. The sales
increases noted above were attributable to an increase in comparable
sales in the Wal-Mart Stores segment of 9% for the third quarter of
fiscal 1999 and the nine months ended October 31, 1998, an increase in
comparable sales in the Sam's Club segment of 9% for the third quarter of
fiscal 1999 and the nine months ended October 31, 1998, and to the
Company's expansion activities in those segments and its International
segment.
Domestic expansion activity during the first nine months of fiscal
1999 included 22 new Wal-Mart stores, the expansion of two Wal-Mart
stores, the conversion of 80 Wal-Mart stores to Supercenters, 22 new
Supercenters, seven new Sam's Clubs and the relocation or expansion of
four Sam's Clubs. International expansion during the first nine months
of fiscal 1999 included the addition of four units in Argentina, three
units in Brazil, six units in Canada, four units in Korea and 24 units in
Mexico.
At October 31, 1998, the Company had 1,863 Wal-Mart stores, 543
Supercenters and 450 Sam's Clubs in the United States, along with 13
units in Argentina, 11 units in Brazil, 150 Wal-Mart stores in Canada,
three units in China (operated under joint venture agreements), 21 units
in Germany, four units in Korea (operated under joint venture
agreements), 409 units in Mexico, and 14 units in Puerto Rico. This
compares with 1,904 Wal-Mart stores, 436 Supercenters, and 444 Sam's
Clubs in the United States, along with eight units in Argentina, eight
units in Brazil, 144 Wal-Mart stores in Canada, three units in China
(operated under joint venture agreements), 396 units in Mexico, and 12
units in Puerto Rico at the same time last year.
The International segment had a 66% sales increase for the third
quarter and an 87% sales increase for the nine-month period ended October
31, 1998. These increases were due principally to expansion activities
which included the merger of the Mexican joint venture companies owned
by Wal-Mart Stores, Inc. and Cifra, S. A. de C. V. (Cifra) and the tender
offer that increased the Company's ownership in Cifra that occurred in
September 1997, the acquisition of the Wertkauf hypermarket chain in
Germany that occurred in December 1997, and the acquisition of four units
previously operated by Korea Makro in Korea that occurred in July 1998.
Due to the timing of these acquisitions, sales for the third quarter and
the nine-month period ended October 31, 1998, are not comparable to the
same periods last year due to the additional sales generated by these
acquisitions in the current year's periods.
<PAGE 9>
Sam's Clubs sales as a percentage of total Company sales fell from
18% in the third quarter of fiscal 1998 and nine-month period ended
October 31, 1997, to 17% for the quarter and nine-month period ended
October 31, 1998, largely as a result of more rapid growth of sales in
other segments. International sales accounted for 9% of total Company
sales in both the third quarter and the nine-month period ended October
31, 1998, compared with 6% during the same periods in fiscal 1998.
The Company's gross profit as a percentage of sales increased from
21.19% in the third quarter of fiscal 1998 to 21.27% during the third
quarter of fiscal 1999. For the nine-month period ended October 31,
1998, gross profit as a percentage of sales was 21.19%, up from 20.94% in
last fiscal year's comparable period. Gross profit as a percentage of
sales improved in the Wal-Mart and International operating segments due
to better mix of merchandise sold offset in part by competitive pricing
and growth in the lower margin food business. Sam's Club operating
segment's gross profit as a percentage of sales is down for the nine-
month period due to retail price reductions on over 18% of its
merchandise assortment as a result of Sam's price rollback program to
enhance member value. This decrease is offset in part due to a better
mix of merchandise sold within the Sam's Club. As the Sam's Club segment
comprises a lower percentage of consolidated Company sales, the gross
profit stated as a percentage of sales for the Company as a whole, is
positively impacted since its contribution to gross margin is a lower
percentage when compared with the Wal-Mart and International operating
segments.
Operating, selling, general and administrative expenses decreased as
a percentage of sales from 17.23% during the third quarter of fiscal 1998
to 16.98% for the third quarter of fiscal 1999. For the nine-month period
ended October 31, 1998, operating, selling, general and administrative
expenses were 16.87%, down from 17.03% in last fiscal year's comparable
period. During the second quarter of fiscal 1998, the Company took a
one-time charge of $50 million for closing the majority of the Bud's
Discount City stores. Without the one-time charge, year to date expenses
would have been 16.97% of sales for the nine-month period ended October
31, 1997. All operating segments made improvements in their expenses, as
a percentage of sales, for the nine-month period when compared to the
previous period. The expense leverage was mitigated in the consolidated
results due to the percentage of the total volume decreasing in the Sam's
Clubs segment, which has lower expenses as a percentage of sales, while
the percentage of total volume increased in the International segment,
which has higher expenses as a percentage of sales than Sam's Clubs.
Also, the Company was affected by the tighter labor markets and the
increase in the minimum wage that occurred during last fiscal year's
third quarter.
The International segment's operating profit increased from $52
million in the third quarter of fiscal 1998 to $109 million for the third
quarter of fiscal 1999 and increased from $85 million for the nine months
ended October 31, 1997, to $315 million in the comparable period in
fiscal 1999. As noted above, the results for the periods in fiscal 1999
include the operating profit of Cifra and Wertkauf. Because the
acquisitions occurred during the last half of fiscal 1998, the additional
<PAGE 10>
operating profit resulting from these acquisitions accounts for a large
part of the increase in the International segment operating profit.
Currently, Mexico is considered to operate in a highly-inflationary
economy and reports its operations using U.S. Dollars. Beginning in
fiscal 2000, Mexico will no longer be considered a highly-inflationary
economy and will begin reporting its operations in its local currency.
The Company does not anticipate there will be a material impact on the
consolidated or International segment's results of operations or
financial position as a result of the change.
Liquidity and Capital Resources
Cash flows provided by operating activities were $2,675 million for
the nine months ended October 31, 1998, compared with $3,248 million for
the comparable period in fiscal 1998. Operating cash flow was down in
the nine months ended October 31, 1998, primarily due to the addition of
$4,136 million in inventory compared with an increase in inventory of
$3,221 million in the comparable period in fiscal 1998 and due to a
smaller increase of $2,304 in accounts payable compared with an increase
in accounts payable of $2,405 million in fiscal 1998. During the first
nine months of fiscal 1999, the Company repurchased $1,117 million of its
common stock, paid dividends of $520 million and invested $2,652 million
in capital expenditures.
At October 31, 1998, the Company had total assets of $51,239 million
compared with total assets of $45,384 million at January 31, 1998.
Working capital at October 31, 1998, was $4,165 million, down $727
million from January 31, 1998. The ratio of current assets to current
liabilities was 1.2 to 1.0 at October 31, 1998 and 1.3 to 1.0 at October
31, 1997, and January 31, 1998.
In March 1998, the Company announced its intention to increase the
size of its existing share repurchase program by approximately $1.6
billion. With this amount and the remaining portion of last year's
program, the Company may repurchase up to $2 billion of its common stock.
Of this amount, $823 million is available after the repurchase of $1,117
during the first nine months of fiscal 1999. The Company also increased
dividends by 15% to $.31 per share for fiscal 1999.
On May 7, 1998, the Company filed with the Securities and Exchange
Commission a registration statement for debt securities aggregating $750
million. In June 1998, the Company sold $500 million of bonds pursuant
to a previously filed shelf registration statement and the registration
statement described above. The bonds bear interest at 5.85% until June 1,
2000. At that date and every second June 1 thereafter (reset date), the
interest rate may be reset. The bonds have put options imbedded that, if
exercised, would require the Company to purchase the outstanding bonds at
100% of the principal amount. The put options may be exercised on each
reset date. The proceeds of the sale were used to meet general working
capital requirements.
The Company anticipates that it will continue to generate
significant operating cash flow. The Company foresees no difficulty in
<PAGE 11>
obtaining long-term financing in view of its credit rating and favorable
experiences in the debt market in the past few years.
The Company may issue public debt securities aggregating $501
million under shelf registration statements on file with the Securities
and Exchange Commission. Operating cash flow along with the Company's
ability to obtain short-term or long-term financing should provide
sufficient cash to use for capital expenditures, pay dividends, meet
maturing debt demands, and continue the share repurchase program.
Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1, "Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use". The SOP
will be effective for the Company beginning February 1, 1999. The SOP
will require the capitalization of certain costs incurred in connection
with developing or obtaining software for internal use. Currently, costs
related to developing internal-use software are expensed as incurred. The
Company does not anticipate there will be a material impact on the
results of operations or financial position after SOP 98-1 is adopted.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement will be effective for the Company beginning
February 1, 2000. The new Statement requires all derivatives to be
recorded on the balance sheet at fair value and establishes accounting
treatment for three types of hedges: hedges of changes in the fair value
of assets, liabilities, or firm commitments; hedges of the variable cash
flows of forecasted transactions; and hedges of foreign currency
exposures of net investments in foreign operations. The Company is
analyzing the implementation requirements and currently does not
anticipate there will be a material impact on the results of operations
or financial position after the adoption of Statement No. 133.
Year 2000
The Company has been evaluating and adjusting all of its known date-
sensitive systems and equipment for Year 2000 compliance, including those
systems and equipment which supports the Company's International segment.
The assessment phase of the Year 2000 project is substantially complete
and included both information technology, such as point-of-sale computer
systems, as well as non-information technology equipment, such as
warehouse conveyor systems. Over 95% of the required coding conversions
on information technology have occurred to date. The Company anticipates
completing all known remaining coding conversions during the current
fiscal year. Virtually all of the compliance was performed or is
expected to be performed by Company associates.
The next phase of the Company's Year 2000 project, complete system
testing, began during the second quarter of fiscal 1999. No significant
issues have been detected thus far in the testing. The initial testing
for all business-critical systems will be substantially complete by
April 30, 1999. The Company will continue system level testing
<PAGE 12>
throughout 1999 to ensure version upgrades, new releases and enhancements
are Year 2000 compliant.
The total estimated cost of the conversion is $12 million, which is
being expensed as incurred. Approximately $9 million of the cost is
related to reprogramming or replacement of software, while approximately
$3 million is related to acquisition of hardware. Approximately $7
million of the $12 million cost of conversion has been incurred as of the
end of the third quarter of fiscal 1999. All of these costs are being
funded through operating cash flows. These costs are an immaterial part
of the Company's information technology budget. The Company's
Information Systems Division has not deferred any information technology
projects to address the Year 2000 issue.
In addition to internal Year 2000 implementation activities, the
Company is communicating with other companies with which our systems
interface or on which it relies on to determine the extent to which those
companies are addressing their Year 2000 compliance. Testing began
during the third quarter of the current fiscal year and will be
substantially complete by July 31, 1999. Thus far, no significant issues
have been detected in the testing. There can be no assurance that there
will not be an adverse effect on the Company if third parties, such as
utility companies or merchandise suppliers, do not convert their systems
in a timely manner and in a way that is compatible with the Company's
systems. However, management believes that ongoing communication with
and assessment of these third parties will minimize these risks.
The Company anticipates minimal business disruption will occur as a
result of Year 2000 issues; however, possible consequences include, but
are not limited to, loss of communications links with certain store
locations, loss of electric power, inability to process transactions,
send purchase orders, or engage in similar normal business activities.
In addition, since there is no uniform definition of Year 2000 compliance
and not all customer situations can be anticipated, the Company may
experience an increase in sales returns of merchandise that may contain
hardware or software components. If returns of merchandise increase,
such returns are not expected to be material to the Company's financial
condition.
Although the Company has not finalized its contingency plan for
possible Year 2000 issues, initial analysis and planning is underway.
Where needed, the Company will establish contingency plans based on its
actual testing experience with its supplier base and assessment of
outside risks. The Company anticipates the majority of its contingency
plans to be in place by July 31, 1999.
The cost of the conversions and the completion dates are based on
management's best estimates and may be updated as additional information
becomes available. Readers are referred to Item 5 of this report, which
addresses forward-looking statements made by the Company.
<PAGE 13>
PART II. OTHER INFORMATION
Item 5. Other Information
The Private Securities Litigation Reform Act of 1995 ("the Act")
provides a safe harbor for forward-looking statements made by or on
behalf of the Company. Certain statements contained in Management's
Discussion and Analysis and in other Company filings are forward-looking
statements. These statements discuss, among other things, expected
growth, future revenues, future cash flows and future performance. The
forward-looking statements are subject to risks and uncertainties
including but not limited to the cost of goods, competitive pressures,
inflation, consumer debt levels, currency exchange fluctuations, trade
restrictions, changes in tariff and freight rates, Year 2000 issues,
interest rate fluctuations and other capital market conditions, and other
risks indicated in the Company's filings with the Securities and Exchange
Commission. Actual results may materially differ from anticipated results
described in these statements.
Item 6. Exhibits and Reports on Form 8-K
(a) The following document is filed as an exhibit to this Form
10-Q:
Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K for the quarter ended
October 31, 1998.
<PAGE 14>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAL-MART STORES, INC.
Date: December 9, 1998 /s/David D. Glass________________
David D. Glass
President and
Chief Executive Officer
Date: December 9, 1998 /s/John B. Menzer________________
John B. Menzer
Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 1,009
<SECURITIES> 0
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0
0
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</TABLE>
