UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

________________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):
November 17, 2016

Wal-Mart Stores, Inc.
(Exact Name of Registrant as Specified in Charter)

	
			
Delaware	001-06991	71-0415188	
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)	

702 S.W. 8th Street
Bentonville, Arkansas 72716-0215
(Address of Principal Executive Offices) (Zip code)

Registrant’s telephone number, including area code:
(479) 273-4000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.
In accordance with Item 2.02 of Form 8-K of the Securities and Exchange Commission (the "SEC"), Wal-Mart Stores, Inc., a Delaware corporation (the "Company"), is furnishing to the SEC a press release that the Company will issue on November 17, 2016 (the "Press Release") and a financial presentation that will be first posted by the Company on the Company’s website at http://stock.walmart.com on November 17, 2016 (the "Financial Presentation"). The Press Release and the Financial Presentation will disclose information regarding the Company's results of operations for the three and nine months ended October 31, 2016, and the Company's financial condition as of October 31, 2016.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, which are furnished herewith pursuant to and relate to this Item 2.02, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise be subject to the liabilities of Section 18 of the Exchange Act. The information in this Item 2.02 of this Current Report on Form 8-K and Exhibits 99.1 and 99.2 hereto shall not be incorporated by reference into any filing or other document filed by the Company with the SEC pursuant to the Securities Act of 1933, as amended, the rules and regulations of the SEC thereunder, the Exchange Act, or the rules and regulations of the SEC thereunder except as shall be expressly set forth by specific reference in such filing or document.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1 - A copy of the Press Release being furnished pursuant to and that is related to the foregoing Item 2.02 is included herewith as Exhibit 99.1.
Exhibit 99.2 - A copy of the Financial Presentation being furnished pursuant to and that is related to the foregoing Item 2.02 is included herewith as Exhibit 99.2.

2

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 hereunto duly authorized.
Dated: November 17, 2016

		
WAL-MART STORES, INC.	

 	 	
By:	/s/ M. Brett Biggs	
Name:	M. Brett Biggs	
Title:	Executive Vice President and
Chief Financial Officer	

3

Walmart reports Q3 FY17 EPS of $0.98,
The company now expects full-year GAAP EPS of $4.34 to $4.49,
Adjusted full-year EPS 1 of $4.20 to $4.35

						
	Diluted EPS was $0.98. Currency negatively impacted EPS by approximately $0.03.	 	 	“We had a solid third quarter. Our e-commerce growth accelerated, operations in the U.S. continued to strengthen and international delivered another solid performance. We are pleased that we can see real progress stemming from our strategic choices and we appreciate the great work by our associates. Yet, we are not satisfied. We will continue to change and pick up speed to reach our longer term aspirations. We’re positioned well for this important fourth quarter and wish everyone a happy, peaceful and prosperous holiday season.”

Doug McMillon, President and CEO, Wal-Mart Stores, Inc.	 	
	Total revenue was $118.2 billion, an increase of 0.7%. On a constant currency basis 1 , total revenue was $120.3 billion, an increase of 2.5%.	 	 		 	
	Walmart U.S. comp sales increased 1.2%, driven by a traffic increase of 0.7%. Neighborhood Market comp sales increased approximately 5.2%.	 	 		 	
	Net sales at Walmart International were $28.4 billion, a decrease of 4.8%. Excluding currency 1 impacts, net sales were $30.5 billion, an increase of 2.4%.	 	 		 	
	Globally, on a constant currency basis, e-commerce sales and GMV increased 20.6% and 16.8%, respectively, representing continued acceleration. Excluding Yihaodian, GMV increased 28.6%.	 	 		 	
	Consolidated operating income decreased 10.4%. As expected, investments in people and technology, as well as currency exchange rate fluctuations negatively impacted results. Excluding last year's lease accounting benefit of $156 million, operating income decreased 7.9%.	
	Year-to-date operating cash flow was $19.6 billion and free cash flow 1  was $12.2 billion, both approximately $5 billion higher than last year led by improved working capital management.	
	The company returned just under $3 billion to shareholders during the quarter through dividends of $1.5 billion and share repurchases of $1.4 billion.	
 	(Amounts in millions, except as noted)	

	
Key results	

						
 		Q3 FY17	Q3 FY16	Change	
 					
 	Revenue	$118,179	$117,408	$771	0.7%	
 	Revenue (constant currency) 1	$120,321	$117,408	$2,913	2.5%	
 	Operating income	$5,119	$5,714	-$595	-10.4%	
 	Operating income (constant currency) 1	$5,253	$5,714	-$461	-8.1%	

							
Free Cash Flow	YTD	$ Change	 	Returns to Shareholders	Q3 FY17	% Change	
Operating cash flow	$19,644	$4,639	 	Dividends	$1,549	-1.4%	
Capital expenditures	$7,459	-$764	 	Share repurchases 2	$1,402	220.8%	
Free cash flow 1	$12,185	$5,403	 	Total	$2,951	47.0%	

1 See additional information at the end of this release regarding non-GAAP financial measures.
2 $11.3 billion remaining of $20 billion authorization approved in October 2015. The company repurchased approximately 20 million shares in Q3 FY17.

			
NYSE: WMT	November 17, 2016	stock.walmart.com	

2

	
	
Guidance	
The company's guidance for earnings per share for fiscal year 2017 assumes currency exchange rates remain at current levels. Additionally, this updated guidance assumes that the full year effective tax rate will be between 31% and 32%.

•	Fiscal year 2017 GAAP EPS: $4.34 to $4.49 (previously $4.29 to $4.49)	
		
•	Fiscal year 2017 adjusted EPS 1 : $4.20 to $4.35 (previously $4.15 to $4.35)	
		
•	Comp sales for the 13-week period ending Jan. 27, 2017 2 :	
		
◦	Walmart U.S.: +1.0% to +1.5%	
		
◦	Sam's Club (ex. fuel): +1.0% to +1.5%	

	
	
Segment results	

							
   U.S .	Q3 FY17	Q3 FY16	Change	
Net sales	$74,550	$72,712	$1,838	2.5%	
Comp sales 3	1.2%	1.5%	-30 bps	N/A	
	Traffic	0.7%	1.7%	-100 bps	N/A	
	Ticket	0.5%	-0.2%	70 bps	N/A	
	E-commerce	~50 bps	~15 bps	~35 bps	N/A	
Operating income	$3,999	$4,506	-$507	-11.3%	

	
						
 		Q3 FY17	Q3 FY16	Change	
 					
 	Net sales	$28,390	$29,811	-$1,421	-4.8%	
 	Net sales (constant currency) 1	$30,527	$29,811	$716	2.4%	
 	Operating income	$1,354	$1,338	$16	1.2%	
 	Operating income (constant currency) 1	$1,488	$1,338	$150	11.2%	

	
								
 		Q3 FY17	Q3 FY16	Change	
 					
 	Net sales	$14,236	$14,075	$161	1.1%	
 	Comp sales (ex. fuel) 1,3	1.4%	0.4%	100 bps	N/A	
 		Traffic	-0.5%	-0.3%	-20 bps	N/A	
 		Ticket	1.9%	0.7%	120 bps	N/A	
 		E-commerce	~60 bps	~60 bps	~0 bps	N/A	
 	Operating income	$396	$539	-$143	-26.5%	

1 See additional information at the end of this release regarding non-GAAP financial measures.
2 Compared to 13-week period ended Jan. 29, 2016.
3 13-week period ended Oct. 28, 2016, compared to 13-week period ended Oct. 30, 2015.

			
NYSE: WMT	November 17, 2016	stock.walmart.com	

3

Wal-Mart Stores, 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 260 million customers and members visit our 11,593 stores under 63 banners in 28 countries and e-commerce websites in 11 countries. With fiscal year 2016 revenue of $482.1 billion, Walmart employs approximately 2.4 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
Steve Schmitt (479) 258-7172

Media Relations contact
Randy Hargrove (800) 331-0085

Along with this press release, Walmart makes available a recorded call with executive leaders and a financial presentation to review business results, provide strategic updates, and comment on expectations for the future. We provide that call in both audio form and in a written transcript. Details on accessing the call are as follows:

•	877-523-5612 (U.S. and Canada)	
		
•	201-689-8483 (other countries)	
		
•	Passcode: 9256278 (Walmart)	
		
•	MP3 @ stock.walmart.com	

The call is archived at stock.walmart.com

###  

	
			
NYSE: WMT	November 17, 2016	stock.walmart.com	

4

	
	
Forward-Looking Statements	
 	
This release contains statements as to Walmart management's guidance regarding earnings per share and adjusted earnings per share for the year ending January 31, 2017, and Walmart U.S.'s comparable store sales and Sam's Club's comparable club sales, excluding fuel, for the 13 weeks ending January 27, 2017. 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 provided by, the Private Securities Litigation Reform Act of 1995, 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 financial performance of Walmart and each of its segments;	
		
•	Walmart's ability to successfully integrate acquired businesses, including Jet.com, Inc.;	
		
•	Walmart's effective tax rate for the quarter ending January 31, 2017 and 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;	
		
•	customer traffic and average ticket in Walmart's stores and clubs and on its e-commerce websites;	
		
•	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, e-commerce websites, mobile apps, initiatives, programs and merchandise offerings;	
		
•	cyber security events affecting Walmart and related costs;	
		
•	developments in, outcomes of, and costs incurred in legal and 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;	
		
•	changes in existing tax, labor and other laws and changes in tax rates, trade restrictions and tariff rates;	
		
•	the level of public assistance payments;	
		
•	natural disasters, public health emergencies, civil disturbances, and terrorist attacks; and	
		
•	Walmart's expenditures for FCPA and other compliance related costs	

Such risks, uncertainties and factors also include the risks relating to Walmart's operations and financial performance discussed in Walmart's most recent annual report on Form 10-K filed with the SEC. You should read this release in conjunction with that annual report on Form 10-K and Walmart's subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K. You should consider all of the risks, uncertainties and other factors identified above and in those SEC reports carefully when evaluating the forward-looking statements in this release. Walmart cannot assure you that the future results reflected in or implied by any such forward-looking statement will be realized or, even if substantially realized, will have the forecasted or expected consequences and effects for or on Walmart's operations or financial performance. Such forward-looking statements are made as of the date of this release, and Walmart undertakes no obligation to update such statements to reflect subsequent events or circumstances.

5

Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Income
(Unaudited)

																							
 	 	Three Months Ended	 	Nine Months Ended	
 	 	October 31,	 	October 31,	
(Dollars in millions, except per share data)	 	2016		2015	 	Percent Change	 	2016		2015		Percent Change	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	117,176			$	116,598		 	0.5	 %	 	$	351,567			$	349,930			0.5	 %	
Membership and other income	 	1,003			810		 	23.8	 %	 	3,370			2,533			33.0	 %	
Total revenues	 	118,179			117,408		 	0.7	 %	 	354,937			352,463			0.7	 %	
Costs and expenses:	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	87,484			87,446		 	—	 %	 	263,513			263,985			(0.2	)%	
Operating, selling, general and administrative expenses	 	25,576			24,248		 	5.5	 %	 	74,865			71,015			5.4	 %	
Operating income	 	5,119			5,714		 	(10.4	)%	 	16,559			17,463			(5.2	)%	
Interest:	 	 	 	 	 	 	 	 	 	 	 	 	
Debt	 	528			509		 	3.7	 %	 	1,536			1,555			(1.2	)%	
Capital lease and financing obligations	 	81			64		 	26.6	 %	 	246			428			(42.5	)%	
Interest income	 	(24	)		(21	)	 	14.3	 %	 	(70	)		(64	)		9.4	 %	
Interest, net	 	585			552		 	6.0	 %	 	1,712			1,919			(10.8	)%	
Income before income taxes	 	4,534			5,162		 	(12.2	)%	 	14,847			15,544			(4.5	)%	
Provision for income taxes	 	1,332			1,748		 	(23.8	)%	 	4,540			5,212			(12.9	)%	
Consolidated net income	 	3,202			3,414		 	(6.2	)%	 	10,307			10,332			(0.2	)%	
Consolidated net income attributable to noncontrolling interest	 	(168	)		(110	)	 	52.7	 %	 	(421	)		(212	)		98.6	 %	
Consolidated net income attributable to Walmart	 	$	3,034			$	3,304		 	(8.2	)%	 	$	9,886			$	10,120			(2.3	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per common share:	 	 	 	 	 	 	 	 	 	 	 	 	
Basic net income per common share attributable to Walmart	 	$	0.98			$	1.03		 	(4.9	)%	 	$	3.17			$	3.14			1.0	 %	
Diluted net income per common share attributable to Walmart	 	$	0.98			$	1.03		 	(4.9	)%	 	$	3.16			$	3.13			1.0	 %	
 	 	 	 	 	 	 	 									
Weighted-average common shares outstanding:	 	 	 	 	 	 	 									
Basic	 	3,089			3,210		 	 	 	3,114			3,221			 	
Diluted	 	3,100			3,219		 	 	 	3,124			3,231			 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends declared per common share	 	$	—		 	$	—		 	 	 	$	2.00			$	1.96			 	

6

Wal-Mart Stores, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

													
 	 	 	 	 	 	 	
(Dollars in millions)	 	October 31,	 	January 31,	 	October 31,	
ASSETS	 	2016	 	2016	 	2015	
Current assets:	 	 	 	 	 	 	
Cash and cash equivalents	 	$	5,939		 	$	8,705		 	$	6,990		
Receivables, net	 	5,344		 	5,624		 	5,012		
Inventories	 	49,822		 	44,469		 	50,706		
Prepaid expenses and other	 	2,296		 	1,441		 	2,404		
Total current assets	 	63,401		 	60,239		 	65,112		
Property and equipment:	 	 	 	 	 	 	
Property and equipment	 	179,667		 	176,958		 	176,660		
Less accumulated depreciation	 	(70,991	)	 	(66,787	)	 	(65,825	)	
Property and equipment, net	 	108,676		 	110,171		 	110,835		
Property under capital lease and financing obligations:	 	 	 	 	 	 	
Property under capital lease and financing obligations	 	11,482		 	11,096		 	10,948		
Less accumulated amortization	 	(5,070	)	 	(4,751	)	 	(4,827	)	
Property under capital lease and financing obligations, net	 	6,412		 	6,345		 	6,121		
 	 	 	 	 	 	 	
Goodwill	 	17,792		 	16,695		 	17,051		
Other assets and deferred charges	 	10,576		 	6,131		 	6,025		
Total assets	 	$	206,857		 	$	199,581		 	$	205,144		
 	 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	
Short-term borrowings	 	$	5,082		 	$	2,708		 	$	4,960		
Accounts payable	 	42,990		 	38,487		 	40,553		
Dividends payable	 	1,541		 	—		 	1,589		
Accrued liabilities	 	21,243		 	19,607		 	19,499		
Accrued income taxes	 	459		 	521		 	587		
Long-term debt due within one year	 	2,266		 	2,745		 	2,746		
Capital lease and financing obligations due within one year	 	549		 	551		 	558		
Total current liabilities	 	74,130		 	64,619		 	70,492		
 	 	 	 	 	 	 	
Long-term debt	 	36,178		 	38,214		 	38,617		
Long-term capital lease and financing obligations	 	5,930		 	5,816		 	5,581		
Deferred income taxes and other	 	10,144		 	7,321		 	7,824		
 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Equity:	 	 	 	 	 	 	
Common stock	 	308		 	317		 	321		
Capital in excess of par value	 	2,084		 	1,805		 	2,006		
Retained earnings	 	87,636		 	90,021		 	87,903		
Accumulated other comprehensive loss	 	(12,335	)	 	(11,597	)	 	(10,659	)	
Total Walmart shareholders’ equity	 	77,693		 	80,546		 	79,571		
Nonredeemable noncontrolling interest	 	2,782		 	3,065		 	3,059		
Total equity	 	80,475		 	83,611		 	82,630		
Total liabilities and equity	 	$	206,857		 	$	199,581		 	$	205,144		

7

Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)  

									
	 	Nine Months Ended	
	 	October 31,	
(Dollars in millions)	 	2016		2015	
Cash flows from operating activities:	 	 	 	 	
Consolidated net income	 	$	10,307			$	10,332		
Adjustments to reconcile consolidated net income to net cash provided by operating activities:	 				
Depreciation and amortization	 	7,374			7,023		
Deferred income taxes	 	1,167			(987	)	
Other operating activities	 	(387	)		644		
Changes in certain assets and liabilities:	 				
Receivables, net	 	271			783		
Inventories	 	(5,516	)		(6,637	)	
Accounts payable	 	5,121			3,603		
Accrued liabilities	 	1,256			662		
Accrued income taxes	 	51			(418	)	
Net cash provided by operating activities	 	19,644			15,005		
 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	
Payments for property and equipment	 	(7,459	)		(8,223	)	
Proceeds from the disposal of property and equipment	 	783			362		
Proceeds from disposal of certain operations	 	—		 	246		
Purchase of available for sale securities	 	(1,901	)	 	—		
Investment and business acquisitions, net of cash acquired	 	(2,406	)	 	—		
Other investing activities	 	(67	)		48		
Net cash used in investing activities	 	(11,050	)		(7,567	)	
 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	
Net change in short-term borrowings	 	2,302			3,537		
Proceeds from issuance of long-term debt	 	134			41		
Payments of long-term debt	 	(2,040	)		(4,422	)	
Dividends paid	 	(4,682	)		(4,728	)	
Purchase of Company stock	 	(6,254	)		(1,720	)	
Dividends paid to noncontrolling interest	 	(320	)		(609	)	
Purchase of noncontrolling interest	 	(89	)		(890	)	
Other financing activities	 	(186	)		(468	)	
Net cash used in financing activities	 	(11,135	)		(9,259	)	
 	 						
Effect of exchange rates on cash and cash equivalents	 	(225	)		(324	)	
 	 						
Net increase (decrease) in cash and cash equivalents	 	(2,766	)	 	(2,145	)	
Cash and cash equivalents at beginning of year	 	8,705		 	9,135		
Cash and cash equivalents at end of period	 	$	5,939		 	$	6,990		

8

Wal-Mart Stores, Inc.
Supplemental Financial Information
(Unaudited)

Net sales and operating income

																		
 	Net Sales	 	Operating Income	
 	Three Months Ended	 	Three Months Ended	
 	October 31,	 	October 31,	
(dollars in millions)	2016	2015	Percent Change	 	2016	2015	Percent Change	
Walmart U.S.	$	74,550		$	72,712		2.5	 %	 	$	3,999		$	4,506		-11.3	 %	
Walmart International	28,390		29,811		-4.8	 %	 	1,354		1,338		1.2	 %	
Sam's Club	14,236		14,075		1.1	 %	 	396		539		-26.5	 %	
Corporate and support	—		—		0.0	 %	 	-630		-669		5.8	 %	
Consolidated	$	117,176		$	116,598		0.5	 %	 	$	5,119		$	5,714		-10.4	 %	

U.S. comparable store sales results

													
 	 	Without Fuel	 	With Fuel	 	Fuel Impact	
 	 	13 Weeks Ended	 	13 Weeks Ended	 	13 Weeks Ended	
 	 	10/28/2016	 	10/30/2015	 	10/28/2016	 	10/30/2015	 	10/28/2016	 	10/30/2015	
Walmart U.S.	 	1.2%	 	1.5%	 	1.2%	 	1.5%	 	0.0%	 	0.0%	
Sam's Club 1	 	1.4%	 	0.4%	 	0.7%	 	-3.3%	 	-0.7%	 	-3.7%	
Total U.S.	 	1.2%	 	1.4%	 	1.1%	 	0.7%	 	-0.1%	 	-0.7%	

1 See additional information at the end of this release regarding non-GAAP financial measures.

9

Wal-Mart Stores, 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.
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. Free cash flow was $12.2 billion and $6.8 billion for the nine months ended October 31, 2016 and 2015 , respectively. The increase in free cash flow was led by improved working capital management.
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.

									
 	 	Nine Months Ended	
 	 	October 31,	
(Dollars in millions)	 	2016		2015	
Net cash provided by operating activities	 	$	19,644			$	15,005		
Payments for property and equipment (capital expenditures)	 	-7,459			-8,223		
Free cash flow	 	$	12,185			$	6,782		
 	 						
Net cash used in investing activities 1	 	$	-11,050			$	-7,567		
Net cash used in financing activities	 	$	-11,135			$	-9,259		
1 "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

10

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 all countries where the functional currency is not the U.S. dollar ("non-USD entities") into U.S. dollars. 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. 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 and without the impact of acquisitions of non-USD entities, if any, until such acquisitions are included in both comparable periods. The disclosure of constant currency amounts or results permits investors to understand better Walmart's underlying performance without the effects of currency exchange rate fluctuations or acquisitions of non-USD entities.
The table below reflects the calculation of constant currency for total revenues, net sales and operating income for the three and nine months ended October 31, 2016.

																								
 	Three Months Ended October 31,		Nine Months Ended October 31,	
 	Walmart International		Consolidated		Walmart International	 	Consolidated	
(Dollars in millions)	2016	Percent Change 1		2016	Percent Change 1		2016	Percent Change 1		2016	Percent Change 1	
Total revenues:	 	 	 	 	 	 	 	 	 	 	 	
As reported	$	28,770		-4.3	 %		$	118,179		0.7	 %		$	86,557		-5.4	 %		$	354,937		0.7	 %	
Currency exchange rate fluctuations 2	2,142		N/A			2,142		N/A			8,403		N/A			8,403		N/A		
Constant currency total revenues	$	30,912		2.8	 %		$	120,321		2.5	 %		$	94,960		3.7	 %		$	363,340		3.1	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Net sales:	 	 	 	 	 		 	 	 	 	 	
As reported	$	28,390		-4.8	 %		$	117,176		0.5	 %		$	85,094		-6.2	 %		$	351,567		0.5	 %	
Currency exchange rate fluctuations 2	2,137		N/A			2,137		N/A			8,323		N/A			8,323		N/A		
Constant currency net sales	$	30,527		2.4	 %		$	119,313		2.3	 %		$	93,417		3.0	 %		$	359,890		2.8	 %	
 	 	 	 	 	 		 	 	 	 	 	
Operating income:	 	 	 	 	 		 	 	 	 	 	
As reported	$	1,354		1.2	 %		$	5,119		-10.4	 %		$	4,245		15.2	 %		$	16,559		-5.2	 %	
Currency exchange rate fluctuations 2	134		N/A			134		N/A			431		N/A			431		N/A		
Constant currency operating income	$	1,488		11.2	 %		$	5,253		-8.1	 %		$	4,676		26.9	 %		$	16,990		-2.7	 %	
1 Change versus prior year comparable period.
2 Excludes currency exchange rate fluctuations related to acquisitions until the acquisitions are included in both comparable periods.

11

Comparable Sam's Club Sales Measures
The comparable club sales of the company's Sam's Club operating segment ("Sam's Club") for the 13-week and 39-week periods ended October 28, 2016 and October 30, 2015, and for the 13-week period ending Jan. 27, 2017 , in each case calculated by excluding Sam's Club's fuel sales for such periods (the "Sam's Club Comparable Sales Measures"), are non-GAAP financial measures as defined by the SEC's rules. We believe the Sam's Club comparable club sales for the historical periods for which the corresponding Sam's Club Comparable Sales Measures are presented, calculated by including fuel sales, are the financial measures computed in accordance with GAAP most directly comparable to the respective Sam's Club Comparable Sales Measures.

We believe that the presentation of the Sam's Club Comparable Sales Measures provides useful information to investors regarding the company's financial condition and results of operations because that information permits investors to understand the effect of the fuel sales, which are affected by the volatility of fuel prices, on Sam's Club's comparable club sales for the periods presented.

Adjusted EPS
Forecasted Adjusted EPS (Forecasted Adjusted EPS) is considered a non-GAAP financial measure. Management believes that Forecasted Adjusted EPS for Fiscal 2017 is a meaningful metric to share with investors because that metric, which adjusts EPS for certain items recorded in the period, is the metric that best allows comparison of the expected performance for Fiscal 2017 performance to the comparable period. In addition, the metric affords investors a view of what management is forecasting for Walmart's core earnings performance for Fiscal 2017 and also affords investors the ability to make a more informed assessment of the core earnings performance for the comparable period.
We have calculated Forecasted Adjusted EPS for Fiscal 2017 by adjusting Forecasted EPS for the amount of the impact of the gain from the sale of Yihaodian in China.

		
Forecasted Adjusted EPS - Fiscal 2017	
 	Fiscal 2017	
Diluted net income per share:	 	
 	 	
Forecasted Adjusted EPS	$4.20 - $4.35	
 	 	
Adjustments:	 	
Q2 gain on the sale of Yihaodian in China	$0.17	
Q2 tax impact of gain on sale 1	-$0.03	
 	 	
Forecasted EPS	$4.34 - $4.49	

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

###

Wal-Mart Stores, Inc. 

 

Safe harbor and non-GAAP measures This presentation contains statements as to Walmart management's guidance regarding earnings per share for the three months ending January 31, 2017, adjusted earnings per share and our effective tax rate for the year ending January 31, 2017, Walmart U.S.'s comparable store sales and Sam's Club's comparable club sales, excluding fuel, for the 13-week period ending January 27, 2017 and the third-party FCPA- and compliance- related expenses expected to be incurred for year ending January 31, 2017. Assumptions on which such forward-looking statements are based are also forward-looking statements. Walmart believes such statements are "forward-looking statements" as defined in, and are intended to enjoy the protection of the safe harbor for such statements provided by, the Private Securities Litigation Reform Act of 1995, as amended. 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 financial performance of Walmart and each of its segments; • Walmart's ability to successfully integrate acquired businesses, including Jet.com, Inc.; • Walmart's effective tax rate for the quarter ending January 31, 2017 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; • customer traffic and average ticket in Walmart's stores and clubs and on its e-commerce websites; • 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, e-commerce websites, mobile apps, initiatives, programs and merchandise offerings; • 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; • changes in existing tax, labor and other laws and changes in tax rates, trade restrictions and tariff rates; • the level of public assistance payments; • natural disasters, public health emergencies, civil disturbances, and terrorist attacks; and • Walmart's expenditures for FCPA and other compliance related costs. Such risks, uncertainties and factors also include the risks relating to Walmart's operations and financial performance discussed in Walmart's most recent annual report on Form 10-K filed with the SEC. You should read this presentation in conjunction with that annual report on Form 10-K and Walmart's subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K. You should consider all of the risks, uncertainties and other factors identified above and in those SEC reports carefully when evaluating the forward looking statements in this presentation. Walmart cannot assure you that the future results reflected in or implied by any such forward-looking statement will be realized or, even if substantially realized, will have the forecasted or expected consequences and effects for or on Walmart's operations or financial performance. Such forward-looking statements are made as of the date of this presentation, and Walmart undertakes no obligation to update such statements to reflect subsequent events or circumstances. This presentation includes certain non-GAAP measures as defined under SEC rules, including net sales, revenue, and operating income on a constant currency basis, Sam's Club comp sales excluding fuel, free cash flow, return on investment and adjusted earnings per share. Refer to information about the non-GAAP measures contained in this presentation. Additional information as required by Regulation G and Item 10(e) of Regulation S-K regarding non-GAAP measures can be found in our most recent Form 10-K and Form 10-Q, and our Form 8-K furnished as of the date of this presentation with the SEC, which are available at www.stock.walmart.com. 2 

 

FY17 Q4 EPS: • $1.18 to $1.33 FY17 adjusted EPS1: • $4.20 to $4.35 Comp sales for 13-week period:2 • +1.0% to +1.5% Comp sales for 13-week period,2 excluding fuel: • +1.0% to +1.5% 1 See press release located at www.stock.walmart.com and reconciliations at the end of presentation regarding non-GAAP financial measures. 2 13-week period from October 29, 2016 through January 27, 2017, compared to 13-week period ended January 29, 2016. Guidance 3 The company's guidance for earnings per share for fiscal year 2017 assumes currency exchange rates remain at current levels. The adjusted earnings per share guidance excludes the non-cash gain of $0.14, net of tax, from the sale of Yihaodian in China to JD.com in Q2 FY17. Also, this updated guidance assumes that the full year effective tax rate will be between 31 and 32 percent. U.S. 

 

Wal-Mart Stores, Inc. (Amounts in millions, except per share data) Q3 $ Δ1 % Δ1 YTD $ Δ1 % Δ1 Total revenue3 $118,179 $771 0.7% $354,937 $2,474 0.7% Total revenue, constant currency2,3 $120,321 $2,913 2.5% $363,340 $10,877 3.1% Net sales $117,176 $578 0.5% $351,567 $1,637 0.5% Net sales, constant currency2 $119,313 $2,715 2.3% $359,890 $9,960 2.8% Membership & other income3 $1,003 $193 23.8% $3,370 $837 33.0% Operating income3 $5,119 -$595 -10.4% $16,559 -$904 -5.2% Operating income, constant currency2,3 $5,253 -$461 -8.1% $16,990 -$473 -2.7% Interest expense, net $585 $33 6.0% $1,712 -$207 -10.8% Consolidated net income attributable to Walmart4 $3,034 -$270 -8.2% $9,886 -$234 -2.3% Diluted EPS (continuing operations)4 $0.98 -$0.05 -4.9% $3.16 $0.03 1.0% 1 Change versus prior year comparable period. 2 See press release located at www.stock.walmart.com and reconciliations at the end of presentation regarding non-GAAP financial measures. 3 Q3 FY17 includes the gain from sale of shopping centers in Chile of $86 million on a reported basis and $83 million on a constant currency basis. Q3 FY17 YTD includes the aforementioned gain from the sale of shopping centers in Chile and the gain from the sale of Yihaodian in Q2 FY17, which was $535 million on a reported basis and $568 million on a constant currency basis. 4 Q3 FY17 YTD includes the gain from the sale of Yihaodian, which was approximately $435 million, net of tax, or $0.14 of diluted EPS. 4 

 

Wal-Mart Stores, Inc. Q3 bps Δ1 YTD bps Δ1 Gross profit rate 25.3% 34 bps 25.1% 49 bps Operating expenses as a percentage of net sales 21.8% 103 bps 21.3% 100 bps Effective tax rate 29.4% -448 bps 30.6% -295 bps Debt to total capitalization2 NP NP 39.2% -50 bps Return on investment3,4 NP NP 15.0% -90 bps 1 Basis points change versus prior year comparable period. 2 Debt to total capitalization is calculated as of October 31, 2016. Debt includes short-term borrowings, long-term debt due within one year, capital lease and financing obligations due within one year, long-term debt, and long-term capital lease and financing obligations. Total capitalization includes debt and total Walmart shareholders' equity. 3 ROI is calculated for the trailing 12 months ended October 31, 2016. 4 See reconciliations at the end of presentation regarding non-GAAP financial measures. NP - Not provided 5 

 

(Amounts in millions) Q3 $ Δ1 % Δ1 Receivables, net $5,344 $332 6.6% Inventories $49,822 -$884 -1.7% Accounts payable $42,990 $2,437 6.0% Wal-Mart Stores, Inc. 1 Change versus prior year comparable period. 6 

 

Wal-Mart Stores, Inc. (Amounts in millions) YTD $ Δ1 Operating cash flow $19,644 $4,639 Capital expenditures $7,459 -$764 Free cash flow2 $12,185 $5,403 (Amounts in millions) Q3 % Δ1 YTD % Δ1 Dividends $1,549 -1.4% $4,682 -1.0% Share repurchases3 $1,402 220.8% $6,254 263.6% Total $2,951 47.0% $10,936 69.6% 1 Change versus prior year comparable period. 2 See press release located at www.stock.walmart.com and reconciliations at the end of presentation regarding non- GAAP financial measures. 3 $11.3 billion remaining of $20 billion authorization approved in October 2015. 7 

 

Walmart U.S. (Amounts in millions) Q3 Δ1 YTD Δ1 Net sales $74,550 2.5% $224,086 3.3% Comparable store sales2,3 1.2% -30 bps 1.2% -20 bps • Comp traffic 0.7% -100 bps NP NP • Comp ticket 0.5% 70 bps NP NP E-commerce impact3,4 ~0.5% ~35 bps NP NP Neighborhood Market ~5.2% -~280 bps NP NP Gross profit rate Increase 32 bps Increase 36 bps Operating expense Increase 130 bps Increase 125 bps Operating income $3,999 -11.3% $12,750 -8.7% 1 Change versus prior year comparable period. 2 Comp sales are on a 13-week and 39-week basis for the periods ended October 28, 2016 for Q3 and YTD, respectively. 3 Jet.com results are not included in our comp sales metrics as acquisitions are not included until the 13th month after acquisition. 4 The company's e-commerce sales impact includes those sales initiated through the company's websites and fulfilled through the company's dedicated e-commerce distribution facilities, as well as an estimate for sales initiated online but fulfilled through the company's stores and clubs. NP - Not provided 8 

 

Walmart U.S. - financial highlights 9 Sales • Net sales increased 2.5%, or approximately $1.8 billion. • Comp sales increased 1.2% led by comp traffic of 0.7% and improved unit sales. On a 2-year stack basis, comp sales and traffic were up 2.7% and 2.4%, respectively. • Market food deflation negatively impacted food comps by approximately 150 basis points. • Strength in general merchandise and health & wellness was led by home, toys, sporting goods, automotive and OTC. Gross Margin • Gross margin increased 32 basis points with improved margin rates across general merchandise, food and consumables. • Gross margin also benefited from savings in procuring merchandise and lower transportation expense as a result of lower fuel costs. • Partially offsetting these cost of goods reductions was the continued implementation of the multi-year strategy of incremental price investment. Expenses • Expenses increased 8.6% primarily as a result of the associate wage rate increases, as well as investments in technology. Jet.com expenses were also a contributing factor. • Last year's Q3 results included a favorable $74 million lease accounting adjustment. Excluding this adjustment, expenses would have increased 8.1%. Inventory • Total inventory declined 2% and comp store inventory declined approximately 6%, while in-stock levels improved. Format growth • Store growth included net openings of 9 Supercenters (including conversions and relocations) and 18 Neighborhood Markets. • Expanded online grocery to around 35 new markets and to nearly 200 more locations; this service is now available in over 100 markets and nearly 600 locations. 

 

Walmart U.S. - merchandise highlights Category Comp Comments Grocery1 relatively flat Continued solid traffic in food and consumables was largely offset by 150 bps of market deflation that negatively impacted food comps. Consumables growth was led by beauty/cosmetics and pets, reflecting improved assortment and product innovation. Health & wellness + low single-digit Branded drug inflation and pharmacy script growth drove increasedsales. Stronger OTC sales were due in part to better in-stock levels. General merchandise2 + low single-digit Overall, a solid back-to-school season positively impacted the start to the quarter; however unseasonably warm weather especially in the back half of the quarter led to lower than expected results in apparel and cold-weather related categories. Newness, key items and product innovation contributed to growth in home, toys and sporting goods while improved service offerings led to better Auto Care Center results. 1 Includes food and consumables. 2 In order to align with how we manage the business, general merchandise now includes entertainment, toys, hardlines, apparel and home/seasonal. 10 

 

Walmart International 1 (Amounts in millions) Reported Constant currency1 Reported Constant currency1 Q3 Δ2 Q3 Δ2 YTD Δ2 YTD Δ2 Net sales $28,390 -4.8% $30,527 2.4% $85,094 -6.2% $93,417 3.0% Gross profit rate Increase 49 bps NP NP Increase 55 bps NP NP Operating income3 $1,354 1.2% $1,488 11.2% $4,245 15.2% $4,676 26.9% 1 See press release located at www.stock.walmart.com and reconciliations at the end of presentation regarding non-GAAP financial measures. 2 Change versus prior year period. 3 Q3 FY17 results include the gain from the sale of certain shopping malls in Chile, which was $86 million on a reported basis and $83 million on a constant currency basis. YTD FY17 results include the gain mentioned above as well as the gain from the sale of Yihaodian in Q2 FY17, which was $535 million on a reported basis and $568 million on a constant currency basis. NP - Not provided 11 

 

Walmart International - financial highlights 12 Sales • Ten of 11 markets had positive comp sales. Seven of 11 markets had comp sales greater than 4 percent. • Strength across our focus markets of Walmex, Canada and China. • Currency exchange rate fluctuations negatively impacted net sales by $2.1 billion. Operating income • The gain from the sale of certain shopping malls in Chile was a benefit to operating income. • Excluding the gain mentioned above as well as the benefit to operating expenses in Q3 last year due to a lease accounting adjustment (primarily impacting China and Canada) operating income on a constant currency basis increased 9.4 percent. Inventory • During the quarter, inventory grew slower than sales on a constant currency basis driven by our largest markets (U.K., Mexico, Canada, and China). 

 

Walmart International - key markets 1 Results are on a constant currency basis. Net sales and comp sales are presented on a nominal, calendar basis. 2 E-commerce results included for the United Kingdom, Walmex and Canada. E-commerce results for Brazil and China are not included in the table. 3 Change versus prior year comparable period. 4 Comp sales for the United Kingdom are presented excluding fuel. 5 Walmex includes the consolidated results of Mexico and Central America. 6 Excluding a benefit to operating expenses from a lease accounting adjustment in Q3 FY16, operating income on a constant currency basis would have increased. Country1,2 Comp3 Net sales3 Gross profit rate3 Operating income3Sales Traffic Ticket United Kingdom4 -5.8% -4.2% -1.6% -3.8% Increase Decrease Walmex5 7.0% 0.8% 6.2% 8.6% Increase Increase3¹ Canada 1.1% 0.2% 0.9% 3.3% Increase Decrease6 Brazil 8.1% 0.5% 7.6% 3.1% Decrease Decrease China 1.6% -2.7% 4.3% 4.2% Increase Decrease6 13 

 

Walmart International - key market highlights 14 Walmex • Walmex comp sales on a two-year stack basis increased nearly 13 percent. • Strong sales momentum continued across all formats, divisions, and countries. ◦ In Mexico, the strongest performance came from Sam's Club. • Comp sales in Mexico increased 7.3 percent and continued to outpace the rest of the self-service market, according to ANTAD. • E-commerce sales grew nearly 20 percent in Mexico during the quarter. • Inventory grew at a slower rate than sales. 

 

Walmart International - key market highlights (cont.) 15 U.K. • Comp sales remained under pressure in the quarter. • Key priority remains on improving the customer experience and building sales momentum. • We continue to simplify the offer, improve product availability, and make strategic investments in service and price. Canada • Net sales increased 3.3 percent. • Gained 60 basis points of market share for the 12-week period ended October 22, according to Nielsen. • Our cost analytics program made good progress helping to drive down COGS enabling further investments in price. • Decreased inventory levels as sales increased 3.3 percent. 

 

Walmart International - key market highlights (cont.) China • Comp sales showed improvement driven by performance in hypermarkets, fresh offering and solid performance during the Mid-Autumn Festival. • Focused on driving efficiency, reducing expenses and strengthening our portfolio through ‘We Operate for Less’ and ‘We Buy for Less’ initiatives. • Inventory grew at a slower rate than sales. Brazil • Delivered solid sales performance including improved traffic trends. • Both Sam’s and the Cash & Carry format delivered double digit sales growth. • Decreased inventory levels as sales increased 3.1 percent. 16 

 

Sam's Club (Amounts in millions) Without fuel1 With fuel Without fuel1 With fuel Q3 Δ2 Q3 Δ2 YTD Δ2 YTD Δ2 Net sales $13,169 1.8% $14,236 1.1% $39,345 1.7% $42,387 0.2% Comparable club sales3 1.4% 100 bps 0.7% 400 bps 0.7% — bps -0.8% 230 bps • Comp traffic -0.5% -20 bps NP NP NP NP NP NP • Comp ticket 1.9% 120 bps NP NP NP NP NP NP E-commerce impact4 ~0.6% ~ 0 bps NP NP NP NP NP NP Gross profit rate Decrease -12 bps Decrease -26 bps Increase 29 bps Increase 42 bps Membership income NP 2.3% NP NP NP 3.0% NP NP Operating income $381 -22.7% $396 -26.5% $1,243 -7.9% $1,281 -8.1% 1 See press release located at www.stock.walmart.com and reconciliations at the end of presentation regarding non-GAAP financial measures. 2 Change versus prior year comparable period. 3 Comp sales are on a 13-week and 39-week basis for the periods ended October 28, 2016 for Q3 and YTD, respectively. 4 The company's e-commerce sales impact includes those sales initiated through the company's websites and fulfilled through the company's dedicated e-commerce distribution facilities, as well as an estimate for sales initiated online but fulfilled through the company's stores and clubs. NP - Not provided 17 

 

Sam's Club - financial highlights 18 Sales • Comp sales1 for the period increased 1.4%. • Market deflation negatively impacted comp sales, primarily in food, by approximately 110 basis points. • Tobacco performed well, along with health & wellness and home & apparel. • E-commerce sales contributed approximately 60 basis points to comp sales. • Club pick-up and the direct to home businesses continue to have strong results. Gross Margin • Excluding fuel1, gross margins declined by 12 basis points primarily as a result of unfavorable mix in sales, and planned promotional activity in the Technology, Entertainment and Office category. Expenses • Operating expenses deleveraged during the quarter, as expected. Planned investments in people and technology, along with costs associated with expanded payment options for members, and investments in item promotions through stepped up in-club demos were the primary headwinds to expenses. Additionally, comparability year-over-year was impacted by a benefit to last year's operating expenses from the accounting treatment for certain leases. Membership Income • Membership income increased 2.3% during the quarter led by Savings member growth. Inventory • Total inventory increased 5.7% led by grocery, tobacco and apparel. The grocery and tobacco categories were expanded to better serve the business member. Comp inventory increased 4.0%. 1 Excluding fuel. See press release located at www.stock.walmart.com and reconciliations at the end of presentation regarding non-GAAP financial measures. 

 

Sam's Club - category highlights 19 Category Comp Comments Fresh / Freezer / Cooler - mid single-digit Commodity deflation continued to pressure results in fresh meat and dairy categories. Assortment changes in frozen foods negatively impacted sales. Produce again delivered positive results on item availability and strong promotional performance. Grocery and beverage + low single-digit Tobacco performed well. Water, sports drinks, adult beverage and snacks generated strong results from new item introductions. This strength was offset by weakness in candy, oil/rice, canned protein, and baking. Consumables + low single-digit Paper goods, laundry, and health & beauty drove positive sales increases through continued strength in the private brand portfolio combined with new and exclusive items in subcategories such as skin care, power accessories and fabric enhancers. Home and apparel + mid single-digit Apparel delivered consistently strong performance. Additionally, strong item merchandising and a successful Savings Celebration event drove positive results in toys and recreation, home and seasonal hardware. Technology, office and entertainment - low single-digit The planned exit from movies and music negatively impacted the category. This softness was offset by good growth in wireless and connected home and wearable devices. Health and wellness + mid single-digit Free/4/10 Plus benefit program continued to drive positive momentum in generic scriptcounts offsetting deflation in generic Rx. Nutrition and Protein Drinks posted strong results driven by newness. 

 

Third-party FCPA- and compliance-related expenses Q3 YTD (Amounts in millions) FY17 FY16 FY17 FY16 Ongoing inquiries and investigations $24 $22 $68 $70 Global compliance program and organizational enhancements 5 8 14 23 Total $29 $30 $82 $93 • In fiscal year 2017, we expect our third party FCPA- and compliance-related expenses to range between $100 and $120 million. These are included in our Corporate and support expenses. 20 

 

Non-GAAP measures - ROI We include Return on Assets ("ROA"), which is calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP") as well as Return on Investment ("ROI") as metrics to assess returns on assets. Management believes ROI is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term potential strategic initiatives with possible short-term impacts. We consider ROA to be the financial measure computed in accordance with GAAP that is the most directly comparable financial measure to our calculation of ROI. ROA was 7.3 percent and 7.5 percent for the trailing twelve months ended October 31, 2016 and 2015, respectively. ROI was 15.0 percent and 15.9 percent for the trailing twelve months ended October 31, 2016 and 2015, respectively. The declines in ROA and ROI were primarily due to our decrease in operating income. We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing 12 months divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and average amortization, less average accounts payable and average accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year or trailing 12 months multiplied by a factor of 8. When we have discontinued operations, we exclude the impact of the discontinued operations. Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. In addition, we include a factor of 8 for rent expense that estimates the hypothetical capitalization of our operating leases. As mentioned above, we consider return on assets to be the financial measure computed in accordance with generally accepted accounting principles most directly comparable to our calculation of ROI. ROI differs from ROA (which is consolidated net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; adjusts total assets for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities; and incorporates a factor of rent to arrive at total invested capital. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA. Although ROI is a standard financial metric, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI. 21 

 

Non-GAAP measures - ROI cont. The calculation of ROI, along with a reconciliation to the calculation of ROA, the most comparable GAAP financial measure, is as follows: Wal-Mart Stores, Inc. Return on Investment and Return on Assets Trailing Twelve Months Ended Trailing Twelve Months Ended October 31, October 31, (Dollars in millions) 2016 2015 (Dollars in millions) 2016 2015 CALCULATION OF RETURN ON INVESTMENT CALCULATION OF RETURN ON ASSETS Numerator Numerator Operating income $ 23,201 $ 25,412 Consolidated net income $ 15,055 $ 15,520 + Interest income 86 101 Denominator + Depreciation and amortization 9,805 9,315 Average total assets1 $ 206,001 $ 206,406 + Rent 2,610 2,579 Return on assets (ROA) 7.3% 7.5% Adjusted operating income $ 35,702 $ 37,407 Denominator Certain Balance Sheet Data 2016 2015 2014 Average total assets1 $ 206,001 $ 206,406 Total assets $ 206,857 $ 205,144 $ 207,668 + Average accumulated depreciation and amortization1 73,357 68,143 Accumulated depreciation and amortization 76,061 70,652 65,634 - Average accounts payable1 41,772 40,105 Accounts payable 42,990 40,553 39,656 - Average accrued liabilities1 20,371 19,136 Accrued liabilities 21,243 19,499 18,773 + Rent x 8 20,880 20,632 Average invested capital $ 238,095 $ 235,940 Return on investment (ROI) 15.0% 15.9% 1 The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2. 22 

 

Non-GAAP measures - 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. Free cash flow was $12.2 billion and $6.8 billion for the nine months ended October 31, 2016 and 2015, respectively. The increase in free cash flow was led by improved working capital management. 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. 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. Nine Months Ended October 31, (Dollars in millions) 2016 2015 Net cash provided by operating activities $ 19,644 $ 15,005 Payments for property and equipment (capital expenditures) -7,459 -8,223 Free cash flow $ 12,185 $ 6,782 Net cash used in investing activities1 $ -11,050 $ -7,567 Net cash used in financing activities $ -11,135 $ -9,259 1 "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow. 23 

 

1 Change versus prior year comparable period. 2 Excludes currency exchange rate fluctuations related to acquisitions until the acquisitions are included in both comparable periods. Non-GAAP measures - constant currency Three Months Ended October 31, Nine Months Ended October 31, Walmart International Consolidated Walmart International Consolidated (Dollars in millions) 2016 Percent Change1 2016 Percent Change1 2016 Percent Change1 2016 Percent Change1 Total revenues: As reported $ 28,770 -4.3% $ 118,179 0.7% $ 86,557 -5.4% $ 354,937 0.7% Currency exchange rate fluctuations2 2,142 N/A 2,142 N/A 8,403 N/A 8,403 N/A Constant currency total revenues $ 30,912 2.8% $ 120,321 2.5% $ 94,960 3.7% $ 363,340 3.1% Net sales: As reported $ 28,390 -4.8% $ 117,176 0.5% $ 85,094 -6.2% $ 351,567 0.5% Currency exchange rate fluctuations2 2,137 N/A 2,137 N/A 8,323 N/A 8,323 N/A Constant currency net sales $ 30,527 2.4% $ 119,313 2.3% $ 93,417 3.0% $ 359,890 2.8% Operating income: As reported $ 1,354 1.2% $ 5,119 -10.4% $ 4,245 15.2% $ 16,559 -5.2% Currency exchange rate fluctuations2 134 N/A 134 N/A 431 N/A 431 N/A Constant currency operating income $ 1,488 11.2% $ 5,253 -8.1% $ 4,676 26.9% $ 16,990 -2.7% 24 The term "currency exchange rates" refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar ("non-USD entities") into U.S. dollars. 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. 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 and without the impact of acquisitions of non-USD entities, if any, until such acquisitions are included in both comparable periods. The disclosure of constant currency amounts or results permits investors to understand better Walmart's underlying performance without the effects of currency exchange rate fluctuations or acquisitions of non-USD entities. The table below reflects the calculation of constant currency for total revenues, net sales and operating income for the three and nine months ended October 31, 2016. 

 

Non-GAAP measures - fuel impact The net sales and operating income of Sam's Club for the quarter ended October 31, 2016, the percentage changes in those financial measures from the prior year period, Sam's Club's comparable club sales for the 13-week and 39-week periods ended October 28, 2016 and Sam's Club's projected comparable club sales for the 13-week period ending January 27, 2017, in each case calculated by excluding Sam's Club's fuel sales for such periods, are non-GAAP financial measures. We believe the Sam's Club net sales and operating income for the quarter ended October 31, 2016, the percentage changes in those financial measures from the prior year period, Sam's Club's comparable club sales for the 13-week and 39-week periods ended October 28, 2016, and Sam's Club's projected comparable club sales for the 13-week period ending January 27, 2017, in each case calculated by including Sam's Club's fuel sales for such period, are, respectively, the financial measures computed in accordance with GAAP most directly comparable to the non-GAAP financial measures described above. We believe that the presentation of the non-GAAP financial measures with respect to Sam’s Club described above provides useful information to investors regarding Walmart’s financial condition and results of operations because that information permits investors to understand the effect of the fuel sales of Sam's Club, which are affected by the volatility of fuel prices, on Sam's Club's net sales and operating income and on Sam's Club's comparable club sales for the periods presented. 25 

 

Non-GAAP measures - fuel impact cont. The table below reflects the calculation of the fuel impact for net sales and operating income for the three and nine months ended October 31, 2016 and 2015. Three Months Ended October 31, Nine Months Ended October 31, (Dollars in millions) 2016 2015 Percent 2016 2015 Percent Sam's Club Net Sales: Excluding Fuel $ 13,169 $ 12,935 1.8% $ 39,345 $ 38,693 1.7% Fuel Impact 1,067 1,140 N/A 3,042 3,595 N/A As Reported $ 14,236 $ 14,075 1.1% $ 42,387 $ 42,288 0.2% Operating Income: Excluding Fuel $ 381 $ 493 -22.7% $ 1,243 $ 1,350 -7.9% Fuel Impact 15 46 N/A 38 44 N/A As Reported $ 396 $ 539 -26.5% $ 1,281 $ 1,394 -8.1% The table below reflects the fuel impact for comparable club sales for the 13 weeks and 39 weeks ended October 28, 2016 and October 30, 2015. Without Fuel With Fuel Fuel Impact 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 10/28/2016 10/30/2015 10/28/2016 10/30/2015 10/28/2016 10/30/2015 Sam's Club 1.4% 0.4% 0.7% -3.3% -0.7% -3.7% 39 Weeks Ended 39 Weeks Ended 39 Weeks Ended 10/28/2016 10/30/2015 10/28/2016 10/30/2015 10/28/2016 10/30/2015 Sam's Club 0.7% 0.7% -0.8% -3.1% -1.5% -3.8% 26 

 

Non-GAAP measures - adjusted EPS Forecasted Adjusted EPS (Forecasted Adjusted EPS) is considered a non-GAAP financial measure. Management believes that Forecasted Adjusted EPS for Fiscal 2017 is a meaningful metric to share with investors because that metric, which adjusts EPS for certain items recorded in the period, is the metric that best allows comparison of the expected performance for Fiscal 2017 to the performance for the comparable period. In addition, the metric affords investors a view of what management is forecasting for Walmart's core earnings performance for Fiscal 2017 and also affords investors the ability to make a more informed assessment of the core earnings performance for the comparable period. We have calculated Forecasted Adjusted EPS for Fiscal 2017 by adjusting Forecasted EPS for the amount of the impact of the gain from the sale of Yihaodian in China. 27 Forecasted Adjusted EPS - Fiscal 2017 Fiscal 2017 Diluted net income per share: Forecasted Adjusted EPS $4.20 - $4.35 Adjustments: Q2 gain on the sale of Yihaodian in China $0.17 Q2 tax impact of gain on sale1 -$0.03 Forecasted EPS $4.34 - $4.49 1 Calculated based on nature of item and statutory rate in effect for relevant jurisdiction. 

 

• Additional information related to reconciliations for our non-GAAP financial measures (ROI, free cash flow, constant currency, Sam’s Club comparable measures, and Adjusted EPS) • Unit counts & square footage • Comparable store sales • Terminology • Fiscal year 2017 and 2018 earnings dates Additional resources at stock.walmart.com 28