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Fitch Affirms Walmart's IDR at 'AA'; Outlook Stable



  Fitch Affirms Walmart's IDR at 'AA'; Outlook Stable

Business Wire

CHICAGO -- July 18, 2013

Fitch Ratings has affirmed its long-term Issuer Default Rating (IDR) of 'AA'
on Wal-Mart Stores, Inc. (Walmart), and its short-term IDR at 'F1+'. The
Rating Outlook is Stable. A full ratings list is provided at the end of this
release.

Key Rating Drivers:

The rating reflects Walmart's dominant market position in North America, a
strong position in the UK, and a growing presence in other markets such as
China, Brazil, Central America and South Africa. Also considered is Walmart's
low cyclicality, consistent free cash flow (FCF) and steady financial leverage
despite ongoing debt-financed share repurchases.

These factors are balanced by a more challenging economic environment
pressuring the company's core customer base, and growing competition from
dollar stores and hard discounters, among others.

Walmart's success flows from its broad selection and sharp prices, made
possible by its low operating costs and significant buying power. Despite
these strengths, comparable store (comp) sales in Walmart's U.S. segment
(which excludes Sam's Clubs and accounted for 71% of consolidated operating
earnings in 2012) declined by 0.3% in the first quarter of 2013 (ending April
30, 2013), following increases of 1.8% in 2012 and 0.3% in 2011.

This decline reflects the difficult environment facing low-income consumers,
including the payroll tax increase that was implemented as of Jan. 1, 2013.
For full-year 2013, Fitch expects modestly positive comps, in part due to
easier comparisons as the year progresses.

Despite soft top-line results, Walmart has been able to maintain a steady
operating margin at or near 6% (5.9% in the LTM ended April 30, 2013), as
modest gross margin pressure has been offset by expense leverage. Going
forward, Fitch expects operating margins will remain consistent with
historical levels.

Steady operating results have enabled Walmart to generate stable credit
metrics over time, with adjusted debt/EBITDAR of 1.7x-2.0x and
EBITDAR/interest plus rents of 7.8x-8.3x over the past five years.

Fitch expects FCF after dividends will track at around $8 billion to $10
billion annually over the next two years, compared with $7.3 billion in 2012,
due to earnings growth and tight control of capital outlays. Share repurchases
are expected to continue to exceed FCF, and to be partly debt-financed, as
Fitch expects the company will manage its adjusted debt/EBITDAR ratio at or
under 2.0x, in the context of maintaining its 'AA' rating.

Rating Sensitivities:

An upgrade is unlikely, given that the rating is currently at the high end of
the rating spectrum and fully captures the company's financial and qualitative
strengths.

Future developments that may, individually or collectively, lead to negative
rating action include:

--A debt-financed acquisition or accelerated share repurchases that pushed
adjusted leverage to over 2x for an extended period;

--Persistently weak comp store sales and/or more pronounced gross margin
pressure that cannot be offset by expense leverage.

Fitch affirms the following ratings:

Wal-Mart Stores, Inc.

--Long-term IDR at 'AA';

--Senior unsecured debt at 'AA';

--Bank credit facility at 'AA';

--Short-term IDR at 'F1+';

--Commercial paper at 'F1+'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' dated Aug. 8, 2012;

--'Short-Term Ratings Criteria for Corporate Finance' dated Aug. 8, 2012.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Short-Term Ratings Criteria for Non-Financial Corporates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685553

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=796886

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Philip M. Zahn, CFA
Senior Director
+1-312-606-2336
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Monica Aggarwal, CFA
Senior Director
+1-212-908-0282
or
Committee Chairperson
Michael Simonton
Senior Director
+1-312-368-3138
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com
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