Press Release

DBRS Morningstar Confirms Walmart Inc. at AA, Stable Trends

May 27, 2020

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Debt rating of Walmart Inc. (Walmart or the Company) at AA with Stable trends. The confirmations reflect DBRS Morningstar’s view that, while uncertainty related to the intensity and duration of the Coronavirus Disease (COVID-19) pandemic persists, Walmart’s earnings profile is well positioned to navigate the current climate and show resilience during the outbreak and resultant macroeconomic aftereffects. Walmart’s ratings continue to be supported by its size and dominant market position as the world’s largest retailer, as well as its relative resilience to economic cycles. The ratings also continue to consider the increasingly competitive retail industry and mature nature of some of the Company’s core markets.

Walmart’s revenue is expected to increase modestly in F2021 (fiscal year ended January 31, 2021) as a result of unprecedented demand for multiple product categories because of the coronavirus pandemic, including food, consumables, and health, partially offset by a decline in more discretionary categories, such as apparel and electronics. During Q1 F2021, U.S. comparable sales grew 10% year over year largely due to a 74% increase in e-commerce sales as grocery pickup and delivery surged following stay-at-home mandates. DBRS Morningstar expects this trend to moderate but persist into the near term as the U.S. and Canada begin to gradually reopen. DBRS Morningstar expects Walmart’s operating income and EBITDA margins to be modestly affected by coronavirus- related incremental expenses, including enhanced employee wages and sanitation costs, a shift in the sales mix to lower-margin categories, and commodity cost inflation. As such, DBRS Morningstar expects Walmart’s F2021 EBITDA to remain relatively stable in the $30 billion range.

Walmart’s financial profile is forecast to also remain relatively stable over the medium term, and cash flow from operations is expected to continue to track operating income. DBRS Morningstar expects the Company to implement capital preserving measures in response to the current environment and prioritize capital expenditure spending toward store maintenance and e-commerce infrastructure driven by the demand for grocery pickup and delivery services. DBRS Morningstar expects Walmart’s dividend outlay will be relatively stable at $6 billion and that the Company will use the bulk of its free cash flow for share repurchases, while maintaining sufficient liquidity, but notes that it may apply a portion towards debt repayment to reduce leverage toward 2.0 times. The Stable trends reflect DBRS Morningstar’s expectation that Walmart’s earnings profile will remain supportive of the current ratings through the coronavirus pandemic and ensuing macroeconomic environment. DBRS Morningstar notes that surveillance of Walmart’s credit profile will be more influenced by the Company’s operating income and earnings profile as opposed to any moderate shift in capital allocation. As such, should lease-adjusted debt-to-EBITDA increase for a sustained period of time as a result of either weaker-than-expected operating income and/or more aggressive financial management, the ratings could be pressured.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Merchandising Industry (August 15, 2019) and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 25, 2019), which can be found on under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit or contact us at [email protected].

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