This discussion relates to Wal-Mart Stores, Inc. and its consolidated subsidiaries and should be read in conjunction with our Condensed Consolidated Financial Statements as of July 31, 2009, and for the three- and six-month periods then ended and the accompanying notes included under Part I, Item 1, of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of January 31, 2009, and for the year then ended and the accompanying notes, and the related Management's Discussion

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affected the financial condition and results of operations of the Company as a whole.

Throughout this Management's Discussion and Analysis of our Financial Condition and Results of Operations, we discuss segment operating income and comparable store sales. Segment operating income is defined as operating income for each operating segment and excludes unallocated corporate overhead. From time to time, we revise the allocation of corporate overhead and the measurement of each segment's operating income as changes in business needs dictate. When we do, we restate all periods presented for comparative purposes.

Comparable store sales is a measure which indicates the performance of our existing stores by measuring the growth in sales for such stores for a particular period over the corresponding period in the prior year. Our comparable store sales are measured in this report on a calendar basis in relation with our fiscal calendar. Comparable store sales is also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies.

In discussions of our consolidated results and the operating results of our International segment, we sometimes refer to the impact of changes in currency exchange rates. When we refer to changes in exchange rates, we are referring to the differences between the currency exchange rates we use to convert the International segment's operating results for a period in fiscal 2009 as stated in the local currencies in which that segment operates into U.S. dollars to report those results in accordance with generally accepted accounting principles and the currency exchange rates we use to convert the International segment's operating results for the comparable fiscal 2010 period into U.S. dollars for reporting purposes. The impacts of those currency exchange rates we refer to typically reflect the effect of those differences in currency exchange rates on the period to period comparisons of our consolidated results or the operating results of the International segment.

In connection with the Company's finance transformation project, we adjusted the classification of certain revenue and expense items within our income statement for financial reporting purposes. The changes, which were effective February 1, 2009, did not impact operating income or consolidated net income attributable to Walmart and had a minimal impact on our comparable store sales.

Company Performance Metrics

Management uses a number of metrics to assess the Company's performance including:

• Total sales;

• Comparable store sales;

• Operating income;

• Diluted net income per common share from continuing operations attributable to Walmart;

• Return on investment; and

• Free cash flow.

Total Sales



                                              Three Months Ended July 31,                                                    Six Months Ended July 31,
                                    Percent       Percent                  Percent       Percent                  Percent       Percent                  Percent       Percent
(Amounts in millions)     2009      of Total      Change         2008      of Total      Change         2009      of Total      Change         2008      of Total      Change
Net Sales:
Walmart U.S.            $  64,209       64.2 %        0.3 %    $  63,989       63.0 %        8.6 %    $ 125,453       64.8 %        2.0 %    $ 122,980       62.9 %        7.7 %
International              23,965       23.9 %       -5.1 %       25,257       24.9 %       17.0 %       45,228       23.4 %       -8.0 %       49,184       25.1 %       19.4 %
Sam's Club                 11,908       11.9 %       -3.2 %       12,300       12.1 %        8.2 %       22,872       11.8 %       -2.4 %       23,424       12.0 %        8.1 %

Total Net Sales         $ 100,082      100.0 %       -1.4 %    $ 101,546      100.0 %       10.6 %    $ 193,553      100.0 %       -1.0 %    $ 195,588      100.0 %       10.5 %

Our total net sales decreased 1.4% and 1.0% for the three and six months ended July 31, 2009, respectively, compared to the corresponding periods in the prior year. The decreases primarily resulted from the negative impact of the currency exchange rates, deflation in certain categories and lower fuel prices. For the three and six months ended July 31, 2009, changes in currency exchange

Comparable Store Sales



                              Three Months Ended           Six Months Ended
                                   July 31,                    July 31,
                             2009            2008         2009          2008
           Walmart U.S.        -1.0 %           4.6 %       0.2 %         3.7 %
           Sam's Club (1)      -4.0 %           7.4 %      -3.2 %         7.1 %

           Total U.S. (2)      -1.5 %           5.0 %      -0.3 %         4.2 %

(1) Sam's Club comparable club sales include fuel. Fuel sales had a negative impact of 4.8 percentage points for the three and six months ended July 31, 2009. Fuel sales had a positive impact of 3.4 and 3.2 percentage points for the three and six months ended July 31, 2008, respectively.

(2) Fuel sales had a negative impact of 0.9 and 0.8 percentage points for the three and six months ended July 31, 2009, respectively. Fuel sales had a positive impact of 0.5 percentage points for the three and six months ended July 31, 2008.

Comparable store sales in the United States, including fuel sales, decreased 1.5% for the second quarter of fiscal 2010 compared to an increase of 5.0% for the second quarter of fiscal 2009. For the six months ended July 31, 2009, comparable store sales in the United States, including fuel sales, decreased 0.3% compared to an increase of 4.2% for the corresponding period in the prior year. Comparable store sales in fiscal 2010 were lower than fiscal 2009 primarily due to a decrease in average transaction size per customer, resulting in part from deflation in certain categories, and lower fuel prices.

Operating Income



                                               Three Months Ended July 31,                                                       Six Months Ended July 31,
                                     Percent       Percent                   Percent       Percent                    Percent       Percent                    Percent       Percent
(Amounts in millions)    2009        of Total      Change        2008        of Total      Change         2009        of Total      Change         2008        of Total      Change
Operating Income:
Walmart U.S.            $ 4,901          83.3 %        5.0 %    $ 4,667          80.3 %       10.1 %    $  9,365          84.4 %        4.2 %    $  8,987          80.7 %        9.7 %
International             1,143          19.4 %       -6.2 %      1,218          21.0 %       17.5 %       2,023          18.2 %      -10.8 %       2,268          20.4 %       18.2 %
Sam's Club                  419           7.1 %       -5.0 %        441           7.6 %       -2.6 %         812           7.3 %       -2.6 %         834           7.5 %        0.7 %
Other                      (581 )        -9.8 %       13.3 %       (513 )        -8.9 %       16.1 %      (1,101 )        -9.9 %       14.8 %        (959 )        -8.6 %       16.5 %

                        $ 5,882         100.0 %        1.2 %    $ 5,813         100.0 %        9.9 %    $ 11,099         100.0 %       -0.3 %    $ 11,130         100.0 %       10.0 %

Operating income growth compared to net sales growth is a meaningful metric to share with investors because it indicates how effectively we manage costs and leverage expenses. Our objective is to grow operating income faster than net sales. For the second quarter of fiscal 2010, our operating income increased 1.2% compared to the prior year, while our net sales decreased 1.4% for the same period. While the Walmart U.S. segment met this objective, the Sam's Club and International segments did not. The Sam's Club segment did not meet this objective due to higher health benefit and remodel costs. The International segment fell short of this objective primarily due to the negative impact of currency exchange rates.

For the six months ended July 31, 2009, our operating income decreased 0.3% compared to the prior year, while our net sales decreased 1.0% for the same period. While the Walmart U.S. segment met the objective of growing operating income faster than net sales, the Sam's Club and International segments did not. The Sam's segment did not meet this objective due to higher health benefit and remodel costs. The International segment fell short of this objective primarily due to the negative impact of currency exchange rates.

Diluted Net Income per Share from Continuing Operations Attributable to Walmart



                                                    Three Months Ended         Six Months Ended
                      `                                  July 31,                  July 31,
                                                    2009          2008         2009        2008
Diluted net income per share from continuing

Return on Investment

Management believes return on investment ("ROI") is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is employing its assets. Trends in ROI can fluctuate over time as management balances the long-term potential of strategic initiatives with any possible short-term impacts.

ROI was 18.4% and 19.4% for the trailing twelve months ended July 31, 2009 and 2008, respectively. The decrease in ROI resulted from the negative impact of currency exchange rates, the accrual for our settlement of 63 wage and hour class action lawsuits in January 2009 and our investment in Chile.

We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization and rent expense) for the fiscal year or trailing twelve 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 of continuing operations plus accumulated depreciation and amortization less accounts payable and accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year or trailing twelve months multiplied by a factor of eight.

ROI is considered a non-GAAP financial measure under the SEC's rules. We consider return on assets ("ROA") to be the financial measure computed in accordance with generally accepted accounting principles ("GAAP") that is the most directly comparable financial measure to ROI as we calculate that financial measure. ROI differs from ROA (which is income from continuing operations for the fiscal year or the trailing twelve months divided by average of total assets of continuing operations for the period) because ROI: adjusts operating income to exclude certain expense items and add interest income; adjusts total assets from continuing operations 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.

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 ROI may differ from the methods other companies use to calculate their ROI. We urge you to understand the methods used by another company to calculate its ROI before comparing our ROI to that of such other company.

                                                       For the Twelve Months Ended
                                                                 July 31,
(Amounts in millions)                                   2009                 2008
CALCULATION OF RETURN ON INVESTMENT
                    Numerator
Operating income (1)                                $      22,767        $      22,967
+ Interest income (1)                                         242                  277
+ Depreciation and amortization (1)                         6,830                6,636
+ Rent (1)                                                  1,756                1,706

= Adjusted operating income                         $      31,595        $      31,586

                   Denominator
Average total assets of continuing operations (2)   $     167,358        $     160,988
+ Average accumulated depreciation and
amortization (2)                                           36,223               31,493
- Average accounts payable (2)                             29,355               28,824
- Average accrued liabilities (2)                          16,157               14,816
+ Rent * 8                                                 14,048               13,648

= Invested capital                                  $     172,117        $     162,489

           Return on investment (ROI)                        18.4 %               19.4 %

CALCULATION OF RETURN ON ASSETS
                    Numerator
Income from continuing operations(1)                $      13,774        $      13,839


                   Denominator
Average total assets of continuing operations (2)   $     167,358        $     160,988

             Return on assets (ROA)                           8.2 %                8.6 %


                                                                     As of July 31,
Certain Balance Sheet Data                              2009                 2008             2007
Total assets of continuing operations (1)           $     168,795        $     165,921      $ 156,054
Accumulated depreciation and amortization                  38,466               33,980         29,005
Accounts payable                                           28,797               29,912         27,736
Accrued liabilities                                        16,706               15,607         14,025

(1) Based on continuing operations only and therefore excludes the impact of Gazeley Limited, a former United Kingdom property development subsidiary, which was sold in the second quarter of fiscal 2009, and the closure of 23 stores and divesture of other properties of The Seiyu, Ltd. in Japan pursuant to restructuring program adopted during the third quarter of fiscal 2009. All of these activities have been disclosed as discontinued operations. Total assets as of July 31, 2009, 2008 and 2007 in the table above exclude assets of discontinued operations that are reflected in the Condensed Consolidated Balance Sheets of $147, $974 and $895, respectively.

(2) 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.

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. We generated positive free cash flow of $4.2 billion and $5.1 billion for the six months ended July 31, 2009 and 2008, respectively. The decline in our free cash flow is primarily the result of increased capital spending.

Free cash flow is considered a non-GAAP financial measure under the SEC's rules. Management believes, however, that free cash flow is an important financial measure for use in evaluating the Company's financial performance, which measures our ability to generate additional cash from our business operations. Free cash flow should be considered in addition to, rather than as a substitute for, income from continuing operations as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.

Additionally, our 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 entire statement 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 our management to calculate free cash flow may differ from the methods other companies use to calculate their free cash flow. We urge you to understand the methods used by another company to calculate its free cash flow before comparing our free cash flow to that of such other company.

The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a non-GAAP measure.

                                                   Six Months Ended July 31,
    (Amounts in millions)                           2009                2008
    Net cash provided by operating activities   $      9,895        $     10,164
    Payments for property and equipment               (5,744 )            (5,074 )

    Free cash flow                              $      4,151        $      5,090

    Net cash used in investing activities       $     (5,748 )      $     (4,527 )
    Net cash used in financing activities       $     (3,434 )      $     (4,380 )

Results of Operations

The following discussion of our Results of Operations is based on our continuing operations and excludes any results or discussion of our discontinued operations.

Consolidated

Three Months Ended July 31, 2009

Our total net sales decreased 1.4% for the second quarter of fiscal 2010 and increased 10.6% for the second quarter of fiscal 2009. The decrease in fiscal 2010 primarily resulted from the negative impact of currency exchange rates, deflation in certain categories and lower fuel prices. Currency exchange rates had a $4.2 billion unfavorable impact on the International segment's net sales for the second quarter of fiscal 2010. Currency exchange rates had a $1.1 billion favorable impact on the International segment's net sales for the second quarter of fiscal 2009.

Our gross profit, as a percentage of net sales, ("gross profit margin") increased from 24.1% for the second quarter of fiscal 2009 to 24.9% in the second quarter of fiscal 2010. This increase is primarily due to more effective merchandising and strong inventory management in the Walmart U.S. and Sam's Club segments.

Operating, selling, general and administrative expenses ("operating expenses"), as a percentage of net sales, increased 0.8 percentage points for the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. Operating expenses as a percentage of net sales increased in the second quarter of fiscal 2010 primarily due to lower net sales, higher health benefit costs and increased technology and system expenses which relate to our long-term transformation projects to enhance our information systems for finance, merchandising and human resources.

Interest, net, for the second quarter of fiscal 2010 increased 3.7% compared to the second quarter of fiscal 2009 due to an increase in total debt. The increase in total debt was partially offset by lower interest rates.

Our effective income tax rate from continuing operations increased from 34.1% for the second quarter of fiscal 2009 to 34.3% for the second quarter of fiscal 2010 due to the timing of certain discrete tax matters, as well as the mix of income between domestic and international operations.

Six Months Ended July 31, 2009

Our total net sales decreased 1.0% for the six months ended July 31, 2009 and increased 10.5% for the six months ended of July 31, 2008. The decrease in fiscal 2010 primarily resulted from the negative impact of currency exchange rates, deflation in certain categories and lower fuel prices. Currency exchange rates had a $9.0 billion unfavorable impact on the International segment's net sales for the six months ended July 31, 2009. Currency exchange rates had a $2.4 billion favorable impact on the International segment's net sales for the six months ended July 31, 2008.

Our gross profit margin increased from 24.1% for the first six months of fiscal 2009 to 24.8% for the first six months of fiscal 2010. This increase was primarily due to more effective merchandising and strong inventory management in the Walmart U.S. and Sam's Club segments.

Operating expenses, as a percentage of net sales, increased 0.6 percentage points for the first six months of fiscal 2010 compared to the first six months of fiscal 2009. Operating expenses as a percentage of net sales increased for the first six months of fiscal 2010 primarily due to lower net sales, currency exchange rates and higher health benefit costs.

Membership and other income, as a percentage of net sales, decreased 0.1 percentage points compared to the first six months of fiscal 2009 due to decline in several miscellaneous income categories.

Interest, net, for the first six months of fiscal 2010 decreased 1.3% compared to the first six months of fiscal 2009 due to lower interest rates on our borrowings.

Our effective income tax rate from continuing operations decreased from 34.3% for the first six months of fiscal 2009 to 34.0% for the first six months of fiscal 2010 due to the mix of income between domestic and international operations, as well as the impact of currency exchange rates.

Walmart U.S. Segment

Three Months Ended July 31, 2009

(Amounts in millions)



                                                         Segment net                                Segment operating                  Segment
                                                        sales increase                               income increase                  operating
                                                          from prior               Segment             from prior               income as a percentage
                                       Segment           fiscal year              operating            fiscal year                    of segment
Three months ended July 31,           net sales         second quarter             income            second quarter                   net sales
2009                                 $    64,209                   0.3 %         $     4,901                      5.0 %                            7.6 %
2008                                      63,989                   8.6 %               4,667                     10.1 %                            7.3 %

Net sales for the Walmart U.S. segment increased 0.3% for the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. The increase resulted from our continued expansion activities and strength in our grocery and health and wellness categories. Comparable store sales for the second quarter of fiscal 2010 decreased 1.0% resulting from a decrease in average transaction size per customer, despite an increase in customer traffic in our comparable stores. The decrease in average transaction size per customer was attributable in part to the change in mix of merchandise sold and deflation.

Gross profit margin increased 1.1 percentage points for the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009 due to higher initial margins, lower inventory shrinkage and consistent year-over-year markdowns as a percentage of sales resulting from better inventory management.

Other income as a percentage of segment net sales for the second quarter of fiscal 2010 was consistent with the second quarter of fiscal 2009.

Six Months Ended July 31, 2009

(Amounts in millions)



                                                       Segment net
. . .