September 14, 1998 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended July 31, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______to______.

Commission file number 1-6991

WAL-MART STORES, INC.
(Exact name of registrant as specified in its charter)

Delaware ___________71-0415188__________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

702 S.W. Eighth Street
Bentonville, Arkansas ____________72716______________
(Address of principal executive offices) (Zip Code)

(501) 273-4000
(Registrant's telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter periods that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____

Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by the court.
Yes _____ No _____

Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.

Common Stock, $.10 Par Value -- 2,252,851,199 shares as of July 31, 1998.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)

[FN]

See accompanying notes to condensed consolidated financial statements

*Note: The balance sheet at January 31, 1998, has been derived from the
audited financial statements at that date, and condensed.

WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in millions except per share data)

[FN]

See accompanying notes to condensed consolidated financial statements.

WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)

[FN]

See accompanying notes to condensed consolidated financial statements.

WAL-MART STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation

The condensed consolidated balance sheet as of July 31, 1998, and
the related condensed consolidated statements of income for the three and
six month periods ended July 31, 1998 and 1997, and the statements of
cash flow for the six month periods ended July 31, 1998 and 1997 are
unaudited. In the opinion of management, all adjustments necessary for a
fair presentation of the financial statements have been included. The
adjustments consisted only of normal recurring items. Interim results are
not necessarily indicative of results for a full year. Certain
reclassifications have been made to the prior year's income statements to
conform to current presentation.

The financial statements and notes are presented in accordance with
the rules and regulations of the Securities and Exchange Commission and
do not contain certain information included in the Company's annual
report. Therefore, the interim statements should be read in conjunction
with the Company's annual report for the fiscal year ended January 31,
1998.

NOTE 2. Inventories

The Company uses the retail last-in, first-out (LIFO) method for the
Wal-Mart Stores segment, cost LIFO for the Sam's Club segment, and other
cost methods for the International segment. Inventories are not in excess
of market value. Quarterly inventory determinations under LIFO are
partially based on assumptions as to inventory levels at the end of the
fiscal year, sales and the rate of inflation for the year. If the first-
in, first-out (FIFO) method of accounting had been used by the Company,
inventories at July 31, 1998, would have been $403 million higher than
reported, an increase in the LIFO reserve of $55 million from January 31,
1998, and an increase of $40 million from April 30, 1998. If the FIFO
method had been used at July 31, 1997, inventories would have been $314
million higher than reported, an increase in the LIFO reserve of $18
million from January 31, 1997, and an increase of $10 million from April
30, 1997.

NOTE 3. Net Income Per Share

The Company presents basic and dilutive earnings per share according
to guidance established in Statement of Financial Accounting Standards
No. 128, "Earnings Per Share." Statement 128 replaces primary and fully
dilutive earnings per share with basic and dilutive earnings per share.
Unlike primary earnings per share, basic earnings per share exclude any
dilutive effect of stock options. Basic and dilutive earnings per share
for all periods presented are the same as previously reported. Basic net
income per share is based on the weighted average outstanding common
shares. Dilutive net income per share is based on the weighted average
outstanding common shares reduced by the dilutive effect of stock
options.

NOTE 4. Segments

The Company is principally engaged in the operation of mass
merchandising stores that serve customers primarily through the operation
of three segments. The Company identifies its segments based on
management responsibility within the United States and geographically for
all international units. The Wal-Mart Stores segment includes the
Company's discount stores and Supercenters in the United States. The
Sam's Club segment includes the warehouse membership clubs in the United
States. The International segment includes all operations in Argentina,
Brazil, Canada, China, Germany, Korea, Mexico and Puerto Rico. The
revenues in the "Corporate and Other" category result from sales to third
parties by McLane Company, Inc., a wholesale distributor.

Revenues by operating segment were as follows (in millions):

Operating profit and reconciliation to income before income taxes,
minority interest and equity in unconsolidated subsidiaries are as
follows (in millions):

NOTE 5. Comprehensive Income

As of February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This
statement establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is net
income, plus certain other items that are recorded directly to
shareholders' equity, bypassing net income. The only such item currently
applicable to the Company is foreign currency translation adjustments.

Comprehensive income was $990 million and $808 million for the
quarters ended July 31, 1998 and 1997, respectively and was $1,830 and
$1,427 for the six months ended July 31, 1998 and 1997, respectively.

The adoption of this Statement had no effect on the Company's
results of operations or financial position.

NOTE 6. Acquisition

In July 1998, the Company extended its presence in Asia with an
investment in Korea. The Company acquired a majority interest in four
units as well as six undeveloped sites from H. S. Chang for approximately
$179 million. Any resulting goodwill will be amortized over 40 years.
The four units were previously operated by Korea Makro. The transaction
will be accounted for using the purchase method and the financial results
will be consolidated in the Company's consolidated financial statements
during the third quarter of fiscal 1999. The transaction should not have
a material impact on the fiscal 1999 consolidated operating results. Pro
forma results of operations are not presented due to the insignificant
differences from the historical results.

NOTE 7. Pre-opening costs

During the second quarter, the Company adopted Statement of Position
(SOP) 98-5, "Reporting on the Costs of Start-Up Activities". The SOP
requires that the costs of start-up activities, including organization
costs, be expensed as incurred. The impact of the adoption of SOP 98-5
on the Company's results of operations was $13 million. Due to the
immateriality to the Company's results of operations, the initial
application was not reported as a cumulative effect of a change in an
accounting principle.

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations

Results of Operations

The Company had 18% sales increases for the quarter and the six
months ending July 31, 1998, that were attributable to an increase in
comparable sales in the Wal-Mart Stores segment of 9% for the quarter
and the six month period, an increase in comparable sales in the Sam's

Club segment of 10% for the quarter and 9% for the six month period and
to the Company's expansion activities.

The increase in the International segment's sales was due
principally to the merger of our Mexican joint venture and public tender
offer that increased the Company's ownership in Cifra, S. A. de C. V.
(Cifra) and the acquisition of the Wertkauf hypermarket chain in Germany.
Since both of these acquisitions occurred during the last half of fiscal
1998, sales during the second quarter and first six months of fiscal 1998
do not include sales from the Wertkauf units or from the additional Cifra
units now included in the Company's consolidated sales and, thus are not
comparable to the sales for the second quarter and first half of fiscal
1999. Sam's Clubs sales as a percentage of total sales fell from 18% last
year to 17% for the quarter and six month period largely as a result of
more rapid growth of sales in other segments. International sales
accounted for 9% of total sales in both the second quarter and first six
months of fiscal 1999 compared with 5% during the same periods a year
ago.

Domestic expansion activity in the first six months of fiscal 1999
included nine new Wal-Mart stores, the conversion of 33 Wal-Mart stores
to Supercenters, six new Supercenters, three new Sam's Clubs and the
relocation or expansion of three additional Sam's Clubs. International
expansion included the addition of four units in Argentina, two units in
Brazil, one unit in Canada and three units in Mexico.

At July 31, 1998, the Company had 1,897 Wal-Mart stores, 480
Supercenters and 446 Sam's Clubs in the United States, along with 13
units in Argentina, nine units in Brazil, 145 Wal-Mart stores in Canada,
three units in China (operated under joint venture agreements), 21 units
in Germany, four units in Korea (operated under joint venture
agreements), 404 units in Mexico, and 14 units in Puerto Rico. This
compares with 1,935 Wal-Mart stores, 383 Supercenters, and 441 Sam's
Clubs in the United States, along with six units in Argentina, six units
in Brazil, 137 Wal-Mart stores in Canada, two units in China, 156 units
in Mexico, and 11 units in Puerto Rico at the same time last year.

The Company's gross profit as a percentage of sales increased from
20.81% in the second quarter of fiscal 1998 to 21.18% during the second
quarter of fiscal 1999. For the six month period ended July 31, 1998
gross profit as a percentage of sales was 21.14%, up from 20.80% in last
year's comparable period. Gross profit as a percentage of sales improved
in the Wal-Mart and International operating segments due to better mix
offset in part by competitive pricing and growth in the lower margin food
business. Sam's Clubs gross profit as a percentage of sales decreased due
to price rollbacks on over 15% of its merchandise assortment to enhance
member value. For the six month period ended July 31, 1998,
approximately one third of the improvement in consolidated gross profit
as a percent of sales was due primarily to changes in the total sales mix
of the operating segments. As the Sam's Club segment comprises a lower
percentage of consolidated Company sales, the gross profit stated as a
percentage of sales is positively impacted since its contribution to
gross margin is a lower percentage when compared with the Wal-Mart and
International operating segments.

Operating, selling, general and administrative expenses decreased as
a percentage of sales from 16.79% during the second quarter of fiscal
1998 to 16.64% for the second quarter of fiscal 1999. For the six month
period ended July 31, 1998 operating, selling, general and administrative
expenses were 16.81%, down from 16.92% in last year's comparable period.
During the second quarter of fiscal 1998, the Company took a one-time
charge of $50 million for closing the majority of the Bud's Discount City
stores. Without the one-time charge, expenses would have been 16.62% of
sales for the second quarter and 16.82% for the six month period ended
July 31, 1997. All operating segments made improvements in their expense
percentage for the six month period when compared to the previous period.
The expense leverage was mitigated in the consolidated results due to the
percentage of our total volume decreasing in the Sam's Clubs segment,
which has lower expenses as a percentage of sales, while the percentage
of total volume increased in the International segment, which has higher
expenses as a percentage of sales than Sam's Clubs. Also, the Company
was impacted by the tighter labor markets and the increase in the minimum
wage that occurred subsequent to last year's second quarter.

The International segment's operating profit increased from $27
million in the second quarter of last year to $124 million this year and
increased from $33 million for the six months ended July 31, 1997 to $206
million in the first half of fiscal 1999. As noted above, the first six
months of fiscal 1999 include the operating profit of Cifra and Wertkauf.
Because the acquisitions occurred during the last half of fiscal 1998,
the additional operating profit resulting from these acquisitions
accounts for a large part of the increase in the International segment
operating profit.

Liquidity and Capital Resources

Cash flows provided by operating activities were $2,205 million for
the six months ended July 31, 1998 compared with $2,510 million for the
same period last year. Operating cash flow is down in fiscal 1999
primarily due to the addition of $1,133 million in inventory compared
with an increase of $514 in the same period in fiscal 1998 and to an
increase in accrued liabilities in the first half of last fiscal year
compared with a small decrease for the six month period ended July 31,
1998. During the first half of fiscal 1999, the Company repurchased $472
million of its common stock, paid dividends of $347 million and invested
$1,626 million in capital expenditures.

At July 31, 1998, the Company had total assets of $46,874 million
compared with $45,384 million at January 31, 1998. Working capital at
July 31, 1998 was $5,141 million, up $249 million from January 31, 1998.
The ratio of current assets to current liabilities was 1.3 to 1.0 at July
31, 1998, 1.5 to 1.0 at July 31, 1997, and 1.3 to 1.0 at January 31,
1998.

In March 1998, the Company announced its intention to increase the
size of its existing share repurchase program by approximately $1.6
billion. With this amount and the remaining portion from last year's
program, the Company may repurchase up to $2 billion of its common stock.

The Company also increased dividends by 15% in fiscal 1999 to $.31 per
share.

On May 7, 1998, the Company filed with the Securities and Exchange
Commission a registration statement for debt securities aggregating $750
million. In June 1998, the Company sold $500 million of bonds pursuant
to its previously filed shelf registration statements and the
registration statement described above. The bonds bear interest at 5.85%
until June 1, 2000. At that date and every second June 1 thereafter
(Reset Date), the interest rate may be reset. The bonds have put options
imbedded that, if exercised, would require the Company to purchase the
outstanding bonds at 100% of the principal amount. The put options may
be exercised on each Reset Date. The proceeds of the sale were used to
meet general working capital requirements.

The Company anticipates that it will continue to generate
significant operating cash flow. The Company foresees no difficulty in
obtaining long-term financing in view of its credit rating and favorable
experiences in the debt market in the past few years.

The Company may issue public debt securities aggregating $501
million under shelf registration statements on file with the Securities
and Exchange Commission. Operating cash flow along with the Company's
ability to obtain short-term or long-term financing should provide
sufficient cash to use for capital expenditures, pay dividends, meet
maturing debt demands, and continue the share repurchase plan.

Accounting Pronouncements

In March 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1, "Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use". The SOP
will be effective for the Company beginning February 1, 1999. The SOP
will require the capitalization of certain costs incurred in connection
with developing or obtaining software for internal-use. Currently, costs
related to developing internal-use software are expensed as incurred. The
Company does not anticipate there will be a material impact on the
results of operations or financial position after SOP 98-1 is adopted.

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement will be effective for the Company beginning
February 1, 2000. The new Statement requires all derivatives to be
recorded on the balance sheet at fair value and establishes accounting
treatment for three types of hedges: hedges of changes in the fair value
of assets, liabilities, or firm commitments; hedges of the variable cash
flows of forecasted transactions; and hedges of foreign currency
exposures of net investments in foreign operations. The Company is
analyzing the implementation requirements and currently does not
anticipate there will be a material impact on the results of operations
or financial position after the adoption of Statement No. 133.

Year 2000

The Company has been evaluating and adjusting all known date-
sensitive systems and equipment for Year 2000 compliance. The assessment
phase of the Year 2000 project is substantially complete and included
both information technology, such as point-of-sale computer systems, as
well as non-information technology equipment, such as warehouse conveyor
systems. Over 95% of the required coding conversions on information
technology have occurred to date. The Company anticipates completing all
known remaining coding conversions during the current fiscal year.
Virtually all of the compliance was performed or is expected to be
performed by Company associates.

The next phase of the Company's Year 2000 project, complete system
testing, is scheduled to begin during the third quarter of the current
fiscal year. Testing will continue for all existing systems and ongoing
new releases and enhancements to ensure readiness.

The total estimated cost of the conversion is $12 million, which is
being expensed as incurred. Approximately $9 million of the cost is
related to reprogramming or replacement of software, while approximately
$3 million is related to acquisition of hardware. Approximately $6
million of the $12 million cost of conversion has been incurred as of the
end of the second quarter. All of these costs are being funded through
operating cash flows. These costs are an immaterial part of the
Company's information technology budget. The Company's Information
Systems Division has not deferred any information technology projects to
address the Year 2000 issue.

In addition to internal Year 2000 implementation activities, the
Company is communicating with others with which our systems interface or
on which they rely to determine the extent to which those companies are
addressing their Year 2000 compliance. Testing is beginning in the third
quarter of the current fiscal year and will continue through December
1999. There can be no assurance that there will not be an adverse effect
on the Company if third parties, such as utility companies or merchandise
suppliers, do not convert their systems in a timely manner and in a way
that is compatible with the Company's systems. However, management
believes that ongoing communication with and assessment of these third
parties will minimize these risks.

Although the Company anticipates minimal business disruption will
occur as a result of Year 2000 issues, possible consequences include, but
are not limited to, loss of communications links with certain store
locations, loss of electric power, inability to process transactions,
send purchase orders, or engage in similar normal business activities.
In addition, since there is no uniform definition of Year 2000 compliance
and not all customer situations can be anticipated, the Company may
experience an increase in sales returns of merchandise that may contain
hardware or software components. If returns of merchandise increase,
such returns are not expected to be material to the Company's financial
condition.

To date, the Company has not established a contingency plan for
possible Year 2000 issues. Where needed, the Company will establish

contingency plans based on our actual testing experience with our
supplier base and assessment of outside risks. We anticipate contingency
plans to be in place by July 31, 1999.

The cost of the conversions and the completion dates are based on
management's best estimates and may be updated as additional information
becomes available. Readers are referred to Item 5 of this report, which
addresses forward-looking statements made by the Company.

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

The Company's Annual Shareholders' Meeting was held June 5, 1998,
in Fayetteville, Arkansas.

Election of Directors:

At that meeting, the shareholders elected for one-year terms all
persons nominated for directors as set forth in the Company's proxy
statement dated April 10, 1998.

Proposal to Adopt Wal-Mart Stores, Inc. Stock Incentive Plan of 1998:

The shareholders approved the adoption of the Stock Incentive Plan
of 1998. Under the Plan, incentive and non-qualified stock options,
stock appreciation rights, stock value equivalent awards and shares of
restricted stock may be granted to any associate or non-associate
director of Wal-Mart and its affiliates. The Plan is administered by
the Compensation and Nominating Committee and by the Stock Option
Committee.

Proposal to Adopt Wal-Mart Stores, Inc. Management Incentive Plan of
1998:

The shareholders approved the adoption of the Management Incentive
Plan of 1998. The purpose of the Plan is to motivate and reward Company
management, including executive officers, for profit improvement by
setting goals related to profitability. Under the Plan, objective annual
performance goals for the Company and its divisions will be established

at the beginning of each fiscal year by the Compensation and Nominating
Committee. The Plan is administered by the Compensation and Nominating
Committee.

Shareholder Proposal:

The Shareholders rejected a shareholder proposal requesting that the
Company endorse the Coalition for Environmentally Responsible Economies
(CERES) Principles as a part of its commitment to be publicly accountable
for its environmental impact.

Item 5. Other Information

The Private Securities Litigation Reform Act of 1995 ("the Act")
provides a safe harbor for forward-looking statements made by or on
behalf of the Company. Certain statements contained in Management's
Discussion and Analysis and in other Company filings are forward-looking
statements. These statements discuss, among other things, expected
growth, future revenues, future cash flows and future performance. The
forward looking statements are subject to risks and uncertainties
including but not limited to the cost of goods, competitive pressures,
inflation, consumer debt levels, currency exchange fluctuations, trade
restrictions, changes in tariff and freight rates, interest rate
fluctuations and other capital market conditions, and other risks
indicated in the Company's filings with the Securities and Exchange
Commission. Actual results may materially differ from anticipated results
described in these statements.

Item 6. Exhibits and Reports on Form 8-K

(a) The following documents are filed as exhibits to this Form
10-Q:

Exhibit 10(a) - Form of individual special stock option grant,
post-termination agreement and covenant not to compete between
David D. Glass and Wal-Mart Stores, Inc. is filed herewith as
an Exhibit to this Form 10-Q.

Exhibit 10(b) - Form of individual special stock option grant,
post-termination agreement and covenant not to compete between
Donald G. Soderquist and Wal-Mart Stores, Inc. is filed
herewith as an Exhibit to this Form 10-Q.

Exhibit 10(c) - Form of individual special stock option grant,
post-termination agreement and covenant not to compete between
Bob L. Martin and Wal-Mart Stores, Inc. is filed herewith as an
Exhibit to this Form 10-Q.

Exhibit 10(d) - Form of individual special stock option grant,
post-termination agreement and covenant not to compete between
H. Lee Scott, Jr. and Wal-Mart Stores, Inc. is filed herewith
as an Exhibit to this Form 10-Q.

Exhibit 10(e) - Form of individual special stock option grant,
post-termination agreement and covenant not to compete between
Thomas M. Coughlin and Wal-Mart Stores, Inc. is filed herewith
as an Exhibit to this Form 10-Q.

Exhibit 27 - Financial Data Schedule

(b) A Form 8-K was filed on June 2, 1998, to file the form of
the Puttable Reset Securities PURSsm due June 1, 2018, and the
opinion of counsel to the Company relating to the Company's
public offering of $500 million aggregate principal amount.

A Form 8-K was filed on June 2, 1998, to file the form of
Calculation Agency Agreement and the Statement of Eligibility
of Trustee related to the Company's public offering of $500
million aggregate principal amount of its Puttable Reset
Securities PURSsm due June 1, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

WAL-MART STORES, INC.

Date: September 11, 1998 /s/David D. Glass________________
David D. Glass
President and
Chief Executive Officer

Date: September 11, 1998 /s/John B. Menzer________________
John B. Menzer
Executive Vice President
and Chief Financial Officer

Form: 10-Q

Documents

10-Q: Quarterly report pursuant to Section 13 or 15(d)