Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc. - Financial and Strategic Analysis Review
Publication Date: 03-Aug-2012 Reference Code: GDRT35083FSA

Company Snapshot
Key Information
Wal-Mart Stores, Inc., Key Information Web Address www.walmartstores.com Financial year-end January Number of Employees 2,200,000 NYSE WMT
Source : GlobalData

Company Overview
Wal-Mart Stores, Inc. (Wal-Mart) is the world’s largest retailer. The company operates retail stores in a variety of formats including discount stores, supercenters, neighborhood markets and club stores. It offers branded as well as private label products of various categories. The company operates approximately 10,130 retail units under 69 different banners across 27 countries. Wal-Mart operates its business through three reportable segments, namely, Wal-Mart U.S., Wal-Mart International and Sam’s Club. Internationally, the company has operations in Brazil, Central America, Argentina, Canada, Chile, China, India, Japan, Mexico, Puerto Rico and the UK.

Key Ratios
Wal-Mart Stores, Inc., Key Ratios P/E EV/EBITDA Return on Equity (%) Debt/Equity Operating profit margin (%) Dividend Yield 14.92 11.52 22.01.00 74.92 5.94 0.02

SWOT Analysis
Wal-Mart Stores, Inc., SWOT Analysis Strengths Weaknesses Strong Market Position Declining Profitability Ratios

Diversified Product and Brand Product Recalls Portfolio Legal Controversies Robust Store and Distribution Network

Note: Above ratios are based on share price as of 01-Aug-2012 Source : GlobalData

Share Data
Wal-Mart Stores, Inc., Share Data Price (USD) as on 01-Aug-2012 EPS (USD) Book value per share (USD) Shares Outstanding (in million)
Source : GlobalData

Opportunities 73.62 4.54 20.86 3,474 Expansion through Acquisitions

Threats Changes in Labor Laws and Other Issues

Conversion of Discount Stores Intense Competition into Supercenters Strategic Expansion Risks Associated With Suppliers

Performance Chart
Wal-Mart Stores, Inc., Performance Chart (2008 - 2012)
Source : GlobalData

Financial Performance
The company reported revenues of (U.S. Dollars) USD 446,950.00 million during the fiscal year ended January 2012, an increase of 5.95% over 2011. The operating profit of the company was USD 26,558.00 million during the fiscal year 2012, an increase of 3.98% over 2011. The net profit of the company was USD 15,699.00 million during the fiscal year 2012, a decrease of 4.21% from 2011.

Source : GlobalData

Wal-Mart Stores, Inc.- Financial and Strategic Analysis Review

Reference Code: GDRT35083FSA Page 1

It also has wide operations in countries including Central America. Better Homes & Gardens. The private labels include Athletic Works. Rollback and Store of the Community. Wal-Mart Stores. Canopy. it is the largest retailer in the world.088). health and beauty aids. George. Strong foothold in its operating regions helps the company derive economies of scale. home furnishings. 2 in the Fortune 500 companies’ 2009 list. neighborhood markets. Central America. sporting goods. Thus. Under these categories. Wal-Mart Stores. (Wal-Mart) is the world’s largest retailer. Puritan. Wal-Mart was placed among the world’s Top Organizations for Multicultural Business Opportunities. Wal-Mart Stores. Its foothold in the domestic and international markets gives the company a strong brand equity and base to venture into the global markets and generate higher revenues. No Boundaries.Wal-Mart Stores. Rollbacks is the company’s commitment to pass on its savings from its internal and external functions to the customers through low prices. Sam’s Club provides exceptional value on branded merchandise at “members only” prices for both business and personal use. In addition. Member’s Mark. This diversification of product and brand portfolio helps the company cater to a broad customer segment and helps attract and retain them. which include discount stores. Everstart. South Africa and the UK. Canada. Wal-Mart offers various products which include apparel. it was ranked first among retailers in Fortune Magazine’s 2010 Most Admired Companies survey and was No. The company’s robust retail stores and distribution network helps to meet the customer requirements in a proactive manner. Spring Valley. Mexico and Puerto Rico. As of fiscal year ended January 2012. Chile (316). McDonald’s. Wall-Mart operates distribution facilities strategically located across its operating geographies. Disney. The company’s diversified product and brand portfolio. apparel. health and wellness. In 2011.130 retail units under 69 different banners in 27 countries. warehouse club stores. India (15) and the UK (541). Wal-Mart has been able to attract a large and loyal customer base. China (370). namely. Strength .Financial and Strategic Analysis Review Reference Code: GDRT35083FSA Page 2 . which help generate brand awareness. grocery. houseware. Brazil. India. club stores. Parent’s Choice. The international operations stores spread across 14 countries including Africa (347) Argentina (88). Strength . Mexico. Inc. China. Japan (419). supercenters.Marketing Activities Apart from its extensive store network and broad product portfolio. The company’s US operations are supported by 133 distribution facilities of which 105 are owned and international operations are supported by 158 distribution facilities located in Argentina. Brazil (512). HomeTrends. Central America (622). Canada. cash-n-carry stores. electronics. Equate.651 stores and 611 Sam's Club. apparel stores and other formats. intense competition and risks associated with suppliers could affect the company’s growth prospects. Sam’s Choice. The company offers these products from major brands as well as private labels. . restaurants.Overview Wal-Mart Stores. home improvement and others. toys. with strong marketing programs. Inc. automotive products. In terms of revenue. entertainment. Inc. growing demand for private label products and healthcare products and expansion in emerging new markets ensure strong future for the company. supercenters and neighborhood markets and club stores. neighborhood markets. To support its retail stores. which it passes on to its customers in the form of everyday low prices. Wal-Mart also offers a variety of licensed brands such as General Electric. and Japan. pet supplies. However. OP. Ol’ Roy. and home products. lawn and garden items.Strengths Strength . thus new growth avenues to the company Strength . Japan. The company has a strong foothold in the US. . The wide network of discount stores.. Sam's Club. Mexico (2. Wal-Mart operates its stores under approximately 70 banners in numerous formats. The company operates its business through various formats including discount stores. jewelry. and White Stag. Inc. To compete and attract a broad customer base in the highly competitive retail industry.Robust Store and Distribution Network The company’s robust store and distribution network helps the company to cater to its customers more efficiently. Wal-Mart ensures that its customers get the lowest prices on goods every day and prices will have no impact due to changes in its promotional offers. Durabrand. grocery. cash-n-carry stores and other formats of the company and accessibility of these stores generates strong brand awareness and customer loyalty. Starter. supercenters. which included 3.SWOT Analysis SWOT Analysis . Store of the Community program ensures that the stores carry merchandise specific to the local demographic needs. Bakers & Chefs.868 stores across 50 states in the US and 5. Brazil. Wal-Mart invests heavily in its marketing activities. Chile.Diversified Product and Brand Portfolio Wal-Mart offers a broad assortment of products and brands in its portfolio. Through its EDLP program. Danskin Now and Just My Size. The company offers products under six categories. wide store network and extensive marketing activities resulted in strong brand image for the company. Faded Glory. In 2010. Great Value.Strong Market Position Market leading position provides the company an advantage while attracting and retaining a loyal customer base. Wal-Mart operates 10. hardware. Some of the most successful programs include Every Day Low Prices (EDLP). Ozark Trail. Inc. Canada (333). Secret Treasures. Mainstays. which helps it to cater to the diverse needs of its customer base. Similarly. it designed various programs.

making the company among the nation’s largest providers of private sector health insurance. Wal-Mart Stores. which were sold under the brand names Million Dollar Baby.6 million employees claimed that Wal-Mart discriminated against them during promotions. the profit margins decreased. bonuses. It employs approximately 2. recalled its eight-count packages of Cruller bakery pastries because the common name of milk was not listed following sodium caseinate.1% in 2011. In April 2011. Strength . it insures more than 1. and other contributions. Wal-Mart’s brand image may get tarnished. It also increases the operational costs to the company resulting in additional costs in recalling the product and loss of the product’s sale during the recall process.2 million associates worldwide. which alleged several employees of Mexican descent endured. Another class action suit that had a major impact on its brand image was the gender discrimination charge levied by its US retail and warehouse club store’s female employees. which can lead to strangulation or suffocation. In January 2010. and hundreds of millions of dollars in merchandise discounts and contributions to the associate stock purchase plan. including profit sharing. This was increased expenses as the company reported an increase in operating costs percentage of sales from 93. Wal-Mart recalled cadmium-tainted kids' jewelry. . Department of Labor found that the company had violated a federal law governing overtime pay. Weakness . In April. over 171. but also the largest in Mexico and one of the largest in Canada as well.75 and is even higher in urban areas. In 2010. The company had to pay $440. The company is a diverse employer with more than 257.6% increase in gross profit and 4% increase in operating profit.4% in 2011 to 25% in 2012. which includes Sonya Lee. In the same month. Such accomplishments of Wal-Mart show that the company provides good jobs with competitive pay and benefits. the company recalled deli sandwich meat used in select Marketside Grab and Go deli sandwiches. Around 1. posing a burn hazard to consumers. job assignments. a seven-piece plastic play set.000 mature associates who are 50 and older. The company’s full-time hourly wage for Wal-Mart stores is $11. hourly associates through financial incentives.Product Recalls The company has been involved in several product recalls.000 Hispanic associates. It was accused of deviating from the federal and state minimum wage laws and currently faces various class action suits. In addition. the U. which resulted in the company paying compensation of over $170m as directed by the court.1% in 2011 to 5. the company’s Sam's Club settled an ethnic harassment lawsuit filed by the U. Last year. over 16. Wal-Mart Stores. The plaintiffs in this case allege that the company is engaged in a pattern and practice of discriminating against women in promotions. pay.5% and operating margin decreased from 6. In February 2012. a milk derivative. With constant involvement in many controversies.8m in back wages and damages to thousands of employees for unpaid overtime after a investigation by the U. The declined margins indicated that the company was not able to capitalize on the growth achieved in 2011. Associated Press conducted lab tests on 103 pieces of low-priced children’s jewelry on sale in the US and found 12 items with high level of cadmium. creating a space into which an infant or toddler can roll and become wedged or entrapped.000 Asian and 5.Financial and Strategic Analysis Review Reference Code: GDRT35083FSA Page 3 . resulting in decreased sales and profitability. In August 2010. In addition. followed by net profit margin decreased from 3. detach or otherwise fail. In May 2012.000 to settle the lawsuit. Wal-Mart will also pay $463. Inc. which was found to have high levels of cadmium.S. Baby Mod and Da Vinci. it has 430.Declining Profitability Ratios Wal-Mart reported declining profitability ratios in 2012.815 in civil fines. on the ingredient label.Employee Friendly System Wal-Mart is not only one of the largest private employers in the U. and over 869. Equal Employment Opportunity Commission. Consumer Product Safety Commission and Health Canada recalled Little People Play 'n Go Campsite. These cribs’ drop-sides could malfunction.000 American Indian and Alaskan Native associates.Weaknesses Weakness . 4. Inc.S.000 women. which could cause the connector tips to heat and melt the plastic encasing the connector tips.. The company’s gross margin decreased from 25. the company recalled Targus Universal Wall Power Adapters for Laptops due to their faulty wiring.9% to 3. including over 1.S.. it also recalled Drop-Side cribs. training and job assignments. In addition.Wal-Mart Stores.Legal Controversies The company has been mired in various legal controversies. a tent and other accessories.S.S. which could hinder brain development in children and cause cancer.000 African-American associates.4 million in the US. over 41. which could impact its brand image. Unfavorable outcome of these legal suits might lead to additional expenditure for Wal-Mart. the company awarded about $2 billion to U.900 Pacific Islander associates. The plastic Sonya Lee figure in the play set could fracture at the waist.2 million associates and family members. affecting its profitability. Wal-Mart was also accused of breaching the California labor law for lunch and meal break provision to its employees. pay and training. Inc.9% in 2012. Weakness . Such continuous product recalls could tarnish the brand image of the company. Even though the company reported 6% increase in revenue. the company agreed to pay $4. exposing small parts that pose a choking hazard to young children.9% in 2011 to 94. the company is a defendant in Dukes class-action lawsuit brought on behalf of all past and present female employees in all of the company’s retail stores and wholesale clubs in the US.

Parent’s Choice.Wal-Mart Stores. Japan. the US retail sales recorded 6. Opportunity . George. Opportunity . Recently. Wal-Mart Stores. Ol’ Roy. India’s GDP is expected to grow 8.8% during 2012. besides opening new units. Mexico. Wal-Mart can capitalize on the rising demand for these goods. Ozark Trail. It has developed a social media technology platform that filters and organizes content in social networks to connect people with real-time information that matters to them. Inc. Wal-Mart offers a variety of private labels including Athletic Works. Sam's Club. This trend led to supercenters. According to National Retail Federation.Expansion through Acquisitions Wal-Mart over the years has followed a strategy of inorganic growth by acquiring companies across regions to enhance its operational base and market presence.5% in 2011. Wal-Mart Stores. a South African retailer with approximately 290 stores in 13 sub-Saharan African countries. Canopy. No Boundaries. social and mobile commerce company. Walmart Super center stores reported high growth at a CAGR of 9% between 2006 and 2011. Mainstays. The company. Faded Glory. Apart from beverages. along with widespread store network. is expected to grow 3. Argentina. The company operated 370 stores in China through a combination of joint ventures and other controlled subsidiaries at the end of fiscal 2012. which is expected to grow significantly in the near future.Increasing Demand for Private Label Products The demand for private label products has been increasing globally. Rise in disposable income has changed their buying behavior. The company’s Indian business consisted of wholesale cash-and-carry and back-end supply chain management operations through joint venture with Bharti Enterprises and technical support to the retail stores of Bharti Retail through a franchise agreement. private labels account for roughly 30% of all food purchases in the country. The company also acquired Kosmix. . The strategic expansion initiatives would help the company to expand its service network. with its established presence in the private label market. especially in the US.Financial and Strategic Analysis Review Reference Code: GDRT35083FSA Page 4 . This was mainly due to the massive fiscal stimulus package in China and India's skillful macroeconomic management. Canada. The prospects for developing countries are better with a relatively robust recovery and are likely to register 6% growth in 2012. the company acquired 51% ownership in Massmart. Chile. The company has hired UBS AG to examine a potential bid for this deal. and increase in cost of goods and services from inflationary pressures have restricted the shoppers in the US from making frequent trips to the stores. Inc. In addition. and White Stag. Increasing fuel prices. These supermarkets were converted to the ASDA brand during fiscal 2012. Growth in East Asia and Pacific region (especially China) as well as South Asia (especially India) has been resilient.. Brazil. Puritan. Wal-Mart is exploring a potential acquisition of the Brazilian unit of French retailer Carrefour SA as part of its strategy to expand operations in Brazil. As people tend to make the most of their shopping trips to supercenters and hypermarkets. at about 40% lower price than its competitors. Central America.Conversion of Discount Stores into Supercenters Wal-Mart has the ability to successfully execute its retail concepts in new markets in the US and increase number of stores in its operating markets. wages and employment levels. According to the World Bank. Member’s Mark. In April 2011. According to industry estimates. Thus. With heavy margins from private labels.Strategic Expansion Wal-Mart operates its business in the US. The World trade volumes are projected to expand 6. the global GDP was 2. Bakers & Chefs. Wal-Mart currently operates supercenters. could increase its sales. HomeTrends. discount stores. Durabrand. Sam’s Choice. Spring Valley. and the UK. This acquisition would strengthen the company’s operations in Africa. by expanding the supercenter and hypermarket concepts in these markets. Thus. Equate. the company can pass on the same to the customers in the form of low prices.9% in 2011. Everstart. Inc. Secret Treasures. Canopy. either by acquisitions or directly entering the markets. the company acquired 147 Netto stores from Dansk Supermarked in the UK. the company decided to expand its operations in the Brazilian and Swedish markets. consumer debt. It is further projected that private label products will account for approximately 30% of all dollar sales by 2012. could increase its sales. add new resources and enhance its position in the competitive market. by converting the existing discount stores into supercenters. Consumers are searching for stores where they can buy everything in one trip on a weekly or monthly basis rather than making more trips to smaller stores for buying various items. This acquisition was part of company’s strategy to expand its capabilities in rapidly growing social commerce environment. It also has joint ventures in India and China. and hypermarkets registering higher sales. The company could expand its business by selective acquisitions and strategic alliances that add new stores and markets to its existing international business. Puerto Rico. The growing economy in these countries has generated new employment opportunities for the residents and boosted their earnings.Opportunities Opportunity . Great Value. Opportunity . store brands constitute approximately 24% of all food and beverages served in the US homes.5% in 2012.7% growth in 2011. the company. Wal-Mart plans to offer one of its private label products. neighborhood markets and Sam’s Clubs in the US. Wal-Mart can focus on these markets to generate higher market share and profitability. China. In June 2011.

These risks associated with the company’s suppliers could affect merchandise sales and revenue. The company’s US segment and international segment compete with retailers operating discount stores. In addition to following the laws. and inflation. discount stores.Risks Associated With Suppliers The company’s operations are subject to the various risks associated with its suppliers.Threats Threat . Inc.5 an hour in January 2011. It also faces challenges in accessing products in a timely and efficient manner with respect to suppliers located and goods sourced from outside the US. .Intense Competition Retail business is highly competitive. transport security. Wal-Mart offers products to its customers at very low prices compared to its competitors. financial instability of suppliers. health and other insurance costs and adoption of new or revised employment and labor laws and regulations. currency exchange rates. Recently. labor problems. It follows certain laws with suppliers including labor and environmental laws. The company faces challenges in finding qualified suppliers who meet these standards. merchandise quality issues. It also faces stiff competition from Internet-based retailers and catalog businesses. It is also subjected to various external factors. There are various factors that could affect the company’s suppliers including political and economic instability in the suppliers’ country. Wal-Mart employs over 2. Inability to respond effectively to competitive pressures in the retail markets could adversely affect the financial performance of the company. pharmacy stores.75 per hour in 2010 to $8. super centers and hypermarkets. The company competes with many discount retailers. Wal-Mart Stores.Changes in Labor Laws and Other Issues The changing labor laws in the US could limit the company’s ability to find qualified personnel to fill vacant positions at the stores. increasing costs of labor and new or revised labor laws. retail and wholesale grocers and general merchandise wholesalers. in-store amenities and price. store hours.1 million qualified personnel at all of its stores including supercenters. suppliers’ failure to meet the standards of the company. including the availability of a sufficient number of qualified persons in the local operating markets. changing demographics.Financial and Strategic Analysis Review Reference Code: GDRT35083FSA Page 5 . supercenters. department stores. rules or regulations could adversely affect the financial performance of the company. neighborhood markets and club stores. supermarkets. Wal-Mart’s Sam’s Club US segment competes with wholesale club retailers including Costco. unemployment levels within those markets. Threat . BJ’s and other discount retailers. Currently. the suppliers should be certified as meeting the required supplier standards of conduct. With an employee base of over two million. Competition is based on various factors including merchandise selection and availability. the US government increased the minimum wage rate from $7. which could impact the growth of the company. Wal-Mart faces intense competition from many retailers in the US as well as other countries. This is possible only with the help of the supplier’s ability to deliver goods at minimum costs. specialty stores. NOTE: * Sector average represents top companies within the specified sector The above strategic analysis is based on in-house research and reflects the publishers opinion only Wal-Mart Stores. transport availability and cost. services offered to customers. Threat . location. availability of raw materials.Wal-Mart Stores.. Inc. clubs and distribution centers. Inc. The company’s products are sourced from a wide variety of domestic and international suppliers. hypermarkets and club stores. prevailing wage rates.

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