Industry Analysis
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Industry Analysis Presentation Transcript

  • 1. Industry Analysis Samir Mohan
  • 2. Industry Sector & the NAICS 2 Digit Code Industry Sector: Retail Trade NAICS 2 Digit Code: 44-45 The Sector as a Whole: The Retail Trade sector comprises establishments engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of merchandise. The retailing process is the final step in the distribution of merchandise; retailers are, therefore, organized to sell merchandise to the general public. Store retailers operate fixed point-of-sale locations, located and designed to attract a high volume of walk-in customers. In general, retail stores have extensive displays of merchandise and use mass- media advertising to attract customers. They typically sell merchandise to the general public for personal or household consumption, but some also serve business and institutional clients. Source: http://www.naics.com/
  • 3. Industry Sub-Sector & the NAICS Code Industry Sub-Sector: Warehouse Clubs & Supercenters NAICS Code: 452910 This industry comprises establishments known as warehouse clubs, superstores or supercenters primarily engaged in retailing a general line of groceries in combination with general lines of new merchandise, such as apparel, furniture, and appliances. Source: http://www.naics.com/
  • 4. Warehouse Clubs & Supercenters (452910) 1997 2002 Growth # of Stores 1,530 2,912 90% Sales ($1,000) 81,918,756 191,252,396 133% Source: http://www.naics.com/
  • 5. Discount Industry & the NAICS Code Industry Sub-Sector: Discount Department Stores NAICS Code: 452112 This U.S. industry comprises establishments known as department stores that have central customer checkout areas, generally in the front of the store, and that may have additional cash registers located in one or more individual departments. Department stores in this industry sell a wide range of general merchandise (except fresh, perishable foods). Source: http://www.naics.com/
  • 6. Discount Department Stores (452112) 1997 2002 Growth # of Stores 6,378 5,650 -11% Sales ($1,000) 126,122,830 133,886,174 6% Source: http://www.naics.com/
  • 7. Warehouse Clubs & Supercenters (452910) + Discount Department Stores (452112) Combined 1997 2002 Growth # of Stores 7,908 8,562 8% Sales ($1,000) 208,041,586 325,138,570 56% Since Wal-Mart belongs to both Sub-Sectors, Wal-Mart data will be compared to the total of both NAICS codes 452910 & 452112 Source: http://www.naics.com/
  • 8. Wal-Mart 1997 2002 Growth Sales ($1,000) 104,859,000 217,799,000 108% Source: www.walmart.com
  • 9. Wal-Mart’s performance relative to Warehouse Clubs & Discount Stores In 1997 Wal-Mart contributed 50% of the Sub Sector’s overall Sales. (Warehouse Clubs - 452910 & Discount Stores - 452112) By 2002 Wal-Mart sales grew to 66% of the Sub Sector’s overall Sales. Source: http://www.naics.com and www.walmart.com /
  • 10. Market Share & HHI ENTERPRISE MARKET SHARE Let's begin at the beginning. A two year time frame (2006-07) was used because their fiscal years have different closing dates. The fiscal years of Mal-Mart (WMT) and Sears (SHLD) closed in early 2007 while those of Costco (COST) and Target (TGT) closed in late 2006. The companies generated $456.6 billion in combined sales revenues. Wal-Mart's share was 62.2 percent of group revenues. The market shares of its three competitors were 13.2, 13.0 and 11.6 percent. Source: http://www.customersandcapital.com/book/walmart/
  • 11. HHI Calculations Market 2006-07 Market Share Sqd. Share 62.2 3,868.84 13.2 174.24 13.0 169 11.6 23.2 HHI = 3,868.84 + 174.24 + 169 + 23.2 = 4235.28
  • 12. HHI The higher the index, the more concentration and (within limits) the less open market competition. A monopoly, for example, would have an HHI index of 10,000, the maximum score. If the 4 company’s had an equal share of 25% the HHI index would be 2500, with no particular company having a higher concentration over the others. Based on these parameters an HHI index of 4235.28, the Discount Department and Warehouse Clubs industry would be considered low to mid concentrated with Wal-Mart having the majority of share. Source: http://www.oligopoly watch.com/2003/08/15.html
  • 13. Wal-Mart’s Performance Relative to Competitors within the same Sub-Sectors 2008 Wal-Mart Stores Inc. BJ's Wholesale Club Inc. Costco Wholesale Corp. Target Corp. Family Dollar Stores Inc Industry Discount, Variety Stores Discount, Variety Stores Discount, Variety Stores Discount, Variety Stores Discount, Variety Store Current Share Price 47.12 28.68 45.03 31.2 27.77 Market Value $184,831 mil $1,687 mil $19,509 mil $23,487 mil $3,885 mil Revenues $404,040 mil $9,944 mil $73,068 mil $65,259 mil $7,054 mil Net Earnings $13,705 mil $132 mil $1,284 mil $2,633 mil $240 mil 5-yr Sales Growth 9.14% 7.62% 10.15% 7.25% 7.34% 5-yr Earnings Growth 9.84% 4.37% 11.04% 8.59% 2.73% Net Profit Margin 3.40% 1.30% 1.80% 4.00% 3.40% Short Interest 2.1 5.9 3.9 4.8 2.3 Proj. Long-Term EPS Growth (%) 10.30% 11.30% 12.10% 12.30% 9.80% Forward P/E 13.9 12.9 15.5 10.7 15.9 PEG 1.35 1.14 1.27 0.87 1.63 Price/Sales 0.5 0.2 0.3 0.4 0.6 Price/Cash Flow 10.7 8.7 11.4 6.8 10 Price/Book 2.8 1.7 2.2 1.7 3 ROE 20.80% 13.60% 14.20% 18.60% 19.50% ROA 8.10% 6.50% 6.10% 5.90% 9.20% Dividends $0.95 $0.00 $0.64 $0.64 $0.54 Dividend Yield 2.02% 0.00% 1.42% 2.05% 1.94% Payout Ratio 27.30% 0.00% 26.50% 17.70% 29.80% Total Return (12-mos) -5.30% -11.50% -32.80% -42.60% 34.40% Total Return (3-yr) 7.60% -10.80% -6.30% -40.20% 21.70% Beta 0.2 0.5 0.8 1.1 0.1 % Off 52-wk High 26.20% 35.24% 40.14% 47.61% 14.55% % Above 52-wk Low 0.43% 1.13% 46.68% 21.87% 54.28% On-Balance Volume Index 53 85 69 86 161 Source: http://www.smartmoney.com/stock-quote/?referrer=/marketmap/index.c fm&story=competition&symbol=WMT
  • 14. Travel Agencies NAICS code: 561510 This industry comprises establishments primarily engaged in acting as agents in selling travel, tour, and accommodation services to the general public and commercial clients. 1997 2002 Growth # of Establishments 29,332 21,705 -26% Sales ($1,000) 9,977,110 9,387,397 -6% The travel agency industry has been seeing a decline in both sales (-6%) and # of establishments (-26%). The decline is sales from ‘97 to ’02 can be attributed to the slight 2001-02 recession in the US economy after the dot com bubble burst and 9/11 terrorist attacks. The number of establishments has decreased due to the popularity and convenience of e-ticketing options. Source: http://www.naics.com/
  • 15. Book Publishing NAICS code: 511130 This industry comprises establishments known as book publishers. Establishments in this industry carry out design, editing, and marketing activities necessary for producing and distributing books. These establishments may publish books in print, electronic, or audio form. 1997 2002 Growth # of Establishments 2,684 3,570 33% Sales ($1,000) 22,648,251 27,162,866 20% There has been an increase in both sales and # of establishments from ‘97 to ‘02. The outrageous cost of college books must be contributing to the increase in sales.
  • 16. Book Publisher’s & Travel Agency’s Sales & No. of Establishments Compared.
  • 17. Industry Life Cycle Based on the competitive and comparative analysis (Sales, # of establishments, growth rates) I would place Discount Stores in the low to mid section of The Maturity stage in the Industry Life Cycle, Book Publishers in the mid to high Maturity stage and Travel Agency's in the mid Decline stage.