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- 1. Wal-Mart Save money Live better Jamshid Shermatov B0900475 Botirkhon Sultonov B0900477 Davron Khudoykulov B0900464 Jasurbek Bozorov B0900457 Hasan Juraev B0900459
- 2. Outline • Overview • Competitor and Industry comparison • Ratio analysis • Prediction • Summary
- 3. Overview Wal-Mart Stores, Inc. operates more than 8,000 retail stores in three business segments globally: •Walmart U.S. 62.1% •Walmart International 26.1% •Sam’s Club. 11.8%
- 7. Industry Comparison WMT COST TGT Industry Market Cap: 200.48B 36.87B 36.60B 6.46B Employees: 2,100,000 92,000 355,000 31.00K Revenue Growth 8.10% 12.40% 5.10% 6.90% Revenue 440.14B 91.30B 69.24B 6.41B Gross Margin 25.04% 12.48% 29.94% 29.94% EBITDA (ttm): 34.23B 3.32B 7.51B 839.00M Operating Margin (ttm): 5.94% 2.69% 7.80% 5.97% Net Income (ttm): 15.59B 1.47B 2.98B N/A EPS (ttm): 4.72 3.32 4.30 1.16 P/E (ttm): 12.39 25.52 12.68 23.82 PEG (5 yr expected): 1.33 1.65 1.14 1.38 P/S (ttm): 0.46 0.40 0.53 0.57
- 8. Competitor comparison • Domestic competitor • Cost leadership • Specialized retailer • International competitor • Good supplier relationship (China)
- 9. Liquidity ratios Jan 31, 2011 Jan 31, 2010 Jan 31, 2009 Working capital -6,591 -7,511 -6,441 Current ratio 0.89 0.87 0.88 Quick ratio 0.21 0.22 0.20 Cash ratio 0.13 0.14 0.13
- 10. Activity ratios 2011 2010 Accounts receivable 90.755100 100.64504 turnover Activity Payable 9.851487314 10.2751096 times Turnover Inventory turnover 9.13464965 9.00406 times Fixed asset turnover 4.094486958 4.210457 times Total asset turnover 2.3867149 2.4244452 times
- 11. Leverage ratios 2011 2010 2009 Debt Ratio: 0.6056359 0.5727801 0.5895526 Debt-Equity Ratio 1.5357278 1.340714 1.436366 Times-Interest- 12.745509 12.712314 11.998947 Earned Ratio Cashflow 23,643 26,249 23,147 Adequacy
- 12. Profitability ratios Return on Jan 31, 2011 Jan 31, 2010 Jan 31, 2009 Sales Gross profit 24.74% 24.78% 23.70% margin Operating profit 6.10% 5.91% 5.68% margin Net profit 3.91% 3.54% 3.34% margin
- 13. Profitability ratios Return on Investment Jan 31, 2011 Jan 31, 2010 Jan 31, 2009 Return on equity 23.91% 20.26% 20.53% (ROE) Return on assets 9.07% 8.40% 8.20% (ROA)
- 14. Market tests (ratios) 2011 2010 2009 Earnings per $4.8 $3.861096 $3.491495 Share (EPS) Price/Earnings $15.75 $16.26 $19.19 (P/E) Dividend Payout 31.00% 28.2303% 27.2089% Dividend Yield 2.38% 2.16% 2.34% Book Value per $20.155per share $18.864 per share $17.029 per share Common Shares
- 15. Summary • World's largest retailer and grocery chain by sales • Low Cost Leadership • Close customer and supplier relationship
Editor's Notes
- Wal-Mart Stores, Inc. (NYSE: WMT) is the world's largest retailer and grocery chain by sales. Wal-Mart is so large that its are almost 50% more than its 5 closest competitors combined, including Target (TGT) and Sears Holdings (SHLD). Because of its mammoth size and buying power, Wal-Mart can buy its products at rock-bottom prices, exchanging high purchase volumes for low cost while passing the savings onto its customers. Many suppliers give in to Wal-Mart's pressure because they depend on the discount retailer for a majority of their sales. Conversely, however, Wal-Mart's reliance on Chinese-made imports makes the company vulnerable to a weakening dollar or strengthening of the Yuan. Wal-Mart purchases billions worth of merchandise directly from China every year with many of its other inventory from companies like Mattel (MAT) coming indirectly from China. In fact, if Wal-Mart were a country, its imports are so substantial that it would be China's sixth largest export country. A stronger Yuan means that Wal-Mart will have to pay more for its merchandise from China, an issue that threatens Wal-Mart's bottom line. Company OverviewWal-Mart operates 8,000 stores across three business segments of retail stores worldwide that offer a wide array of general merchandise including groceries, apparel, electronics, and small appliances. In addition, the company is the world's largest retailer and grocery chain by sales and just over half of the company's sales comes from grocery items. Over half of the company's stores are located in the United States, with the majority of international stores located in Central and South America and China.
- DescriptionWal-Mart Stores, Inc. (Walmart) operates retail stores. The Company operates in three business segments: Walmart U.S., Walmart International and Sam’s Club. During the fiscal year ended January 31, 2011 (fiscal 2011), the Walmart U.S. segment accounted for 62.1% of its net sales, and operated retail stores in different formats in the United States and Puerto Rico, as well as Walmart’s online retail operations, walmart.com. The International segment consists of retail operations in 14 countries. During fiscal 2011, the segment generated 26.1% of the Company’s net sales. The International segment includes different formats of retail stores and restaurants, including discount stores, supercenters and Sam’s Clubs that operate outside the United States. The Sam’s Club segment consists of membership warehouse clubs in the United States and Puerto Rico, and the segment’s online retail operations, samsclub.com. During fiscal 2011, Sam’s Club accounted for 11.8% of its net sales.
- Wal-Mart Low Cost LeadershipWal-Mart is the largest retailer in the world by sales, with almost 50% higher sales than its 5 closest competitors combined, including Target (TGT), Sears Holdings (SHLD), and Macy's Inc. (M). Wal-Mart uses its enormous size and buying power to pressure its suppliers into extremely low prices, offering orders of high volumes of merchandise in exchange for low prices. Wal-Mart then passes on these savings to its customers. Since many suppliers depend on Wal-Mart for a majority of its business, companies often give in to Wal-Mart's cost cutting demands, narrowing their margins or even redesigning their product offerings. Wal-Mart's bargaining power has helped the company maintain its low price leadership despite fluctuating commodities prices. For example, to fight rising prices of gasoline, grain, and dairy products, Wal-Mart pressured companies like General Mills (GIS) to shave its costs by implementing redesigns of its products and packaging. Competition Domestic Competitors Target (TGT) is Wal-Mart's most direct competitor, offering a range of general merchandise in a similar store format (standard Targets, with limited food offerings, compare to Wal-Mart's discount stores, and Supertargets compare directly to supercenters). Target’s major competitive advantage over Wal-Mart lies in its customer base: the average household income for Target customers is about $50,000 a year, whereas the average yearly income for a Wal-Mart customer is only $35,000. Finally, because of its focus on low prices, Wal-Mart has found it difficult to promote higher-quality items or private labels that come in at a higher price point; meanwhile, Target has had success with its quality-at-value-prices strategy among higher-income demographics, where price is not the only influence on sales. This higher-income customer base gives Target more stability than Wal-Mart, particularly as energy costs rise and the real estate market slows. Kmart (SHLD), as the third discount retailer of the "Big Three", has seen steadily declining sales since 2000, losing considerable market share to both Wal-Mart and Target. Other Retailers As a large-scale retailer, Wal-Mart competes with a wide variety of other, specialized retailers, such as Safeway in groceries, Best Buy (BBY) in consumer electronics, and department stores such as Macy's in apparel and home decor. Wal-Mart’s focus on price differentiation means that these companies, while competing in overall market share, are not necessarily competing for the same type of customer; however, in more volatile or price-sensitive markets, such as consumer electronics, discounters like Wal-Mart are able to leverage their pricing advantage and apply increasing pressure on other retailers. Sam's Club directly competes with Costco Wholesale (COST) and BJ's Wholesale Club (BJ) in the warehouse club sector, where Costco has the advantage in terms total sales. International Competitors Wal-Mart's major international competitors are Britain's Tesco, France's Carrefour, and Germany's Metro. Each of these companies have a competing presence in China, the UK, and Japan, with Wal-Mart contending with at least one of them in many of its other markets. Relying on Imports from China Makes Wal-Mart Vulnerable to Currency Rate ChangesWal-Mart depends heavily on China for manufacturing its merchandise as it purchases billions of dollars worth of merchandise every year. Additionally, many of the company's suppliers like Mattel (MAT) manufacture their products in China, which in turn are sold in Wal-Mart stores. Wal-Mart's imports are so substantial in fact, that if Wal-Mart were a country, it would be China's sixth-largest export market. By outsourcing to China, Wal-Mart is able to secure lower costs of inventory, which the company in turn passes on to low prices for customers. However, as a result of its dependency on Chinese manufacturing, Wal-Mart is vulnerable to fluctuations in the value of the dollar compared to the Chinese Yuan. If, for example, the dollar weakens compared to the Yuan, the price of Wal-Mart's Chinese imports would rise. As a result, the company would either have to raise its prices or would have to cope with narrowed gross margins, reducing its profitability. Additionally, the company is vulnerable to adverse legislation, such as higher tariffs, that would raise the cost of its Chinese imports.
- RatioDescriptionThe companyCurrent ratioA liquidity ratio calculated as current assets divided by current liabilities.Wal-Mart Stores Inc.'s current ratio deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level. Quick ratioA liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities.Wal-Mart Stores Inc.'s quick ratio improved from 2009 to 2010 but then slightly deteriorated from 2010 to 2011. Cash ratioA liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities.Wal-Mart Stores Inc.'s cash ratio improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
- Accounts Receivable Turnover: Measures ability to collect cash from credit customers.Accounts Receivable Turnover: Net Sales/Average Net Account ReceivablesActivity Inventory Turnover: Indicates the stability of inventory. The number of times a company sells its average inventory level during the year.Activity Inventory Turnover: Cost of Goods Sold/Average InventoriesActivity Payable Turnover: Measures efficiency of the firm in paying suppliers.Activity Payable Turnover: Cost of Goods Sold/Average Accounting PayableFixed Asset Turnover: Measures the firms efficiency of managing fixed assets.Fixed Asset Turnover: Net sales/Average net PP&ETotal Asset Turnover: Measures the firms efficiency of managing all assets.Total Asset Turnover: Net Sales/Average Total Assets
- Debt Ratio: Shows the portion that is financed with debt.Debt Ratio: Total Liabilities/Total AssetsDebt-Equity Ratio: Indicates nature of capital structure and relative use of leverage.Debt-Equity Ratio: Total Liabilities/Total Shareholder’s EquityTimes-Interest-Earned Ratio: Number of times operating income can cover interest expense.Times-Interest-Earned Ratio: Income From Operations/Interest ExpenseCashflow Adequacy: Measures how many times capital expenditures, debt repayments, and cash dividends are covered by operating cashflow.Cashflow Adequacy: Cash flow from Operating Activities/(Capital expenditures + Debt Repayments + Dividends Payment
- RatioDescriptionThe companyGross profit marginGross profit margin indicates the percentage of revenue available to cover operating and other expenditures.Wal-Mart Stores Inc.'s gross profit margin improved from 2009 to 2010 but then slightly deteriorated from 2010 to 2011. Operating profit marginA profitability ratio calculated as operating income divided by revenue.Wal-Mart Stores Inc.'s operating profit margin improved from 2009 to 2010 and from 2010 to 2011. Net profit marginAn indicator of profitability, calculated as net income divided by revenue.Wal-Mart Stores Inc.'s net profit margin improved from 2009 to 2010 and from 2010 to 2011.
- ROEA profitability ratio calculated as net income divided by shareholders' equity.Wal-Mart Stores Inc.'s ROE deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level. ROAA profitability ratio calculated as net income divided by total assets.Wal-Mart Stores Inc.'s ROA improved from 2009 to 2010 and from 2010 to 2011.
- Earnings per Share (EPS): Indicates the amount of net income per one share of the company’s common stock.Earnings per Share (EPS): (Net Income – Preferred Dividends)/No. of Shares of Common Stock OutstandingPrice/Earnings (P/E) Ratio: Indicates the market price of $1 earnings.Price/Earnings (P/E) Ratio: Market price per share of common stock/EPSDividend Payout: Shows percentage of earnings paid t0 shareholders.Dividend Payout: Dividends per share of common stock/ EPSDividend Yield: Shows the percentage of a stock’s market value returned as dividends to shareholders each period.Dividend Yield: Dividends per share of common stock/ EPSBook Value per common shares: Indicates the recorded accounting amount for each share of common stock accounting. This measure is used as a benchmark to track a firm’s value.Book Value per Common Shares: (Total stockholders’ Equity – Preferred equity)/(Number of shares of common outstanding)