2. Industry Overview
Wal-Mart Stores, Inc. founded in Sears Roebuck and Co. founded
1962 in 1886
Sector: Services Sector: Services
Industry: Discount, Variety Stores Industry: Department Stores
Full-time Employees: 2,1M Full-time Employees: 312K
Number of Locations: 8,970 Number of Locations: 2,248
Target: Households, companies Target: Households
(wholesale)
4. Past Year’s Major Event
Bought 51% of the stocks Holding awards $20 000 in small
volume of Massmart. (June) business grants (June).
15 billion share repurchasing
program (June). Shares three TV friends in 2011
Investment in Yihaodian, fast and launch movie download service
growing e-commerce business in (December)
China. (May)
Acquisition of Social Media
Company Kosmix (April)
Increases in annual dividend by
21% ($1.21$1.46) (March)
9. Revenue by Area
United States International Sears Domestic Sears Canada
Focus on 5%
12%
US market
9 times
Higher
88% 95%
Total Revenue: $419B Total Revenue: $43B
10. Revenue by Segment
Walmart US International Sam's Club Sears Domestic K mart Sears Canada
12% 11%
Walmart is better:
International
Strong membership
loyalty
36%
62%
26% 53%
Total Revenue: $419B Total Revenue: $43B
18. Sales per Store & Sales per Square Foot
Sales per store Sales per square foot
-28 Increase by
sales 50 due to the
600 per 4500 modern
Stores strategies of
4000 supermarket
500
3500
400 -81.6 3000 Increase by
sales
2500 0.41 due to
300 per the modern
Stores 2000 strategies of
200 1500 supermarket
1000
100
500
0 0
2009 2010 2009 2010
WMT 509 481 WMT 4283 4333
SHLD 190.7 109.1 SHLD 1.09 1.5
19. Top Competitors by Market Capitalization
Market Capitalization: $203B Market Capitalization: $7B
Walmart
Target Corp:
Stores, Inc.:
$38B
$203B
Costco Wholesale
Target Corp:
Corp:
$38B
$37B
J. C. Penney
Carrefour S.A.:
Company, Inc.:
$12B
$9B
20. Top Competitors by Market Capitalization
Market Capitalization: $203B Market Capitalization: $7B
Walmart
Target Corp:
Stores, Inc.:
$38B
$203B
Costco Wholesale
Target Corp:
Corp:
$38B
$37B
J. C. Penney
Carrefour S.A.:
Company, Inc.:
$12B
$9B
21. Direct Competitors by Market Share
Discount, Variety Stores Industry: Department Stores Industry:
Percentage Market Share Percentage Market Share
13% 1% 2%
12%
2%
2%
Walmart Sears
82% Stores Holdings
Costco Target Corp
Wholesale 85%
Target Corp Walmart
Stores
Other Other
22. Competitors by Segment
• Best Buy: $8B • Tesco: $2 543B
• Gamestop: 3B • Morisson Supermarket:
• Radioshack: $678M $752B
• Sainsbury’s: $550B
Electronics Grocery
Stores Stores
Industry Industry
Home
Drug
Improvement
Stores
Stores
Industry
Industry
• CVs Caremark: $58B • Home Depot: $920B
• Walgreen: $29B • Kingfisher: $660B
• GNC Holdings: $3B • Lowe’s Companies:
$34B
23. Industry Differentiation
Discount, Variety Stores Industry: Department Stores Industry:
Discount grocery stores Durable goods and products to
the consumer's personal and
residential needs;
Other discount retailers multiple merchandise lines
e.g.: Target (TGT)
Sell apparel, furniture, home
Sell small cheaply priced goods appliances, toys, cosmetics, gar
to households dening, toiletries, etc.
(scissors, tape, pencils, etc.)
Part of a retail chain of many
stores.
25. Marketing Strategy
Low prices: High quality:
“Saturation” strategy Build in large towns
Stores at 1 day drive to Sell
warehouse attractive, innovative, high-
quality products
Branded products at low
prices Fleeting star clothes
collection
Large discount stores in
small rural towns
26. Quarterly Loading of Sales
Walmart: Quarterly sales as percent of year sales Good
repartition of
30% 28% sales during
27%
25%
25% 23% 23%
25% 24% 24% the year
2009 2010
20%
15%
10%
5%
0%
Q1 Q2 Q3 Q4
Sears: Quarterly sales as percent of year sales Good
30% repartition
25%
of sales
24% 24% during the
23% 23% 23%
20% 22% year with
2009 2010
a
15%
significant
10% rising in
the end of
5%
the year
0%
Q1 Q2 Q3 Q4
27. Quarterly Loading of Net Income
Walmart: Quarterly net income as percent of year net income Good
repartition
35% 32%
of net
30% 28% income
26%
25% 23%
24% 23% 23% during the
21%
year
20%
2009
15%
2010
10%
5%
0%
Q1 Q2 Q3 Q4
Terrible repartition
500 Massive
of net income
Sears: Quartely net income in million of dollar
430
400 374 won in Q4
during the year Massive loss of
300
net income in
200 Q2-Q3
100
26 16 2009
0 2010
Q1 Q2 -39 Q3 Q4
-100
-94
-127
-200
-218
-300
28. Beta Analysis
Walmart vs Sears
Sears much more riskier (2.51 vs. 0.46)
Services
S&P500:
Shares of Sears plunged more than 27% in 3 years Sector:
1.22
Closed 120 US stores 0.97
Walmart
Defensive stock as the beta is <1
Positive quarterly sales growth
Constant growth in the stock price
Reaction of the stock is less than the market Index
Less risky to the market
Assets has less systematic risk than the overall market
Sears
Aggressive stock as the beta is >1
Most of the quarterly sales growth are negative since 2007
High volatility of the stock more risks more expected
return Sears 5.5
Stock will react more than the market index
times higher
More risky than the market
30. Comparative Income Statement – 2 Years
Horizontal Analysis
In millions of USD WALMART SEARS
Period ending January 31, 2011 2010 2011 vs 2010 2011 2010 2011 vs 2010
Amount Amount Amount V% Amount Amount Amount V%
Total Revenue 421 849 408 085 13 764 3%3% 43 326 44 043 -717 2%
-2%
Cost and expenses
Cost of sales 315 287 304 444 10 843 4% 31 448 31 824 -376 -1%
Gross Margin 106 562 103 641 2 921 3% 11 878 12 219 -341 -3%
Operating , selling, general and administrative
81 020 79 639 1 381 2% 11 404 11 506 -102 -1%
expenses
Total operating expenses 396 307 384 083 12 224 3% 42 852 43 330 -478 -1%
Operating Income or loss 25 542 24 002 1 540 6%6% 474 713 -239 -34%
-34%
Interest expenses 2 205 2 065 140 7% 324 326 -2 -1%
Interest income -201 -181 -20 11% -36 -33 -3 9%
Income from continuing operations before 6% -56%
23 538 22 118 1420 6% 186 420 -234 -56%
income taxes
Provision for income taxes 7 579 7 156 423 6% -36 -123 -87 -71%
Income from continuing operations 15 959 14 962 997 7% 150 297 -147 -49%
Income from discountinued operations, net of tax 1034 -79 1 113 1 409%
1 409% X X
Consolidated net income 16 993 14 883 2 110 14% 150 297 -147 -49%
Minority interests -604 -513 -91 18% -17 -62 45 -73%
Total consolidated net income 16 389 14 370 2 019 14%
14% 133 235 -102 -43%
-43%
31. Comparative Income Statement – 2 Years
Vertical Analysis
In millions of USD WALMART SEARS
Period ending January 31, 2011 2010 2011 2010
Amount %Rev Amount %Rev Amount %Rev Amount %Rev
Total Revenue 421 849 100% 408 085 100% 43 326 100% 44 043 100%
Cost and expenses
Cost of sales 315 287 75% 304 444 75% 31 448 73% 31 824 72%
Gross Margin 106 562 25% 103 641 25% 11 878 27% 12 219 28%
Operating , selling, general and administrative
expenses
81 020 19%
19% 79 639 20%
20% 11 404 26%
26% 11 506 26%
Total operating expenses 396 307 94%
94% 384 083 94% 42 852 99%
99% 43 330 98%
Operating Income or loss 25 542 6%6% 24 002 6%6% 474 1% 713 2%
Interest expenses 2 205 1% 2 065 1% 324 1% 326 1%
Interest income -201 0% -181 0% -36 0% -33 0%
Income from continuing operations before income
23 538 6%6% 22 118 5%5% 186 0%0% 420 1%1%
taxes
Provision for income taxes 7 579 2% 7 156 2% -36 0% -123 0%
Income from continuing operations 15 959 4% 14 962 4% 150 0% 297 1%
Income from discountinued operations, net of tax 1 034 0% -79 0% X X
Consolidated net income 16 993 4% 14 883 4% 150 0% 297 1%
Minority interests -604 0% -513 0% -17 0% -62 0%
Total consolidated net income 16 389 4%4% 14 370 4% 133 0%0% 235 1%
32. One-Day Comparative Income Statement
In millions of USD WALMART SEARS
Period ending January 31, 2011 2011
Amount % revenue Amount % revenue
Total Revenue 1 171,8 100% 120,4 100%
Cost and expenses
Cost of sales 875,8 75% X6
87,4 73%
Operating , selling, general and administrative
225,1 19% 31,7 26%
expenses
Total operating expenses 1 100,9 94% 119,0 99%
Operating Income or loss 71,0 6% 1,3 1%
6.1% 1.1%
Interest expenses 6,1 1% 0,9 1%
Interest income -0,6 0% -0,1 0%
Income from continuing operations before
65,4 6% 0,5 0%
income taxes
Provision for income taxes 21,1 2% -0,1 0%
Income from continuing operations 44,3 4% X 13
0,4 0%
Income from discountinued operations, net of
2,9 0% X X
tax
Consolidated net income 47,2 4% 0,4 0%
Minority interests -1,7 0% -0.0 0%
Total consolidated net income 45,5 3.9%4% 0,4 0.3%0%
33. Comparative Balance Sheet: Assets
In millions of USD WALMART SEARS
Period ending January 31, 2011 2010 2011 vs 2010 2011 2010 2011 vs 2010
ASSETS Amount % Amount % V V% Amount % Amount % V V%
Current assets
Cash and equivalent $7 395 4% $7 907 4% $-512 -6% $1 390
-6% 6% $1 700 7% $-310 -18%
-18%
Receivables, net 5 089
Due from banks: 2%
3% 4 144 945 23%
23% 683 3%
Decreased income 31
652 3% 5%
Inventories 36 318 $1.2B in FY2011
20% 32 713 16% 3 605 11% 11% Higher pension & post-retirement 5%
9 123 38% 8 705 35% 418 5%
$2.6B in FY2010
Pharmacies Insurance Higher working capital balances
Prepaid expenses 2 960
Banks for credit card, 1% card
2% 3 128 debit -168 -5% 312 1% 351 1% -39 -11%
13 divisions to 49 departments: Sears Canada: $150M increase
Current assets of Better for marketing
Suppliers turnover Change in exchange rates
131 0% 140 0% -9 -6% 27
Retail environment 0%
0% 30 changing -3 -10%
discontinued operations Precise COGS, ending inventory
value at the lower of cost or market Low sales
Total Current assets $51 893 29% $48 032 23% $3 861 8% $11 535 BUT Good438
48% $11 Mgmt: -$42M $97
46% 1%
Property and equipment US: $32M in goodwill
$105 098 6% $-369 -5%
net Int.:58% $99in currency $5 554
$605M 544 66% 6% $6 966 29% $7 335 30% -5%
Property under capital translation
Expansion:
2 780 2% 2 763 1% 17 1% 399 Improvements 2%
2% 374 25 7%
lease net Asia, Brazil, Mexico Extention of existing
Goodwill 16 763 9% 16 126 8% 637 4%
4% 1 392
facilities and1 392
6% 6%
equipment 0 0%
Other asset and defered
4 129 2% 3 942 2% 187 5% 3 976 16% 4 269 17% -293 -7%
charges
Total assets $180 663 100% $170 407 $10B
100% $10 256 6% $24 268
6% 100% $24 808 100% $-540 -2%
$-540M -2%
34. Comparative Balance Sheet: Liabilities & Owner’s Equity
In millions of USD WALMART SEARS
Period ending January 31, 2011 2010 2011 vs 2010 2011 2010 2011 vs 2010
LIABILITIES Amount % Amount % V V% Amount % Amount % V V%
Current liabilities
ST Debt $1 031 1% $523 0% $508 97%
97% $360 1% $325 1% $35 11%
Account payable 33 557 19% 30 451 18% 3 106 10%
10% 3 101 13% 3 335 13% -234 -7%
-7%
Finance seasonal
Accrued liabilities 18 701 10%
buildups in18 734 11%
Increased investment in
inventory -33 0% 3 115 13% 3 098
Lower sales at Sears
12% 17 1%
Income tax payable 157 Need liquidity 1% -1 190
0% 1 347
inventory -88% 557 2% 534 2% 23 4%
-88% Domestic
Current portion of LT debt and $1.0B tax benefit3%
in
capitalized lease
4 991 3% 4 396 595 14% So, reduced inventory 27
509 2% 482 2% 6%
discontinued operations
receipts at the end of 2010
Other liabilities 47 0% 92 0% -45 -49% 976 4% 1012 4% -36 -4%
Total current liabilities $58 484 32% $55 543 33% $2 941 5% $8 618 36% $8 786 35% $-168 -2%
LT debt 40 692 23% 33 231 20% 7 461 22%
22% 2 663 11% 1 698 7% 965 57%
57%
Other non current liabilities 10 240 6% 8 985 5% 1 255 14% 4 373 18% 4 889 20% -516 -11%
Pay down or refinance $1.2B issuance of Senior
Total Liabilities $109 416 61% $97 759 57% $11 657 12% $15 654 65% $15 373 62% $281 2%
existing debt Secured Notes (due 2018 at
EQUITY
$1B of currency 6.625%)
Common stock $352 0% $378 0% $-26 -7% $1 0% $1 0% 0 0%
translation loss
Treasury stock -14 342 Investment in UK & -7 002 95%
-8% -7 340 -4% 95% -5 826 -24% -5 446 -22% -380 7% 7%
Paid-in-capital $162M of Japan
3 577 2% restricted stock -226
$14B Stock3 803 2%
Repurchase -6% 10 185 42% 10 465 42% -280 -3%-3%
$394M shares repurchase
Retained earnings and performance share 4 612 6%
78 309 43% 73 697 43% 6% 4 930 20% 4 797 19% 133 3%
Purchased 5.4 million 3%
Accumulated other awards Shareholders: $133M($1.19 -58
646
$4B0% -70
Cash dividends 0% 716 1 023% -779 -3% shares of Sears
common -721 -3% 8%
comprehensive loss 1 023% per diluted share)
Noncontrolling interest ($1.21 per share) 1%
2 705 1% 2 180 525 24%24% 103 Canada $269M 1%
0% 339 -236 -70%
-70%
Total equity $71 247 39% $72 648 income 401
BUT $17B from 43% $-1 -2% $8 614 35% $9 435 38% $-821 -9%
Total liabilities and taxes to invest abroad
$180 663 100% $170 407 100% $10 256 6% $24 268 100% $24 808 100% $-540 -2%
shareholder's equity
36. Comparative Cash Flow
In millions of USD
WALMART SEARS
Fiscal year ending January 31, 2011
Cash flows from operating activities
Income from continuing operations 16389 133
Depreciation and amortization 7641 900
Income tax payable -1190 23
Accrued liabilities -33 17
A/R -945 -31
Inventories
Inventories -3 605
-3605 -418-418
Free cash Free cash
A/P 3106 -234
Prepaid expenses 168 39
Property under capital lease -17 -25
flow: Current asset from discontinued operations
Other non current liabilities
9
1275
3
0
flow:
$9 371 Post retirement benefits
Current liabilities from discontinued operations
0
-45
-120
-36 -$280
Net cash provided by operating activites 22753 251
Cash flows from investing activities
Property and equipment
Payments for property and equipment -13 195
-13195 -531-531
Goodwill -637 0
Investment and business acquisitions -187 293
Net cash used in investing activities -14019 -238
Cash flows from financing activities
ST borrowings 508 35
LT Debt
Proceeds from issuance of LT debt 7 461
7461 -396-396
Long-term obligations under capitalized lease -20 965
Obligation under capitalized lease -10
Current portion of LT debt 605 27
Additional paid-in-capital -226 -280
Dividend -11777 0
Common stock -26 0
Purchase of treasury stockStock
Treasury -7 002
-7002 -380-380
Other comprehensive gain/(loss) 716 -58
Non controlling interests 525 -236
Net cash used in financing activities -9246 -323
Change in cash position -512 -310
Difference 0 0
Net change in cash -512 -310
Cash at begining 7907 1700
Cash at end 7395 1390
38. Individual Ratios 2 Years - Walmart
2010 2009 Better / Worse
Current & Quick Liquidity
Ratios are Constant Current 0,89 0,86 B
Quick 0,27 0,28 W Based on 2009
Profitability: Profitability
ROA 0.091
0,091 0.069
32% 0,069 B
ROA & ROE
ROE 0,24 0,2 B
ROS 0,04 0,04 Equal
EQUAL
Turnover: Turnover
Generates profits Receivables Turnover 82.89
82,89 - 16%98,48
98.48 W
But Asset Turnover 2,34
2.34 19% 1,96
1.96 B
A/R & Inventory Inventory Turnover 8,68 9,31 W
8.68 - 7% 9.31
Leverage
D/A 0,32 0,27 W
Lowly leverage
D/E 1.54 1.35 W
Cash Management
DSO 4,34 + 0.68 days 3,66
4.34 3.66 W
# of days ICD 41,47 38,7 W
APD= 2.31 days UP APD 38,32 36,01 B
CCC 7.5 7,5 + 1.17 days6,33
6.33 W
Dividends
4,24
Earnings
EPS
DPS
4.24
-
16% 3,65
3.65
-
B
-
Payout Ratio 0,26 0,26 Equal
EQUAL
Productivity
Sales/Employee $210 925 $194 326 B
8 Better
Ni/Employee $8 195 $6 843 B 8 Worse
39. Individual Ratios 2 Years - Sears
2010 2009 Better / Worse
Liquidity
Current 1,34 1,30 B
Quick 0,28 0,31 W Based on 2009
Profitability
Profitability ROA 0,01 0,01 Equal
EQUAL
decreases ROE 0,02 0,03 W
slowly ROS 0 0,01 W
Turnover
Receivables Turnover 63,43
63.43 - 6% 67,55
67.55 W
Asset Turnover 1,79 1,78 B
Inventory Turnover 3,45
3.45 - 6% 3,66
3.66 W
Leverage
D/A TIE - - -
Less Debt Financing D/A 0,65 0,62 W
D/E 1,82
1.82 -12% 1,63
1.63 W
Cash Management
Cash Management DSO 5,68 5,33 W
# of days ICD 104,44 98,47 W
APD 35,50 37,73 W
CCC 74.61 + 8.6 days 66,08
74,61 66.08 W
Dividends
Market Cap. - - -
Earnings EPS 1.19
1,19 - 40% 1.99
1,99 W
DPS
No Dividend
- - - 2 Better
Payout Ratio - - -
Productivity 14 Worse
Sales/Employee $138 865 $192 559 W
Ni/Employee $426
$426 $6 381 W
40. Comparative Ratios - 2010
Liquidity WALMART SEARS Better / Worse
Current Ratio 0,89 1,34 W 170%
Quick Ratio 0,27 0,28 W 96%
Profitability
1000%
ROS 4% 0% B
ROA 9% 1% B 900%
ROE 4% 2% B 200%
Walmart: Turnover
78% Better Receivable 82.89 63.43 B 130%
Wal-Mart: 14 Better
22% Worse Asset Turnover 2.31 1.79 B 130%
Inventory 8.68 3.45 B
Better 252%
Cash Management Days
Sears: DSO 4.34 days 5.68 days B +1.34 d
22% Better Profitability, Turnover, Leverage
ICP 41.47 days 104.44 days B +63 d
78% Worse APD 38.32 days 35.50 days W -2.82 d
and Productivity
CCC 7.50 days 74.61 days B +67d
Leverage
Debt to Asset 32.4% 64,5% B 50%
Debt to Equity 153.7% 181,7% B 8%
Market Value
EPS $4.24 $1.19 W 356%
Dividend Payout 26% 311% W
Productivity
Sales/Employee $210 925 $138 865 B 152%
NI/Employee $8 195 $426 B 1900%
Based on
Walmart
41. Reuter’s Ratios
WALMART % DIFFERENCE INDUSTRY % DIFFERENCE SEARS
VALUATION RATIOS
P/E Ratio (TTM) 12.94 45%
45% 28.76 - -
P/E High – Last 5 Yrs 16.06 35% 45.28 215% 97.45
P/E Low – Last 5 Yrs 13.04 78% 16.66 113% 18.87
Beta 0.34 59%
59% 0.58 336%
336% 1.95
Price to Sales (TTM) 0.45 60% 0.75 23% 0.17
Prices to Book (MRQ) 2.82 77% 3.66 46% 1.67
Price to Tangible Book (MRQ) 3.97 87% 4.58 282% 12.90
Price to Cash Flow (TTM) 8.19 61% 13.44 - -
Price to Free Cash Flow (TTM) 35.34 140% 25.20 - -
DIVIDENDS
Dividend Yield 2.48 175%
175% 1.42 - -
Divisdend Yield – 5 Yrs Avg 2.08 166% 1.25 - -
Dividend 5 year Growth Rate 16.86 157% 10.77 - -
Payout Ratio (TTM) 31.95 161% 19.83 - -
GROWTH RATES
Sales (MRQ) vs Qtr 1 Yr. Ago 5.85 41%
41% 14.35 -28%
-28% -3.98
Sales (TTM) vs TTM 1 Yr. Ago 5.95 31% 19.02 -14% -2.57
Sales – 5 Yr. Growth Rate 5.11 43% 11.77 -40% -4.75
EPS (MRQ) vs Qtr. 1 Yr. Ago 7.06 208%
208% 3.39 -22 283%
-22 283% -755.39
EPS – 5 Yr. Growth Rate 9.19 109% 8.42 - -
Capital Spending – 5 Yr. Growth Rate -2.92 - 18.58 - -
FINANCIAL STRENGHT
Quick Ratio (MRQ) 0.23 50%
50% 0.46 43%
43% 0.20
Current Ratio (MRQ) 0.88 78%
78% 1.13 98%
98% 1.11
LT Debt to Equity (MRQ) 66.02 126% 52.24 92% 48.10
Total Debt to Equity (MRQ) 74.92 104%
104% 72.23 111%
111% 80.47
Interest Coverage (TTM) 12.75 114%
114% 11.22 15%
15% 1.70
55. Dividend History
Has approved an annual dividend of $1.21 per
share, an 11 percent increase from the $1.09
per share paid during fiscal year 2010.
The annual dividend of $1.21 per share will be Does not provide any
paid in four quarterly installment of $0.3025 per dividend since they merged
share. with K-Mart in 2004
Has increased its dividend every year since its
first declared dividend of $0.05 per share in
March 1974.
58. Walmart Dividend Evolution
"We're very pleased that our
financial position continues to
allow us to pay shareholders
an increased dividend again
this year.”
Mike Duke
59. Treasury Stocks
2009 2010
In millions of USD
Numbers % Numbers %
Outstanding Share 3 929 96% 3786 93%
Treasury Stock 145 4% 280 7%
Total 4074 100% 4066 100%
5.0%
6.0% The amount of
Treasury stock rise
outstanding shares
form 4% to 7% which
treasury stock
represent a 43% raise
94.0%
2009 95.0%
2010
60. Treasury Stocks (cont’d)
2009 2010
In millions of USD
Numbers % Numbers %
Outstanding Share 115 94% 109 95%
Treasury Stock 7 6% 6 5%
Total 122 100% 115 100%
5.0%
6.0% The amount of
outstanding Treasury stock fall
shares
treasury stock
form 6% to 5% which
represent a 20% fall
94.0%
2010
95.0%
2009
61. WACC – Walmart
Walmart Weighted average cost of
capital is 6.27%
13.9% 33.7%
86% 66.3%
6.7% 5.8%
6.3%
62. WACC - Sears
Sears Weight average cost of capital
is 9.11
35.4% 65.2%
64.6% 34.8%
10.7% 7.5%
9.1%
63. Bank of Walmart
Walmart money car in association with GE
money bank
Walmart also have partnership with SunTrust
and Green dot
Walmart Canada provide a debit card with no
intermediary
65. Risks
Governments Factors:
Higher taxes Net import
Increase of exportation taxes from China’s Gov.
Political Factors:
Cold War between the U.S and China
Economic Factors:
Currency:
• Decrease of the dollar against the renminbi
• Increase of the renminbi against the dollar
Price competition
Inflation: Leading to a decrease in customers’ purchasing
power
Debt: Interest Rate
Environmental / Internal Factors:
Inventory: Strikes or environmental foribidding importing from
China
Editor's Notes
About the 2 companies’ industries, we can notice few majors differences.Wal-Mart is a very large American multinational retailer company as my colleague told you, which is focus in a eternal competition to the lowest priced goods, with very discounted grocery stores which erases all the little grocery stores around with the biggest number of employee in America. Only Target tries to remain in the competition prices. And the other side SEARS a very large company specialised in the department stores in the lower level than Wal-Mart, which is based in the durable goods and products to the consumer’s need, with multiple merchandise lines, a mix between “les galerieslafayettes and target”, Sears selling apparel furniture, toys, cosmetics and so on… Finally SEARS is a part of retail chain of many stores.
So as the two companies are in the same industry, their products are really similar, only few exceptions make them different,For Walmart: they sell Auto, they act like tires companies, they also give the possibility to offer home improvement, and enable their clients to benefit of a very high photo after sell service and other services also linked to the photo.Sears on their side, are more focus on outside house improvements, with a large range of lawn and garden products, tools, and outdoor living products and services. Furthermore Kmart has a special part for pets and office supply really advanced.
We took 3 factors, so the cash equivalents to show how much cash we have in hand, Then we took the total shareholders’ equity and long term debt to be able to compute the long term to equity ratio, So we found for Wal-Mart 57%. So they would have to liquidate 57% of their total equities to pay their debt. On the other side sears has a ratio of 0.31 so less debt to cover so investors would be more interesting to invest regarding these elements. We can also say that both have about 57% of the actual debt maturities are after 2016, which leave a bad uncertainty to the investors, furthermore we notice a fair increase in their long term debt compared to their equity between 2010 and 2009 for both Wal-Mart and SEARS, which indicates the impact of their new investments.
The comparative ratios shows us really significantly the difference in scale between the two companies. Between the 18 ratios here Wal-Mart is better for 14 in them, but let’s see more precisely. We are going to focus ourselves on few ratios About Liquidity, we can easily see that SEARS has a higher current ratio, they have more cash in hand and are more able to pay their obligations but they have to compared to the amount of debt that they have. About the profitability, they all higher, the ROA is 9X higher because… The cash management is also better for Wal-Mart because the ICD of SEARS is really high they… In term of leverage, the walmart’s is twice less higher because of the very large amount of Asset held by Wal-Mart. The Debt to Equity for both could make afraid the investors at first sight, because the both has more debt than equity. But their management is well constructed to enable them to be indebted to make new investments.The EPS could lead investors to be more influence to buy sears’ stock because Sears give lots of importance to their shareholders and give them a fair return much higher than Wal-Mart.
So let’s talk about the bankruptcy of each company, as you may know bankruptcy means the end of a business, often meaning a new fresh start with total liquidation of the former business because of a inability to meet its debt obligations. So first, we went through several steps to find our final results which will enable us to see the position of each company compared to a possible bankruptcy. First, we took the Balance sheet, then we compute the total fire sales assets by multiplying the assets by coefficients representing how quickly the asset can be liquidated (for example cash is equal to 1 because it is already converted but property under capital lease has a 0.5 because it needs a real conversion taking more time. Then we subtracted the liabilities and then we took the total and divided it by the common share outstanding to find the Net Liquidation Value.For Wal-Mart it means that in 2011 for when every assets would be liquidated, except the shares, the shareholders would have got $2. 33 per share instead of $58 normal. The difference is very big, which do not push the shareholders to buy the stock because of the high return in case of a default.And for sears it means that the shareholders would have been got 42.12 instead of about $70. For SEARS, the difference is lower, if the company defaults the shareholders would get a fair amount of money per share compared to the initial price.The decrease in the Net liquidation share value for the two companies shows us, that their risks of bankruptcy has a bit increased which can be a factor which influence investors not to invest in Wal-Mart or SEARS’ stocks.
Walmart:As a governments matter, their risk are a probable increase in taxes net import, and exportation taxes from china’s governmentIn a political way they could be in real danger in there would be a war between the U.S and China,Economic way:Currency: If the dollar decrease against the Renminbi, it would cost more expensive to import productThe risk is that a company find a way to challenge them very hard in the price competitionInflation: Decrease in customers’ purchasing powerDebt: IRInternal factor: a big strike because of the low wages or an natural disaster in China making impossible the exportation.
The big difference with walmart is in the inside factors: If sears lost suppliers they could be in real issues, or if the brands want to be independent and not to be sold in Sears, because of sears politics or improvements.
