Evaluating the Financial Health of Wal-Mart Stores, Inc

Only available on StudyMode
  • Download(s): 198
  • Published: November 12, 2010
Read full document
Text Preview
Evaluating the Financial Health of Wal-Mart Stores, Inc.
Wal-Mart Stores, Inc. is a discount variety business that began small and has grown into a worldwide multibillion dollar industry within the forty eight years of operation. Providing a brief history, analyzing the financial statements, performing an industrial comparison and trend analysis, this paper will evaluate the financial health of this corporation. (Walmart Corporate, 2010). History

Wal-Mart was established in 1962 by Sam Walton, a 1940 University of Missouri economics major. The first store was opened in Rogers, Arkansas offering a variety of merchandise for consumers. Mr. Walton’s strategy of opening locations in small towns and offering consumers a wide variety of products at low costs was compelling and successful. The company became incorporated on October 31, 1969 and went public in 1970. By 1991, the company had become international and a multibillion dollar business. (Walmart Corporate, 2010). Industry and Economy

Currently, Wal-Mart has businesses within 15 countries including the United States. They employ over 2.1 million individuals worldwide. The Wal-Mart Stores, Inc. is comprised of three business segments. These segments are Walmart U.S., International and Sam’s Club they consist of retail operations that include discount stores, supercenters, grocery stores, Sam’s Clubs, Distribution Centers, and a internet shopping network called Walmart. Com. The supercenters, which were established in 1988, offer a variety of specialty shops that include vision centers, restaurants, portrait studios, one hour photo centers, pharmacies, health clinics, employment agencies, hair salons, banks and grocery centers. The wide variety of merchandise offered includes family apparel, health and beauty aids, electronics, toys, lawn and garden products, jewelry, automotive products, home furnishings, hardware, sporting goods, pet supplies and house wares. Wal-Mart Stores, Inc. mission “to save people money so they can live better”, has been the foundation of which the business has grown. (Walmart Corporate, 2010). Wal-Mart Stores, Inc. sales volume is affected by seasonal aspects and competition. They have the highest volume of sales during their fourth fiscal quarter, which includes the holidays. Their lowest volume of sales occurs during the first fiscal quarter. The majority of the competition occurs regionally with like industries. Some of these retail competitors include Target Corporation and Costco Wholesale Corporation. Wal-Mart Stores, Inc. also competes with other retail competitors on the internet, warehouse stores and for new store locations. (Walmart Corporate, 2010). Some of the risk factors that can affect Wal-Mart Stores, Inc. include inflation, deflation, expansions, conversions, higher interest costs, high fuel costs, legal proceedings, natural disasters, price increases by suppliers, unavailability of the needed volume of goods and competition to name a few. (Walmart Corporate, 2010). Industry Comparison

As mentioned previously Wal-Mart Stores, Inc. compete with other retail operators within the same industry. To give an idea of how Wal-mart compares to these retailers an industry comparison chart is illustrated below. (Walmart Corporate, 2010).

INDUSTRY COMPARISON CHART
Wal-Mart Stores, Inc.
FY 2009
(Dollar amounts in millions)
COMPANYOPERATING ACTIVITYINVESTING ACTIVITYFINANCING ACTIVITYCASH INCREASECASH DECREASE Wal-Mart$23,147 ($10,742) ($9,918) $1,706
Target$5,881($1,703)($2,842)$1,336
Costco$2,092($1,101)($439)$538
(Costco, 2010), (Target, 2010) &(Walmart Corporate, 2010)
This industry comparison allows individuals to see how Wal-Mart Stores, Inc. measures up to other companies in the same industry. As illustrated, Wal-Mart’s operating activity was $17,266 higher than Target and $21,055 more than Costco. The investing activities were 6.3 times higher than Target and 9.8 times higher than Costco. The...
tracking img