Wal−Mart Stores is a global retailer operates in three business segments: Wal−Mart Stores, Sam's Club and International. Co.'s Wal−Mart Stores retail formats include: Supercenters, Discount Stores and Neighborhood Markets while Co.'s Sam's Club segment consists of membership warehouse clubs, which operate in the U.S., and the segment's online retail format, samsclub.com. Since January 31st 2008, Wal-Mart’s International segment consisted of retail operations in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, and the U.K. and Wal-Mart has operated 971 discount stores, 2,447 supercenters, 591 Sam's Clubs and 132 Neighborhood Markets in the U.S” (Mergent Online: Wal-Mart Stores, Inc, 2008).
Target is a large−format general merchandise discount store in the U.S., which consist of Target and SuperTarget stores. Target provides a range of general merchandise and a more limited assortment of food items in its stores. SuperTarget stores provide an array of food items along with general merchandise items. Besides, Target Corp operates the online business- the Target.com. Since February 2nd 2008, Target Corp operated 1,352 stores, leased 73 stores, and 166 owned buildings on leased land (combined) stores for a total of 1,591 locations. In addition, Target Corp also owned 26, leased 5 and operated 1 combined distribution centers for a total of 32 locations (Mergent Online: Target Corp, 2008).
Ratio Analysis of Wal-Mart and Target Corp
Figure 1: Current Ratio
Source: Current ratios of two companies are from Mergent Online, benchmark is from Valueline.
The current ratio of Wal-Mart from fiscal 2003 to fiscal 2007 was more stable than Target Corp in this current five years. A little downward tendency showed since fiscal 2004. The highest current ratio was 0.93 in fiscal 2003, after that, it remained at 0.9 during fiscal 2005 to fiscal 2007. Wal-Mart had both steadily increased in current assents and current liabilities, so the current of previous 4 years were almost remain the same.
By contrast, the current ratio of Target Corp is more fluctuated than Wal-Mart. The current ratio decreased year by year after it reached highest point at fiscal 2005. At fiscal 2007, it dropped to the lowest point of 1.32. In fiscal 2005, Target Corp held less current liabilities than other years due to less account payables and accrued liabilities. a working capital deficit due to their efficient use of cash in funding operations and in providing returns to shareholders in the form of share repurchase and dividend payment. Wal-Mart maintained at a low current ratio so that it can focus on efficient cash management.
By comparing with these two companies, the Target Corp’s current ratio is better than the Wal-Mart’s and they both higher than the industry level showed that Target Corp is more liquid than Wal-Mart. However, Wal-Mart hold a large portion of inventories, if it has a high inventory turnover, it is not a bad situation while Wal-Mart held a low current ratio.
Figure 2: Quick Ratio
Source: Quick ratios of two companies are from Mergent Online, benchmark is from Valueline.
As similar with the current ratio, the quick ratio of Wal-Mart was also as stable as the current ratio and lower than the industry level. By contrast, the Target Corp’s quick ratio was fluctuated with the industry level. The quick ratio of Wal-Mart showed a growth tendency since fiscal 2003. The Target Corp has the highest quick ratio at 0.94 in fiscal 2005 and lowest point at 0.68 in fiscal 2007. The inventory level of Target Corp maintained at a constant level of 40% of the total current assets so that the quick ratio was fluctuated as the current ratio. The inventory level of Wal-Mart was 82.7% in fiscal 2003 then declined year by year to 72.3% in fiscal 2007, which leaded the quick ratio showed a growth tendency rather than the declined...
Please join StudyMode to read the full document