The company Wal-Mart, founded by Sam Walton in 1945, is one of the most recognizable names in the retail sector in many countries of the world. Wal-Mart is having around 9320 stores and club locations in 15 countries employ 2.1 million associates, serving more than 176 million customers a year (Walmart, WalMart Stores). Sam Walton, in his autobiography said “If we work together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see what it’s like to save and have a better life.” *
* Current Situation:Walmart Stores U.S. is the company’s largest division, accounting for $258 billion, or 63.8% of total sales for financial year 2010. It consists of three retail formats that have become commonplace in the United States: Discount Stores, Supercenters and Neighborhood Markets (Walmart, 2011). Walmart International is a fast-growing part of Walmart’s overall operations, with 4,803 stores and more than 730,000 associates in 14 countries outside the continental U.S (Walmart International).
There are wholly owned operations in Argentina, Brazil, Canada, and the UK. With 2.1 million employees worldwide, the company is the largest private employer in the US and Mexico, and one of the largest in Canada. (Walmart Corporate Fact Sheet.pdf) In the financial year 2010, Walmart’s international division sales were $100 billion, or 24.7% of total sales (Walmart International). Walmart generates 63.8 % of Revenue from Walmart Stores, 11.5 % of Revenue from Sam’s club and 24.7 % of revenue from Walmart International (Wikinvest Walmart). Net Sales increased 3.4 % to $419 billion and net income increased 14 % to %16.4 billion (Wikinvest Walmart).
Financial Summary of past 5 years:
As of and for the Fiscal Years Ended January 31| 2011| 2010| 2009| 2008| 2007| Net Sales ($)| 418952| 405132| 401087| 373821| 344759| Net sales increase (%)| 3.4| 1| 7.3| 8.4| 11.6|
Comparable sales in the United States (2) (%)| -0.6| -0.8| 3.5| 1.6| 2| Walmart U.S. (%)| -1.5| -0.7| 3.2| 1| 1.9|Sam’s Club (%)| 3.9| -1.4| 4.9| 4.9| 2.5|Gross profit margin (%)| 24.7| 24.9| 24.2| 24| 23.4|Operating, selling, general and administrative expenses, as a percentage of net sales (%)| 19.3| 19.7| 19.3| 19| 18.5| Operating income ($)| 25542| 24002| 22767| 21916| 20552| Income from continuing operations attributable to Walmart (%)| 15355| 14449| 13235| 12841| 12224| Net income per share of common stock: ($)| | | | | |
Diluted net income per common share from continuing operations attributable to Walmart ($)| 4.18| 3.73| 3.35| 3.15| 2.93| Dividends declared per common share ($)| 1.21| 1.09| 0.95| 0.88| 0.67| Financial Position| | | | | |
Inventories ($)| 36318| 32713| 34013| 34690| 33235|Property, equipment and capital lease assets, net ($)| 107878| 102307| 95653| 96867| 88287| Total assets ($)| 180663| 170407| 163096| 163200| 151274| Long-term debt, including obligations under capital leases ($)| 43842| 36401| 34549| 33402| 30735| Total Walmart shareholders’ equity ($)| 68542| 70468| 64969| 64311| 61298| Unit Counts | | | | | |
Walmart U.S. Segment | 3804| 3755| 3703| 3595| 3488|Walmart International Segment | 4557| 4099| 3595| 3093| 2733| Sam’s Club Segment| 609| 605| 611| 600| 588|Total units| 8970| 8459| 7909| 7228| 6809|(Wikinvest Walmart Shareholders Filing, 2011)| Net Sales in 2011| Percent of total in 2011| Percent Change in 2011| Net sales in 2010| Percent of Total in 2010| Percent Change in 2010| Net Sales in 2009| Percent of Total in 2009| Walmart US| $260,261| 62.1%|0.1%| $259,919| 64.2%| 1.1%| $256,970| 64%| Walmart International| $109,232| 26.1%| 12.1%| $97,407| 24%| 1.3%| 96,141| 24%| Sam’s Club| $49,459| 11.8%| 3.5%| $47,806| 11.8%| -0.4%| 47,976| 12%| Net Sales| $418,952| 11.8%| 100%| $405,132| 100%| 1.0%| $401,087| 100%| Exhibit 2:
Our consolidated net sales increased by 3.4% and 1.0% in fiscal 2011 and fiscal 2010, respectively, when compared to the previous fiscal year. Net sales in fiscal 2011 increased primarily due to our continued expansion activities as we added 3.4% of additional retail square feet during fiscal 2011. In addition, foreign currency exchange rates favorably impacted our fiscal 2011 sales growth by approximately $4.5 billion, offset by a 0.6% decline in total U.S. comparable store and club sales.
Net sales in fiscal 2010 increased due to increased customer traffic, continued global expansion activities and the acquisition of our Chilean subsidiary, Distribución y Servicio S.A. de C.V. (“D&S”) in January 2009, offset primarily by a $9.8 billion unfavorable currency exchange rate impact in our Walmart International segment and adversely affected by price deflation in certain merchandise categories in our Walmart U.S. segment. Volatility in currency exchange rates may continue to impact the Company’s net sales in the future. (Wikinvest Walmart Shareholders Filing, 2011)
Exhibit 3:Sales by Segment:
Exhibit 4:Value Chain Analysis:
Walmart offers products at everyday low prices. This is only one if the many strategies that lead to the success of Walmart. This type of value chain is completely cost effective. Walmart expects and rewards employees for their suggestions. Due to the cost effective value chain, the management is able to track the movement of products through the entire value chain.
Streamlining supplies has helped Walmart to maintain appropriate inventory and track the sales. Walmart’s operations and distribution and operation strategies have also helped in achieving low prices. Word of mouth advertising and clustering stores away from large cities has helped to cut down the prices and minimize the advertising costs. Offering superior customer service and achieving customer satisfaction is the main motive of Walmart. “Exceed our customers’ expectations. If you do, they’ll come back over and over.” Said Sam Walton.
Value Chain Analysis of Walmart:
In North America, Wal-Mart’s primary competition include department stores like Kmart, Target, ShopKo and Meijer, Canada’s Zellers, Hart the Real Canadian Superstore and Giant Tiger, and Mexico’s Commercial Mexicana and Soriana. Competitors of Wal-Mart’s Sam’s Club division are Costco, and the smaller BJ’s Wholesale Club chain operating mainly in the eastern US. Wal-Mart’s move into the grocery business in the late 1990s also set it against major supermarket chains in both the United States and Canada.
Several smaller retailers, primarily dollar store, such as Family Dollar and Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales (Stilgoe, 2003). In 2004, Wal-Mart responded by testing its own dollar store concept, a subsection of some stores called “Pennies-n-Cents” (Grow, 2004).
Exhibit 5:American Customer Satisfaction Index ( ACSI ):(Walters, 2008)
Comparison of Walmart with competitors:
| Walmart| Costco| Target| Others|Market Cap:| 189.32B| 35.76B| 35.70B| 2.75B|Employees:| 2,100,000| 82,000| 355,000| 24.80K|Qtrly Rev Growth (yoy):| 4.40%| 16.00%| 2.20%| 6.90%|Revenue (ttm):| 426.23B| 84.86B| 67.73B| 6.08B|Gross Margin (ttm):| 25.19%| 12.70%| 29.80%| 29.80%|EBITDA (ttm):| 33.46B| 3.20B| 7.35B| 428.66M|Operating Margin (ttm):| 6.03%| 2.79%| 7.79%| 5.22%|Net Income (ttm):| 15.48B| 1.42B| 2.94B| N/A|EPS (ttm):| 4.58| 3.2| 4.09| 1.65|P/E (ttm):| 11.91| 25.51| 12.66| 19.76|PEG (5 yr expected):| 1.16| 1.84| 1.15| 1.28|P/S (ttm):| 0.44| 0.42| 0.53| 0.53|(Finance, Yahoo Finance WMT competitors, 2011)
Current Competitors and their growth:
(Finance, Yahoo Finance echarts)
Recently, Walmart has been charged for gender discrimination and some 1.5 million female employees of Wal-Mart Stores Inc. could not act as a class, seeking in billions in damages from the nations largest retailer (Sameulson, 2011). With 2.1 million workers in more than 8000 stores worldwide, Walmart could have faced billions of dollars in damages if it had to answer the claims by huge group of women (Sherman, 2011).
Business interests, including nearly two dozen large companies, lined up with Walmart, while civil rights, women’s and consumer groups sided with the women plaintiffs (Sherman, 2011). This fueled the negative reputation that Walmart already had and alsosubstantiated the beliefs of the people about sex-biased Walmart.
I feel that Walmart should primarily concentrate on clearing the Brand Image, as this would definitely help the company in increasing the sales. This will be done by having an excellent PR department focusing on improving the brand name. Secondly, Walmart should focus on associate satisfaction as they are focusing on customer satisfaction. This would help the company in getting better results from the associates and would create a workable environment, which the associates as well as the customers will appreciate. Wages and perks of employees should be monitored.
Another issue that needs to be looked into is the health coverage. 79% of the total employees in the industry have health coverage. Reevaluation of health coverage package would help the employee satisfaction go up.
When expansion is thought about, Walmart should tie up with local companies in new countries to get established. This would most probably decrease the entry barrier and also decrease the probability of failure.
The company should buy out shares of Sam’s Club, and other subsidiaries, which ensures complete control of Walmart’s management.
Conclusion:Walmart’s strategies are the key to its success and to the issues that they are facing today. A few changes and revisions in the strategies can minimize the issues of the company and increase the brand image amongst customers. As Sam Walton rightly said, “Recognize that the road to success includes failing, which is part of the learning process rather than a personal or corporate defect or failing. Always challenge the obvious.” Works Cited
Finance, Y. (n.d.). Retrieved from Yahoo Finance echarts: http://finance.yahoo.com/echarts?s=WMT+Interactive#chart2:symbol=wmt;range=1y;compare=walmexv.mx+cost+tgt;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined Finance, Y. (2011, July 22). Retrieved from Yahoo Finance WMT competitors: http://finance.yahoo.com/q/co?s=WMT+Competitors Grow, R. B. (2004, May 10). Bloomberg Business Week. Retrieved from Business Week: http://www.businessweek.com/magazine/content/04_19/b3882086.htm Manage.com, 1. (n.d.).
Value chain analysis of walmart. Retrieved from 12Manage: http://www.google.com/imgres?q=value+chain+analysis+of+walmart&hl=en&client=safari&sa=X&rls=en&biw=1366&bih=780&tbm=isch&prmd=ivns&tbnid=inBcjQWVVwaFbM:&imgrefurl=http://www.12manage.com/methods_porter_value_chain.html&docid=d912epkV3cNEcM&w=473&h=353&ei=3RYtTsPJPIe30AGK5snkDg&zoom=1&iact=hc&vpx=597&vpy=97&dur=1233&hovh=194&hovw=260&tx=116&ty=157&page=1&tbnh=144&tbnw=193&start=0&ndsp=23&ved=1t:429,r:2,s:0
People, U. (n.d.). Retrieved from UCSC people: people.ucsc.edu/~flannery/econ136/Papers/JDWalmart.doc Sameulson, K. (2011, July 10). McClatchy – Tribune Business News. Wal-Mart sex-bias ruling implications debated . Sherman, M. (2011, June 21). High court blocks Walmart sex-bias case. Telegraph – Herald . Stilgoe, J. (2003, November 23). Boston News: Wal-Mart giant can be tamed. Retrieved from Boston.com News: http://www.boston.com/news/local/massachusetts/articles/2003/11/23/wal_mart_giant_can_be_tamed/ Walmart Corporate Fact Sheet.pdf. (n.d.).
Walmart International. (n.d.). Retrieved from http://walmartstores.com/AboutUs/246.aspx Walmart. (2011). Walmart Annual Report 2010. Walmart. Walmart. (n.d.). WalMart Stores. Retrieved from WalMart Stores: http://walmartstores.com/AboutUs/297.aspx Walters, C. (2008, February 21). Retrieved from The Consumerist: http://consumerist.com/2008/02/latest-acsi-survey-is-out-you-really-like-dollar-general.html Wikinvest Walmart. (n.d.). Retrieved from http://www.wikinvest.com/stock/Wal-Mart_(WMT) Wikinvest Walmart Shareholders Filing. (2011, March 21). Retrieved from Wikinvest: http://www.wikinvest.com/stock/Wal-Mart_(WMT)/Filing/10-K/2011/Ex-13/D14661311
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