According to Bloomberg, the current Chief Executive Officer (CEO) at Walmart is Michael Terry Duke. Mr. Duke has been the CEO at Wal-Mart Stores Inc. since 2006 (2011). And Bloomberg also reports that Charles M. Holley Jr. is the current Chief Financial Officer of Walmart and has held that position since late 2010. Mr. Holley’s education background consists of a MBA from the University of Houston. His financial experience is quite extensive and he has been working within the Wal-Mart Stores Inc. finance scene since 1999. Before that he started working for Walmart he was with Ernst & Young for over ten years (2011).
After examining Mr. Holley’s experience, I believe that he is well qualified for the position that he currently holds. He has over a decade of experience within Walmart itself dealing with their finances, not to include the years of experience he has had with other corporations. Walmart continues to grow, and he still holds his position within the company so there is no doubt he was the right choice for the position of Chief Financial Officer.
Walmart currently has “…three reportable business segments: (1) the Walmart U.S. segment; (2) the Walmart International segment; and (3) the Sam’s Club segment” (Wal-Mart Stores, Inc., 2011). According to Wal-Mart Stores, Inc. in 2011 they had an increase of 3.4% in net sales compared to the previous year.
This increase in net sales was credited to a rise in customer traffic and their continual expansion of store locations worldwide (2011). While looking at the company’s annual report I also compared the current ratio of 2011 to 2010. According to Wal-Mart Stores, Inc. in 2011 Walmart had a current ratio of 0.89. Their total assets were reported to be $51.893 billion and total liabilities were $58.484 billion. In 2010 Walmart had a current ratio of 0.86 which is slightly smaller than that for the year of 2011 (2011).
Currently, Walmart is focused on expanding their corporation worldwide. Some of the more recent acquisitions the company has made are with, according to Wal-Mart Stores Inc., the purchase of Netto Foodstores Limited and Massmart. This purchase adds 481 new locations in the United Kingdom, South Africa, as well as thirteen other sub-Saharan African countries (2011). I was unable to find any predictions that Walmart made about how these new locations will affect their overall financial status but it will be interesting to hear more about this purchase in the near future.
Business risks are factors that “…could materially and adversely affect … business, results of operations, financial condition and liquidity” (Edgar Online Inc., n.d.). Walmart has listed several different business risks that the company is currently facing. The top three risks of those mentioned were: interest rate risk, foreign currency risk, and general economic factors.
The first business risk listed was the interest rate risk that could negatively affect the company. According to Wal-Mart Stores Inc. as of the first of 2011, 15% of the company’s long-term and short-term debt is represented by their variable rate borrowings (2011). Any changes in the market rates could potentially cause the company’s annual interest costs to vary by millions of dollars. This could quickly become a serious hinder to the company if substantial changes took place in market rates.
Foreign currency risk is another business risk that the company faces due to international business operations. Similarly to the risk that Walmart faces with interest rates, they also face with currency exchange. As an example, if the company had a gain of $100 million in 2011 from business in Europe and then the currency exchange rates experienced a 5% rise or decline, they could potential gain or lose $5 million during the changeover of the currency. Depending on the total amount of money that is being exchanged the overall gain or loss could differ significantly.
General economic factors are of large concern to Walmart’s business. These general economic factors encompass several different variables. Some of these variants are: “…higher fuel and other energy costs …, higher levels of unemployment, decreases in consumer disposable income …, higher consumer debt levels …, [and] overall economic slowdown” (Wal-Mart Stores, Inc., 2011) to name just a few. These factors could potentially negatively affect the company’s overall financial profits until the economy regenerates itself.
Over the last four quarters, (10/2011, 07/2011, 04/2011, 01/2011), there wasn’t any noticeable differences on the income statement except for the quarter of January 2011. According to Forbes, the total net income for this quarter was $6.06 billion, compared to $3.4 billion, $3.8 billion, $3.34 billion for quarters 04/2011, 07/2011, and 10/2011 respectively (2012).
Looking back over the past several years this seems to be a reoccurring spike in business for this quarter. It very well could be related to the holiday season sales. Overall for the year, according to Walmart Corporate, the net sales increased by 3.4% and were reported to be $419 billion (n.d.). The company has obviously experienced healthy growth and profit for fiscal year 2011.
After reviewing Walmart’s financial history thoroughly, I would have no issues investing into this company. However, before investing “[investors] should always understand the meaning and trends of stock valuations to make an informed speculative decision on the future performance of a stock” (Ebert & Griffin, 2003). When reviewing Walmart’s stock history, you can see the slow increase of value in the stock as the company has expanded. Wal-Mart Stores Inc. has stores in all 50 states and numerous other countries and they continue to grow. I truly believe that this would be a solid longterm investment.
References Bloomberg. (2011). Wal-Mart Stores Inc. Retrieved January 29, 2012, from Bloomberg Businessweek: http://investing.businessweek.com/research/stocks/people/person.asp?
personId=2145566&ticker=WMT:US&previousCapId=313055&previousTitle=WAL-MART%20STORES%20INC Bloomberg. (2011). Wal-Mart Stores Inc. Retrieved January 29, 2012, from Bloomberg Businessweek: http://investing.businessweek.com/research/stocks/people/person.asp?
personId=3237812&ticker=WMT:US&previousCapId=313055&previousTitle=WAL-MART%20STORES%20INC Ebert, R. J., & Griffin, R. W. (2003). Business essentials (5th ed.). Upper Saddle River, NJ: Prentice Hall. Edgar Online Inc. (n.d.). Item 1A. Risk Factors. Retrieved January 29, 2012, from Edgar Online: