Walmart Stores Sam Walton was the founder of this large retail outlet opened first in 1962 in Rogers, Arkansas. Sam was born in 1918 in Kingfisher, Oklahoma. After being in the military for three years, he moved with his wife to Iowa and then to Arkansas. He gained some retail experience and eventually operated his own variety store. They then moved to a difference city in Arkansas and opened a dime store. Because of his success with that store, he decided to open the first Walmart in Rogers when he was 44 years-old.
Sam’s success in the company was attributed to a lot of things. Sam wanted to bring great opportunity and value to his customers through lower prices and better service. Walmart did better than Sam had imagined, and the company went public in 1970 with the first stock sold at $16.50 per share. He shared his visions for the company with all of his associates in order to make Walmart great. He improved inventory levels as well as constantly stacking shelves and keeping track of how slow or fast the goods were moving.
He offered wholesale goods at discounted prices. He also opened new store formats like Sam’s Club and the Walmart Supercenter. He even expanded outside of the country by locating a Walmart in Mexico. In 1992 he was awarded the Presidential Medal of Freedom award by President H. W. Bush. During his acceptance speech he stated. “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” (“Sam Walton”, 2012).
Recent Operating Results Walmart stores operating results have improved in the last five years. According to their 2012 Annual Report (2012), net sales have steadily increased each year from $373,821,000 in 2008 to $418,952,000 in 2011. Walmart’s operating income has also seen an increase each year for the past five years going from $21,916,000 in 2008 to $25,542,000 in 2011. Current Operating Results
The year 2012 has been the best year yet for Walmart in terms of net sales. Their total net sales is up to $443,854,000 a 5.9% increase from 2011. The increase in net sales in 2012 came from a combination of growth in retail square feet, increase in comparable sales, and currency translation benefits. Their operating income is also the highest this year at $26,558,000. Although it is the highest, it only increased 4.0% from 2011 compared to the percent change of 6.4% from 2010 to 2011. The lower percentage change is due to strategic investments for products sold in retail operations. Economic Forces
There are many economic factors that could impact Walmart’s financial performance. According to their Form 10-K report:
In the United States, higher interest rates, higher fuel and other energy costs, weakness in the housing market, inflation, deflation, higher levels of unemployment, decreases in consumer disposable income, unavailability of consumer credit, higher consumer debt levels, fluctuations in currency exchange rates, higher tax rates and other changes in tax laws, other regulatory changes, overall economic slowdown and other economic factors could adversely affect consumer demand for the products and services we sell through our Walmart U.S. segment and Sam’s Club segment, change the mix of products we sell to one with a lower average gross margin, cause a slowdown in discretionary purchases of goods and result in slower inventory turnover and greater markdowns on inventory. (Wal-Mart Stores, Inc., 2011)
Many of these economic factors in other countries can also affect Walmart’s consumer demand for their merchandise in those countries, especially those with an average income that is much lower than in the United States. All of these factors can affect the company’s cost of sales, gross margin, inventory turnover, markdowns, and operating results. Social Forces
Not only do economic forces affect Walmart’s success, but social forces do as well. Social pressure plays a big role when determining a company’s corporate strategy and performance. According to Maria Shao (2009), “Walmart embarked on a strategy to burnish its reputation and improve or soften its impact on workers, local communities, and the environment.” She also stated that in response to critics, the company adopted more progressive community, environmental, and employee practices.
One practice included cutting energy use and requiring eco-responsibility among its suppliers. This reinforces that greater social pressure may result in better social performance. This is very important because social pressures can affect the company’s financial performance through hurting their reputation, brand equity, or productivity. Political Forces
There are also many political forces that affect Walmart in various ways. Various laws and regulations make a big impact on the company. Local land use and other regulations that restrict the construction of buildings like their supercenters, local community action opposed to the location of stores at specific sites, and adoption of other certain local laws that restrict Walmart’s operation would affect their ability to open new clubs and stores, to convert some stores into supercenters, or to relocate and expand.
Because Walmart has locations in multiple countries, there are even more political factors that come into play affecting their financial performance. Any political instability in other countries is beyond their control. Legal and regulatory constraints, trade policies, currency regulations, as well as monetary and fiscal policies all affect Walmart. SWOT Analysis
Strengths Walmart has very many strengths, which is why they are ranked 2nd on the Fortune 500 scale. The company has very loyal customers because of their great prices, great customer service, and their locations in areas that other retailers ignore. They also have a loyal employee base because of their competitive wages, health insurance, flexible hours, and discounts. They also manufacture their own branded goods as well as supply goods from local suppliers and other major brands. The company’s large size enables them to get major discounts from suppliers and pass the savings on to the customers. Another strength they have is strong marketing capabilities. Weaknesses
Although Walmart is at the top of the fortune 500 companies, they still have some weaknesses. Buying products from suppliers in large quantities may give them a great discount, but it makes their inventory a little unreliable as well. They also tend to keep more part time employees than full time. Another thing that may be considered a weakness is that many communities do not like Walmart because they put their small business out of business. They have also had many legal issues. Opportunities
Since Walmart is doing so good globally, an opportunity for them would be to expand into more companies. They could even take over companies overseas. Another opportunity they could pursue is making Walmart convenience stores, which would overcome local objections and increased travel costs. Threats
One threat is competition from local convenience stores as travel costs to get to Walmart increase. There is also competition from other similar companies. Because they are so successful, they are likely open to attack on any ethical stance like poor work conditions, environmental issues, low pay, and supply of goods from cheap labor countries. Plans
Walmart has many plans to make their business more successful in the future. One major project they plan on doing is introducing smaller stores that are aimed to provide more convenient shopping settings. These new convenience stores will be located in small neighborhoods in order to cut costs for customers’ travel costs to get to a Walmart. It will have the same great customer service and low prices. They will also expand by adding more Walmart and Sam’s Club supercenters. They plan to add between 36 and 39 million square feet globally in 2013 and 36 to 40 million square feet in 2014 (Walmart, 2012). Predictions
When a company like Walmart makes predictions for the future they need to incorporate their future plans to make the company more successful. They also need to factor in economic, political, and social changes. With Walmart’s plans to expand creating more Walmart supercenters, Walmart neighborhood markets, and Sam’s Club supercenters they have predicted the following unit growth (Walmart, 2012): |Retail Square Footage (Net) | |(in millions) | |Segment | | | | |Actual |Projected | | |FY 12 |FY13 |FY14 | |Walmart U.S. |9.6 |14 – 15 |15 – 17 | |Sam’s Club U.S. |0.4 |~1 |~1 | |Walmart International |42.2* |21 – 23 |20 – 22 | |Total |52.2 |36 – 39 |36 – 40 |
Their increased number of building requires more capital expenditure but they plan to reduce construction costs. Their predictions for capital expenditures in billions for FY13 and FY14 are as follows (Walmart, 2012): |Capital Expenditure Detail | |(US$ billions) | |Segment | | |FY 13 – FY 14 | | |Actual |Projected |YoY% Change | | |FY 12 |FY13 |FY14 | | |Walmart U.S. |$6.2 |$6.0 – 6.5 |$5.5 – 6.0 |-8.0% | |Sam’s Club U.S. |$0.8 |~$1.0 |~$1.0 | – | |Walmart International |$5.3 |$4.6 –5.0 |$4.5 – 5.0 |-1.0% | |Corporate |$1.2 |~$1.0 |~$1.0 |– | |Total |$13.5 |~$12.6 – 13.5 |~$12.0 – 13.0 |-4.2% |
Adjustments Any company will need to make many adjustments down the road as the economy and consumers’ wants are always changing. One adjustment they may have to make is using mobile and social media technology to keep up with other competing stores as well as staying convenient for their customers. More and more individuals are using smart phones, and some use them as their primary way to access the Internet. There are also many applications that other businesses develop on these phones that allow customers to order from a company, whether it is retail or pizza places. Walmart will need to adjust by creating a way for customers to easily order from their phone.
Since Walmart plans to add many new stores and remodels they are going to have increased capital expenditures and are planning to adjust by reducing constructions costs. They want to achieve lower costs in real estate and construction, while delivering slightly greater square footage growth next year compared to this year. Another thing they will have to adjust for is the world becoming more “green”. They are already talking about bringing affordable renewable power to consumers, which will help contribute to everyday low costs and enable everyday low prices for the customers. Rahul Raj, the director of sustainability and merchandising innovation at Walmart.com states that, “In California, approximately 75% of Walmart owned locations will have rooftop solar installed by the end of 2013” (Caurs, 2012). Conclusion
Walmart serves customers more than 200 million times per week at 10,270 retail outlets in 27 countries. They employ more than 2.2 million associates globally, 1.4 million in the United States. Walmart’s 2012 sales reached $444 billion, which put them 2nd on the fortune 500 list. The previous two years they ranked at number 1. While they are doing very great, they still could use improvements in order to get that top spot back on the list.
References Carus, F. (2012) Walmart Sees an Affordable Renewable Energy Future. Retrived from http://energy.aol.com/2012/06/29/walmart-sees-an-affordable-renewable-energy-future/ “Sam Walton”. (n.d.). Retrieved from