Financial Analysis of Wal-Mart

Assignment 1: Financial Analysis of Wal-Mart

ACC 556 Financial Accounting for Managers

Strayer University

Assignment 1: Financial Analysis of Walmart

Introduction

Wal-Mart Stores, Inc. is an American public corporation that operates a chain of massive price cut retail stores and a chain of warehouse stores. Wal-Mart controls over 11,000 retail units or point of sales under sixty five banners across twenty eight countries. Wal-Mart Stores, Inc. performs online sales through an e-commerce platform in eleven countries. This corporation is considered to be the world’s largest merchant and grocery chain by sales. More than half of its operations are place in the United States and the other half are internationally placed in Central America, South America, and China. Its traditional Neighborhood Markets and Wal-Mart US, average 42,000 square feet of retail space. The smaller Neighborhood Markets range in size from 12,000 to 16,000 square feet (Q2 2016 WalMart Stores Inc Earnings Call).

Financial Performance Summary

The company under its financial statements emphasizes on having the cheapest costs in its industry, earning $446.98 billion in profit in 2014, a 6% rise in sales in 2013 based on Wal-Mart financial statement (2011-2014). Wal-Mart (NYSE:WMT) can buy its retail at the lowest cost, exchange high buying volumes for low price for customers to save. The company’s worldwide operation consist in variate formats. Its major operating segments are Wal-Mart U.S., Walmart international and Sam’s Club. The company’s economic background includes consistence on paid dividends since 1974 meaning 42 years of dividend payments in a row. At the same time it’s located as one of the 60 companies which can be purchased through “commission-free purchase.” The company’s most recent dividend increase was reported in February 2015, when 2% increase was approved by the Board of Directors equivalent to an increase of, 49 cents per share. According with market surveys, the larger competitors for Wal-Mart include Target (NYSE:TGT), Costco (NSDAQ: COST), and Dollar General (NYSE:DG). Wal-Mart ranks No. 1 for the past four years, according to STORES’ 2013 Top Retailers List.

In terms of liquidity, Wal-Mart Stores Inc.’s quick ratio deteriorated from 2013 to 2014 but then improved from 2014 to 2015 exceeding 2013 level; their current liquidity ratio is 0.97, compared to its previous years with an average of 0.88. Wal-Mart Stores Inc.’s debt-to-capital/solvency ratio deteriorated from 2013 to 2014 but then improved from 2014 to 2015 exceeding 2013 level. Wal-Mart Stores Inc.’s net profit margin deteriorated from 2013 to 2014 but then slightly improved from 2014 to 2015, and is now 3.93%, which indicates an increase in profitability (Liquidity Services, 2015). Over the longer term, Doug McMillon, President and CEO, Wal-Mart Stores, Inc. believes they will continue to grow in key markets around the world and further integrate their store and e-commerce offerings (Q2 2016 WalMart Stores Inc Earnings Call).

Investing Views

Other than Wal-Mart’s major financial factors, investors would invest in this company because Wal-Mart was built on the foundation of saving people money so they can live better (Wal-Mart Stores, Inc. Annual Report. 2010). This mission has truly allowed the company to grow in various aspects of its industry. However, aside from living up to its mission, Wal-Mart, prides itself for serving its local communities, and this is a key part of Wal-Mart’s culture through associate volunteerism and donations. They act quickly to support areas impacted by natural disasters such as the Haiti and Chile earthquakes. This past year, Walmart, Foundations, associates and customers, supported organizations worldwide with $624 million in charitable contributions. With their continuous efforts to help their communities, they continue strive to increase their community impact globally. For example, in a number of countries, WalMart and CArE help empower women to achieve more equitable, consistent incomes. Also, they work with farmers and small manufacturers in South and Central America to increase efficiency, improve supply chain processes, and link them to the global marketplace. In addition to previous annual reports, Walmart’s 2015 Global Responsibility Report outlines the company’s major milestones in fiscal year 2015 tied to social and environmental responsibility, specifically highlighting Walmart’s achievements to create economic opportunity for associates, enhance the sustainability of its operations and supply chains, and serve the communities in which it operates.

In addition, Wal-Mart Stores also have several environmental initiatives that investors would view as reasons for investing in the company. The Packaging Sustainable Value Network Team at Wal-Mart Stores Inc. is advocating the corporate mission to reduce overall packaging by 5 percent, measuring its 60,000 suppliers on their ability to develop packaging that is good for the environment. The plan is projected to create $10.98 billion in total savings and to prevent 667,000 metric tons of carbon dioxide from entering the atmosphere (Genuario, 2007).

Conclusion

Walmart is able to let customers receive everyday low prices, which are based on everyday low cost. This action alone shows that they have learned how to maximize earnings and continue with day to day operations without disrupting its customer base. Wal-Mart operates for less, which allows their products to be able to be sold for less as well and increase their sells as well, which investors are certainly interested in. The customer is and always has been the main focus in Wal-Mart and they are always trying to find new ways for the customer to have a better shopping experience. (Wal-Mart Stores, I. (2)). This company has come a long way since opening their first store in 1962 and they continue making strides and efforts in the right direction to ensure that they are offering the best product to their customers and saving them money at the same time.

REFERENCES

Q2 2016 WalMart Stores Inc Earnings Call – Final. (n.d). Fair Disclosure Wire (Quarterly Earnings Reports).

Wal-Mart Stores, Inc. Annual Report. (2010). Reportal Company Reports, 1.

Wal-Mart Stores, I. (4). Walmart Releases 2015 Annual Shareholders’ Meeting Materials. Business Wire (English).

Genuario, L. (2007). Less is More. Private Label Buyer, 21(8), 40-42.

(2015, May 7). Liquidity Services Announces Second Quarter 2015 Financial Results. Business Wire (English).

Wal-Mart Stores, I. (2). Walmart announces Q4 underlying1 EPS of $1.61 and additional strategic investments in people & e-commerce; Walmart U.S. comp sales increased 1.5 percent. Business Wire (English).