Financial Analysis of Walmart

Financial Analysis of Wal Mart Financial Analysis of Wal-Mart Company Overview Wal-Mart Stores Inc. (WMT) is the largest global retail and chain stores operating in various formats. The company operates more than 8000 stores globally across its business segments, which include electronics, groceries, apparel, and small appliances. Although, Wal-Mart operates a global business, however, more than half of the company businesses are located in the United States. Wal-Mart also operates its global businesses through subsidiaries in the United Kingdom, Canada, Japan, Brazil, Argentina, and China.

However, majority of the company subsidiaries are located in the Central & South America and Chile. For more than 50 years, Wal-Mart has been implementing the low price model to make difference around the world. Over the past ten years, Wal-Mart has increased the total revenue and net income. The strategy that Wal-Mart uses to drive up its profitability over the years is by buying items at rock-bottom prices from China and sells them at affordable prices to customers.

The company has been able to be ahead of its competitors by offering high quality products at low prices. To decline costs, Wal-Mart purchases products directly from manufacturers, which assists the company to record high increase in profitability yearly. In 2011, the company recorded the total revenue of $421.8 Billion, however, the company increased its total revenue to $446.9 Billion in 2012. The company net income also increased within the last decades.

At the end of the 2008 fiscal year, the company recorded net income of $12.7 Billion, however at the end of the 2012 fiscal year, the company net income increased to $15.7 Billion. Wal-Mart focuses on the three priorities to enhance shareholder's value, and this include growth, return and leverages. Using these strategies, the company has efficiently utilized the company assets to generate profitability. (Seeking Alpha, 2012). Objective of the report is to carry out the financial analysis of Wal-Mart.

The paper provides the company key financial highlights to evaluate the company financial performances over the years. 3: Key Financial Highlights. The report uses the five-year financial summary to provide the company financial highlight. In 2008, the company net sales were $373.8 Billion, however, the net sales increased to $443.8 Billion in 2012. Between 2011 and 2012, the company increased its net sales by 5.9% because the net sales increase from $418.9 Billion in 2011 to $443.8 Billion in 2012.

Despite the recession that the United States experienced between 2008 and 2009, the company still recorded the 8.4% increase in the net sales in 2008 and 7.3% increase in 2009. Over the years, Wal-Mart has been able to achieve an increase in the net sales because the company focuses on the comparable store growth, and expansion in its international segment to realize its sale's objectives. Over the last five years, Wal-Mart has been able to increase its total assets from $163.2 Billion in 2008 to $193.4 in 2012.

The company uses its strong cash flow, sound financial management and efficient working capital to increase its total assets. As being revealed in Table 1, the company operating income increases from $21.9 Billion in 2008 to $26.5 Billion in 2012. However, overview of the company financial data reveals that Wal-Mart is performing better internationally than the U.S. segment. For example, at the international segment, the sales increased by 15.2% in 2012, however at the U.S.

segment, there was an increase in the net sales by 1.5% while Sam Club was able to increase the net sale by 8.8% in 2012. The company net sales increased by 5.9% and 3.4% in 2012 and 211 respectively. The company has been able to achieve the sale growth in 2012 and 2011 because the company increases the retail squares and achieves benefits from the currency exchanges. Typically, "the continued expansion activities added 5.3% and 3.4% of additional retail square feet between fiscal years 2012 and 2011, respectively.

Currency translation benefits accounted for $4.0 billion and $4.5 billion of the increase in net sales for fiscal 2012 and 2011, respectively. The acquisitions of Netto and Massmart completed in the second quarter of fiscal 2012." (Wal-Mart 2012 Annual Report P. 19). Table 1 presents the five-year financial highlight of Wal-Mart. Table 1: Wal-Mart 5-Year Financial Highlight "Dollar amounts in millions, except per share and unit count data)" 2012 2011 2010 2009 2008 Operating Results Net sales $443,854 $418,952 $405,132 $401,087 $373,821 Net sales increase Comparable sales in the U.S. Walmart U.S.

Sam's Club Gross profit margin 24.5% 24.8% 24.9% 24.3% 24.1% Operating, selling, general & administrative expenses, 19.2% 19.4% 19.7% 19.4% 19.1% Operating income $26,558 $25,542 $24,002 $22,767 $21,916 Income from continuing operations 15,766 15,355 14,449 13,235 12,841 Net income per common stock share Diluted net income per common share $4.54 $4.18 $3.73 $3.35 $3.15 Dividends declared of common share 1.46 1.21 1.09 0.95 0.88 Financial Position Inventories $40,714 $36,437 $32,713 $34,013 $34,690 Net Property, equipment & capital lease assets 112,324 107,878 102,307 95,653 96,867 Total assets 193,406 180,782 170,407 163,096 163,200 Long-term debt 47,079 43,842 36,401 34,549 33,402 Total shareholders' equity 71,315 68,542 70,468 64,969 64,311 Unit Counts Walmart U.S.

segment 3,868 3,804 3,755 3,703 3,595 Walmart International segment 5,651 4,557 4,099 3,595 3,093 Sam's Club segment Total units 10,130 8,970 8,459 7,909 7,288 Source: Wal-Mart Annual Report, 2012 3.1: Annual Report The Wal-Mart annual report 2013 consists of the company financial data that reveals the: Statements of Income Balance sheet Statements of Shareholders' Equity and, Statement of cash flow. A comprehensive income statement is a profit and loss account that reveals the overall company level of profitability, total revenue, costs of sales and the net income.

The Wal-Mart Statement of Income in the 2013 annual report reveals the company total revenue, costs and expenses, operating income, and the net income. The company income statement also consists of the operating income and net income per common shares. Overview of the Wal-Mart statement of income reveals that the company records the total revenue of $469.1 Billion in 2013 compared to the $446.9 Billion total revenue in 2012. However, the company costs of sales keep increasing yearly.

In 2011, the cost of sale was $314.9 Billion, however, the cost of sales increased to $335 Billion in 2012 and $352.4 Billion in 2013. Moreover, the company operating incomes increase from $25.5 Billion in 2012 to $26.5 Billion in 2013. The company also increases its income from continuing operations from $15.9 Billion in 2012 to $16.4 Billion in 2013. The company is also able to increase the "basic net income per common share attributable to Walmart" (Wal-Mart Annual Report 2013 P. 32) between $4.48 Billion in 2012 and $4.54 Billion in 2013. Wal-Mart annual report (2013) also consists of the company balance sheet.

A company balance sheet is the summary of a company total assets and total liabilities. The difference between a company total assets and total liabilities is equal to the net assets. From the balance sheet, the company total assets consist of the current assets and long-term assets. The current assets are the assets that could be converted to cash within one year. However, long-term assets are the assets that could be converted to cash after one year.

The company current assets consist of the following: Cash and cash equivalents Receivables, Inventories Prepaid expenses and other The total current assets at the end of the 2012 fiscal year were $54.9 Billions, however, the company current assets increased to $59.9 Billion in 2013. On the other hand, the company long-term assets consist of the following: Property and equipment Property under capital leases: Goodwill Other assets & deferred charges The company net property and equipment totaled $109.6 Billion in 2012 and increased $113.9 Billion in 2013.

The company total assets were $193.4 Billion at the end of 2012 fiscal year and increased to $203.1 Billion in 2013. The company balance sheet also consists of the current liabilities and long-term debt. The current liabilities are the obligations that the company must settle within one year. Wal-Mart current liabilities are as follows: Short-term borrowings Accounts payable Accrued liabilities Accrued income taxes Debt due within one year "Obligations under capital leases due within one year." (Wal-Mart Annual Report 2013 P. 33).

However, the company has not been able to decline its total current debts between 2012 and 2013. The company total current liabilities were $62.3 billion at the end of 2012 fiscal year and increase to $71.8 Billion in 2013. The company total liabilities keep increasing because "from time to time, Wal-Mart utilize the liquidity under the short-term borrowing programs to fund the operations, dividend payments, share repurchases, capital expenditures and for other cash requirements and corporate purposes, as needed." (Wal-Mart Annual Report 2013 P. 26). However, the company long-term debts also declined from 2012 and 2013.

The long-term debts declined from $44 Billion 2012 to 38.4 Billion in 2013. The long-term debts "were used to pay down or refinance existing debt and for other general corporate purposes." (Wal-Mart Annual Report 2013 P. 33). The company equities are also listed in the company balance sheets that consist of: Common stock shareholders' equity Retained earnings The company total equity was $75.7 Billion at the end of the 2012 fiscal year and increase to $81.7 Billion in 2013. Statements of Cash Flows The statement of cash flow is a financial statement that reveals the inflow and outflow of cash.

The cash flow by operating activities was "$25.6 billion, $24.3 billion and $23.6 billion for fiscal years 2013, 2012 and 2011, respectively. The increase in cash flows provided by operating activities in the years 2013 and 2012, when compared to the previous fiscal years is primarily due to higher income from continuing operations." (Wal-Mart Annual Report 2013 P. 25). However, cash flow from operating activities declined from 16.6 Billion in 2012 to $12.6 Billion in 2013.

On the other hand, "cash flows used in investing activities generally consist of payments for property and equipment, which were $12.9 billion, $13.5 billion and $12.7 billion for fiscal 2013, 2012 and 2011, respectively." (Wal-Mart Annual Report 2013 P. 25). "Cash flows used in investing activities also consist of payments for investments and business acquisitions, net of cash acquired, which were of $0.3 billion, $3.5 billion and $0.2 billion for fiscal 2013, 2012 and 2011, respectively." (Wal-Mart Annual Report 2013 P.

25) Competitive Standing Wal-Mart operates in a highly competitive retail industry, and the company faces a strong competition from department, discount, drug, variety and specialty stores, dollar stores, supermarkets and from other warehouse clubs. Many of the Wal-Mart competitors are based in the United States and outside the United States. Some of its competitors are also internet-based retailers as well as catalog businesses.

While there are numerous competitors facing the company, Wal-Mart has some direct competitors in the United States and internationally, and these competitors include Carrefour SA, Costco Wholesale Corporation, Target Corp, Big Lots, Inc., Dillard's, Inc., Sears Holdings Corporation, and Fred's, Inc. Target Corporation is a direct competitor of Wal-Mart with the revenue of $73 Billion in 2012. Wholesale Corporation also recorded revenue of $103 Billion at the end of the 2012 fiscal year. Internationally, Wal-Mart competes with the retail stores such as France's Carrefour, Britain's Tesco and Germany's Metro.

Each of these companies has their presence in China, Japan, and the UK. Despite various competitions that the company is facing locally and internationally Wal-Mart is still ahead of its direct competitors with the revenue of $469.16 Billion in 2013 and market capitalization above $259.7 Billion. (See table 2). Wal-Mart has been able to differentiate itself from the industry by offering low prices for its products. Table 2: Direct Competitor Comparison Wal-Mart Carrefour SA Costco Wholesale Corporation Target Corp.

Industry Market Cap: N/A 48.00B 44.73B Employees: 2,200,000 364,969 96,000 361,000 Qtrly Rev Growth (yoy): 0.04 N/A 0.08 0.07 0.22 Revenue (ttm): 73.30B 3.35B Gross Margin (ttm): 0.25 N/A 0.12 0.29 0.31 EBITDA (ttm): 36.30B N/A 3.87B 7.51B Operating Margin (ttm): 0.06 N/A 0.03 0.07 0.01 Net Income (ttm): 17.00B 1.63B 1.96B 3.00B N/A EPS (ttm): 5.02 N/A 4.46 4.52 N/A P/E (ttm): 15.72 N/A 24.64 15.43 N/A PEG (5 yr expected): 1.56 N/A 1.78 1.29 N/A P/S (ttm): 0.55 N/A 0.46 0.61 0.08 3: Financial Analysis (Horizontal, Vertical, Ratio) The report uses the Wal-Mart income statements to carry out the horizontal financial analysis.

The report uses five-year financial record to carry out the analysis. At the end of the 2010 fiscal, the company total revenue was $408.2 Billion, however, the company total revenue increased to $469.1 Billion in 2013. Similarly, the company net income increased from $14.3 Billion in 2012 to 16.9 Billion in 2013.Overview of the company financial record reveals that Wal-Mart is performing excellently well over the last 5 years. Vertical Analysis The report uses the percentages increase of the company sales within the last 5 years to demonstrate the company financial vertical analysis.

Analysis of the company financial records reveals that the company sales decline within the past 5 years. In 2008, the company recorded the 8.4% sale increase; however, the company sales declined by 5.9% at the end of the 2013 fiscal year. The 5-year average operating income also declined from 8.7% to 4.8% from 2008 to 2012. EPS 5-year average also declined from 10.77% in 2011 to 9.91% in 2012. However, the 5-Year Average of the company revenue declines between 2008 and 2012 from 9.41% to 4.37%. (See Table 3).

Table 3: Wal-Mart Operating Results 2012 2011 2010 2009 2008 Net sales $443,854 $418,952 $405,132 $401,087 $373,821 Net sales increase Wal-Mart Latest Qtr 2013 2012 2011 2010 2009 2008 Revenue % Year over Year 3.86 4.97 5.95 3.34 0.64 7.08 3-Year Average 4.75 3.29 3.65 5.40 8.72 5-Year Average 4.37 5.09 5.97 7.23 9.41 10-Year Average 6.65 7.35 8.23 9.48 11.41 Operating Income % Year over Year 2.37 4.68 3.98 6.65 5.05 3.65 3-Year Average 5.10 5.22 5.11 5.33 7.15 5-Year Average 4.80 5.32 6.63 6.98 8.70 10-Year Average 7.38 8.20.