Walmart Income Statement Analysis of Wal-Mart Income Statement 2009-2011

Broad Overview

Wal-Mart operates retail stores classified into the three categories of Walmart U.S., Walmart International, and Sam's Club. International sales account for 26% of net sales, while Sam's Club is just 11.8% (Walmart, 2012, p. 17). An initial perusal of Wal-Mart's income statement evidences the staggering scale of its retailing operations. In 2011, revenues from both retail receipts and club memberships rose 4.3%, over 2009 figures, to nearly 422 billion (USD). Operating income demonstrates a steady incremental increase reflective of consistent management and cost control practices. Lastly, the income from continuing operations reflects a consistent incremental increase with each passing year.

Based upon a general overview of the Walmart income statement, it appears that the firm is financially healthy and consistently capturing accounting profits. Review of the accompanying notes reveals that Walmart does not include the costs of their warehouse and distribution facilities in their cost of sales, therefore benchmarking their gross profit margin to competitors may present a skewed view of the firm (Walmart, 2012, p. 36).

2009-2011 Yearly Analysis

Initial reviews of net sales highlights that retail receipts are increasing; yet membership, and other income, is waning. Net sales comprise less than 1% of overall revenues, however the decline may be indicative of changing customer buying habits or some other shift in the market. In 2009, membership income totaled 3.167 billion (USD) of revenues, but has declined nearly 8.5% to 2.897 billion (USD) in 2011.

Consistency in the cost of sales to net sales implies that inflation is not eroding profitability and increased revenues are not the result of any abnormal discounting of prices. Walmart has built their reputation on the "everyday low price" slogan, while competitors are fettered to running sales to drive revenues, therefore customers have come to expect their prices are the lowest available (Business Insider, 2012).
The areas representing the most variation relate to discontinued operations and income taxes. Discontinued operations increased income by 146 million (USD) in 2009, decreased it by 79 million (USD) in 2010, and increased it by 1,034 million (USD) in 2011. The affect of such dramatic variance from shutting down particular activities and sale of the corresponding resources ripples through the income statement to increase, or decrease, the earnings per share for each year. While the continuing operations of Walmart demonstrate an admirable consistency, the firm continues to experiment with new stores, markets, and product services that do not always prove profitable or sustainable. The notes to their annual report indicate that the discontinued operations were related to a venture in Germany (Walmart, 2012, p. 45).

The tax section of the income statement represents the second area of notable variance. In 2009, current taxes represented 31.45% of income from operations, yet the effect of deferred taxes increased the effective rate to 34.18%. Similarly in 2010, current taxes accounted for 34.55% of income from operations, and the effect of deferred taxes…