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Walmart Performance
Wallie's ratios
Discuss Wal-Mart's performance over the three-year period.
Wal-Mart's sales growth slumped from 7.3% 2009-2008 to 1% from 2010 over 2009, but has increased again to 3.4% year-end 2011 over 2010 (Wal-Mart, 2012a, n.p.). This is a deep discount from years prior to the 2008 recession, when sales growth was 8.4% and 11.6% year over year in 2008 and 2007, respectably, but considering global macroeconomic conditions since that time, the increase from 2011 over 2010 suggests consumers are spending again. At the same time, operating income has continued to increase year over year, with per-share revenue growth and an increase in dividends, all while the firm has taken on more long-term debt and expanded fixed assets mostly it seems through opening new international units. This increase in long-term debt has driven a fall in owner equity with the result being a picture of a competitive multinational increasing its global presence which should increase earnings per share if increasing sales cover debt service given continued spending growth. Increasingly positive operating income even in the face of expanding debt supports the likelihood debt service will not overwhelm earnings per share, alongside 2011 operating expense falling back to 2009 levels after an increase in 2010, all while sales in U.S. retail stores have actually fallen, but were carried by increased sales at Sam's Club stores in that segment.
Discuss the major differences in financial performance over the three-year period.
The major difference as mentioned above is a significant increase in capital assets and debt as Wal-Mart expands the number of international retail stores. Inventories have increased after a fall in 2010, which probably reflects the addition of some 450 retail...
Negative U.S. retail sales growth rates coupled with an increase of 50 units in the U.S. may suggest Wal-Mart has achieved domestic saturation and reducing growth at home may deliver higher performance per unit. The most marked change has been a precipitous drop in net sales growth rates from 2009-2010, which fell by a factor of roughly 7x, but which has since picked up more than half that growth rate, significant given the expansion in number of stores abroad and declining revenues at home. At the same time, costs have fallen back to 2009 levels which suggests performance improvement which indeed shows up as positive operating income even given expanding debt.
Calculate two (2) financial ratios with the data provided.
Table 1: Current Ratio and Inventory Turnover
2011
2010
TCA
51893
48032
in U.S. $ (millions)
TCL
58484
55543
in U.S. $ (millions)
TCA/TCL
0.89
0.86
Current ratio
SALES
418952
405132
in U.S. $ (millions)
INVENT
36318
32713
in U.S. $ (millions)
S/I
11.54
12.38
Inventory turnover
Discuss the ratios you selected and what they tell you about Wal-Mart's performance.
A look at Wal-Mart's balance sheet (Wal-Mart, 2012b, p. 31) sheds a different light on the company's current liquidity situation: the company's current ratio is less than 1. What this means is that should the firm need to raise cash to cover operating costs and debt exposure,…
References
Wal-Mart (2012a). Walmart 2011 annual report: Financial review. Not dated but since fiscal year ends 31 Jan. therefore must be from 2012. Retrieved from http://walmartstores./sites/annualreport/2011/financials.aspx
-- (2012b). Consolidated balance sheets. Walmart 2011 Annual report: 31. Retrieved from http://walmartstores./sites/annualreport/2011/financials.aspx
-- (2012c). Notes to consolidated financial statements. Walmart 2011 Annual report: 34.
Retrieved from http://walmartstores./sites/annualreport/2011/financials.aspx
-- (2012d). Notes to consolidated financial statements. Walmart 2011 annual report. Retrieved from http://walmartstores./sites/annualreport/2011/financials.aspx
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