This paper presents a comprehensive financial analysis of Walmart Stores Inc. using five years of financial data spanning 2007 to 2011. The analysis covers net sales growth, key profitability ratios including return on equity and return on assets, and cash flow performance across operating, investing, and financing activities. The paper also examines how the 2008–2009 global financial crisis affected Walmart's performance and how the company recovered. Additionally, Walmart's competitive position relative to Target, Costco, and BJ's Wholesale Club is assessed through comparative financial metrics, concluding with a projection of sustained long-term growth.
Walmart Stores Inc. is a multinational retail corporation rebranded as Walmart in 2008. Founded in 1962, Walmart has grown into one of the largest American corporations, operating a vast chain of retail stores. The company sells a wide variety of consumer goods including electronics, toys, automotive products, furniture, and video games, among many others. Walmart serves approximately 200 million customers per week and recorded net sales of $419 billion at the end of fiscal year 2011. By 2012, the company was operating in 27 countries and recorded $443 billion in sales (Walmart Annual Report).
The objective of this report is to provide a financial analysis of Walmart using the last five years of financial data to evaluate the company's overall performance.
The analysis uses a five-year financial summary to evaluate Walmart's performance from 2007 to 2011. The data in Table 1 reveals that Walmart recorded healthy financial results throughout this period. Net sales grew from $344 billion in 2007 to $418 billion in 2011, representing an increase of more than 21% over the five-year span.
Despite this absolute growth in sales, the percentage rate of net sales increase declined over the same period. In 2007, Walmart recorded an 11.6% increase in net sales; by 2011, that figure had fallen to 3.4% (see Table 1 and Fig. 1). The primary driver of this slowdown was the global financial crisis, which adversely affected many large companies in the United States and Europe. Many corporations experienced declining sales between 2008 and 2009 as a direct consequence of the global financial downturn.
Table 1: Walmart Net Sales, 2007–2011 (USD$ Million)
Net sales: $344,759 (2007) | $373,821 (2008) | $401,087 (2009) | $405,132 (2010) | $418,952 (2011)
% Net sales increase: 11.6% (2007) | 8.4% (2008) | 7.3% (2009) | 1.0% (2010) | 3.4% (2011)
Gross profit margin: 23.4% (2007) | 24.0% (2008) | 24.2% (2009) | 24.9% (2010) | 24.7% (2011)
Total assets: $151,274M (2007) | $163,200M (2008) | $163,096M (2009) | $170,407M (2010) | $180,663M (2011)
Source: Walmart Annual Report 2011.
Despite the decline in the percentage rate of net sales growth, Walmart succeeded in growing its total assets from $151 billion in 2007 to $180 billion in 2011. Return on assets (ROA) improved correspondingly, rising from 7.46% in 2007 to 9.07% in 2011. Walmart also increased shareholder value over this period: return on equity (ROE) grew from 18.33% in 2007 to 23.91% in 2011 (see Table 2).
Table 2: Walmart Ratio Analysis, 2007–2011
Gross profit margin: 23.4% (2007) | 24.0% (2008) | 24.2% (2009) | 24.9% (2010) | 24.7% (2011)
Net profit margin: 3.27% (2007) | 3.40% (2008) | 3.34% (2009) | 3.54% (2010) | 3.91% (2011)
Operating profit margin: 5.94% (2007) | 5.87% (2008) | 5.68% (2009) | 5.91% (2010) | 6.10% (2011)
Return on equity (ROE): 18.33% (2007) | 19.70% (2008) | 20.53% (2009) | 20.26% (2010) | 23.91% (2011)
Return on assets (ROA): 7.46% (2007) | 7.79% (2008) | 8.20% (2009) | 8.40% (2010) | 9.07% (2011)
Source: Stock Analysis.
Walmart's winning strategy centers on selling branded products at low prices. To sustain this approach, the company places strong emphasis on procurement efficiency and treats customers as guests by offering consistent discount pricing. Walmart also invests in innovation to deliver superior merchandise. The expansion into online retail has allowed the company to reach customers across all parts of the United States. According to a report by Zenith Management Consulting, Walmart's enduring slogan — "Always Low Prices" — has been central to its operational efficiency and competitive positioning.
Walmart's bargaining power over its suppliers has also been a significant driver of financial performance. Historically, retail stores have sought to leverage supplier relationships, and Walmart is particularly notable in this regard. Walmart suppliers operate with limited negotiating power: each year, the company sets the prices it will pay and the quantities each supplier must provide. The company also reduces per-unit prices for items that have not undergone significant product innovation, and it retains the ability to drop any supplier unable to meet the terms it sets. This procurement discipline has enabled Walmart to record an average annual growth rate of approximately 8.90% over the last five years, with earnings per share (EPS) of $4.93 and a consistently rising operating profit margin.
Over the past five years, Walmart's average debt-to-equity ratio was 0.71, reflecting conservative use of leverage. The low ratio indicates that shareholders hold a larger proportion of company assets relative to debt, suggesting the company operates at lower financial risk. However, Table 4 also shows that Walmart's current ratio stands at 0.9 and its quick ratio at 0.2, indicating that the company is less liquid than some of its competitors — a pattern consistent with aggressive reinvestment of profits into future development.
Table 4: Walmart Stores Inc. — Ratios and Returns (Last 12 Months)
Gross Profit Margin: 26.9% | EBIT Margin: 6.0% | EBITDA Margin: 7.8% | Pre-Tax Profit Margin: 5.5%
Interest Coverage: 11.3 | Current Ratio: 0.9 | Quick Ratio: 0.2 | Leverage Ratio: 2.9
Receivables Turnover: 96.4 | Inventory Turnover: 7.6 | Asset Turnover: 2.3 | Revenue to Assets: 2.3
ROE from Total Operations: 25.6% | Return on Invested Capital: 14.9% | Return on Assets: 8.8%
Debt/Common Equity Ratio: 0.71 | Price/Book Ratio: 3.01 | Book Value per Share: $19.61
Total Debt/Equity: 0.88 | Long-Term Debt to Total Capital: 0.42 | SG&A as % of Revenue: 19.1%
R&D as % of Revenue: 0.0% | Working Capital per Share: −$2.36 | Cash per Share: $2.06
Cash Flow per Share: $7.38 | Free Cash Flow per Share: $0.80 | Tangible Book Value per Share: $13.65
Price/Cash Flow Ratio: 8.0 | Price/Free Cash Flow Ratio: 73.4 | Price/Tangible Book Ratio: 4.32
As the cash flow statement provides information about a company's cash receipts and payments during an accounting period — showing how these cash flows link the ending cash balance to the opening balance on the statement of financial position — it is divided into three components: cash flows from operating activities, investing activities, and financing activities (Stock Analysis, p. 1).
Walmart's cash flow from operating activities grew from $20.2 billion in 2007 to $23.6 billion in 2011, an increase of approximately 17%. However, cash flow from investing activities deteriorated over the same period. It stood at $14.5 billion in 2007, fell to $10.1 billion in 2009, and then partially recovered in 2010 and 2011. The primary cause of this decline was the global financial crisis, which significantly impacted advanced economies between 2008 and 2009. Fig. 3 illustrates the sharp contraction in U.S. GDP growth during this period, which recorded a decline of −6.8% at its trough.
Despite these pressures, Walmart demonstrated resilient cash flow from financing activities and successfully improved its overall financial performance in fiscal years 2010 and 2011 (see Table 3 and Fig. 2).
Table 3: Walmart Statement of Cash Flow, 2007–2011 (USD$ Million)
Net cash provided by operating activities: $20,209 (2007) | $20,354 (2008) | $23,147 (2009) | $26,249 (2010) | $23,643 (2011)
Net cash used in investing activities: $14,507 (2007) | $15,670 (2008) | $10,742 (2009) | $11,620 (2010) | $12,193 (2011)
Net cash used in financing activities: $4,839 (2007) | $7,134 (2008) | $9,918 (2009) | $(14,191) (2010) | $(12,028) (2011)
Walmart's sustained ability to outperform competitors is attributable to its consistent focus on selling quality products at low prices, reinforced by strong customer service. The company's procurement leverage over its supplier base has further supported this positioning, enabling continued investment in growth even during periods of macroeconomic stress.
Walmart operates in a highly competitive U.S. retail environment. Its principal competitors include Target Corporation, BJ's Wholesale Club Inc., and Costco Wholesale Corporation. Based on the data in Table 5, Walmart holds a dominant position relative to all three rivals. Walmart's total revenue of $446.9 billion far exceeds that of its competitors, and its net income of $15.77 billion is substantially higher than those of Target ($2.93 billion), Costco ($1.52 billion), and BJ's Wholesale Club ($95 million). However, Costco's year-over-year quarterly revenue growth rate of 10% is higher than Walmart's 5.9%, indicating that Costco is gaining market share at a faster pace.
Table 5: Walmart Competitive Comparison
"Walmart benchmarked against Target, Costco, and BJ's"
Yahoo Finance. "Walmart Stores, Inc. Common Stock (WMT)." Yahoo Inc., 2012.
Zenith Management Consulting. Case Study: How to Exploit Walmart's Weakness. Zenith Management Consulting White Paper, 2006.
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