interpreting a 10-k tanya burnside, jyothsna kodali, ashley pleasant, and james totten bellevue...

CORPORATE OUTLOOK WALMART(WMT)

Save Money. Live Better


0World’s largest retailer – 10,900 retail units in 27 countries.

0Third largest publicly traded company

0Three business segments: Wal-mart U.S., Wal-mart International and Sam’s Club

0World’s largest private employer: 1.3 million U.S. associates - 2.2 million associates worldwide


02013 revenues $469.2 billion with net sales of $466.1 billion.

0 Wal-Mart U.S. - 59% of net sales

0 Wal-Mart International - 29% of net sales

0 Sam’s Club - 12% of net sales

0High revenues require strategic merchandising, nobody does it better


0Wal-Mart U.S. strategic merchandise units in Fiscal 2013:

CORPORATE OUTLOOK WALMART(WMT)0Competitors Include:

0 Target Corporation

0 Costco Wholesale Corporation

0 Kohl’s Corporation

0 Dollar General Corporation.


SWOT

Strengths Weaknesses Vast operations- power player able to negotiate pricing etc.

High employee turnover- low pay, even lower benefits

Large group of suppliers – dictate price demands

Poor product quality- several brands made with substandard products.

Low product cost- mass quantities Negative public perception- Shuts down towns. Diverse products- meets customer needs. One stop shop.

Lawsuits involving labor issues – Discrimination against women.

Opportunities Threats Additional business formats meeting demographic needs of customers.

Competition from other retailers like Dollar General

Community investments of local distributers and business partners

Lack of specialty products because of too many different product lines

E-commerce expansion in the U.S. and abroad Unions may form resulting in cost-per hire and labor costs.

International Government shut-down – War/Terriorism


0 Formats to meet customer needs and market demands:

0 Supercenters

0 Discount stores

0 Neighborhood Markets

0 walmart.com

0 “Everyday low prices” (EDLP) pricing philosophy

0 Programs: “Rollbacks”, “Save Even More/Ad Match”, “Store of the Community”, and “Clean, Fast, and Friendly”

0 Corporate slogan “Save money. Live better”

http://stock.walmart.com/microsites/annual-report-2013/ceoLetter.aspx

CORPORATE OUTLOOK FOR TARGET (TGT)

Expect More. Pay Less.®


0 Stores0 1,788 stores in the United States0 82 stores in Canada0 37 distribution centers0 361,000 team members worldwide

0 Guests0 Median age of 400 Median household income of approximately $64,0000 Approximately 43% have children at home0 About 57% have completed college


0 Consolidated revenues were $73,301 million for 2012

0 2012 net sales $71,960 million

0 Target stores in Canada just opened this fiscal year0 Projected to have 124

open by EOY 2013


Household Essentials

25%

Hardlines18%

Apparel & Accessories19%

Food & Pet Supplies

20%

Home Furnish-ings

& Décor 18%

Target Percentage of Sales


0Competitors Include:0 Best Buy0 Costco0 Macy's0 Walgreens0 Walmart


Strengths Weaknesses

Designer brands and exclusives Less store brand products than WMT

REDCard debit and credit card Wages lower than some competitors

Customer loyalty Perceived as more expensive than WMT

Nationwide presence Less international presence than WMT

Opportunities Threats

Expansion into new markets (Canada) Failure to effectively execute plans for Canada expansion

Increasing number of products and services (Exclusives, Brightspot, Ticket)

Disruptions (third party providers, supply chain, computer systems)

Improve competitive pricing perception Macroeconomic (Credit freezes, consumer confidence, effective tax rates)

Increasing social media presence (Pinterest, Facebook, Apps)

Failure to develop and maintain multichannel experience


Expect More. Pay Less.®

http://www.youtube.com/watch?v=vC2yFblskcc

THE 10-K

http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000010416913000011-

29T7QR984CV72K8HUI23G5JV18&docFormat=HTM&formType=10-K

http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000104746913003100-3HVR622FHI91HVP82G9RJG0EU8&docFormat=HTM&formType=10-K

Ratio AnalysisRatio Analysis Ratio Analysis is used for the assessment of firm’s financial

condition.Liquidity RatioLeverage Ratio ( Debt)Profitability Ratio ( Performance)Activity Ratio

Ratio Analysis*Based on financial statements for Jan 2013

Liquidity RatioCompany’s ability to turn assets in to cash.

Current Ratio = Current Assets / Current LiabilitiesAcid Test Ratio = (Cash + Accounts Receivable + Marketable Security ) /

Current Liabilities

Ratio Wal-Mart TargetCurrent Ratio 0.835 1.168Acid Test Ratio 0.203 0.54

Leverage RatioThe degree on which company relies on borrowed funds in its operations.

Debt to Equity Ratio = Total Liabilities / Owners Equity

Ratio Wal-Mart TargetDebt to Equity Ratio 0.71 1.066

Ratio AnalysisProfitability Ratio (Performance)This ratio measures how effectively a firm’s manager uses resources to

achieve profits.Return on Sales= Net Income/Net SalesReturn on Equity= Net Income after Tax/Total Owner’s Equity

Activity RatioThis ratio tells how effectively inventory is converted into sales. Inventory Turnover Ratio=Cost of Goods Sold/Average Inventory

Ratio Wal-Mart TargetReturn on Sales 3.65% 4.09%Return on Equity 22.27% 18.11%

Ratio Wal-Mart TargetInventory Turnover Ratio 10.64 9.11

Ratio AnalysisGross Profit RatioThis ratio will mark up on inventory sold.Gross Profit Ratio= Gross Profit/Sales

Ratio Wal-Mart TargetGross Profit Ratio 24.38% 30.38%

Asset Turnover RatioAsset Turnover Ratio= Sales/Company’s Average Total Assets

Ratio Wal-Mart Target

Asset Turnover Ratio 2.29 1.52

Ratio Analysis*Based on financial statements for October 3, 2013

Basic Earnings Per Share

Price to Earnings Ratio (P/E)Price to Earning Ratio= current per share stock price/latest basic earnings per share

Ratio Wal-Mart Target

Price to earnings ratio 14.010 13.570

Ratio Wal-Mart TargetBasic Earnings Per Share 5.220 4.680

MONTLY STOCK PRICES

http://finance.yahoo.com/q;_ylt=AoWSH2Q64tqxug2kBT4E4JwgBrgF?uhb=uhb2&fr=uh3_finance_vert&type=2button&s=WMT

http://finance.yahoo.com/q;_ylt=AoWSH2Q64tqxug2kBT4E4Jwnv7gF?uhb=uhb2&fr=uh3_finance_vert&type=2button&s=TGT







Wal-Mart Strategy vs.

Target Strategy

Wal-Mart Business Strategy


0Low-price model0 Sam Walton’s slogan “Everyday low prices” set Wal-Mart

apart 0 Even though the product is marked down in price, sales

growth causes Wal-Mart to be profitable


0Selection of Vendors0 Wal-Mart carefully chose the location of its distribution

centers, resulting in faster replenishing time0 Because of rapid sales growth, all of the vendors want to

work with Wal-Mart0Allow Wal-Mart to receive major discounts on product


0Technology 0 Advantage of technology before many retailers and used

the UPCs to keep track of inventory0 Use of UPCs improved communications between stores

and vendors0 Lowered inventory costs


0Human Resource practices0 Initially employees offered a portion of Wal-Mart’s profit0 Recruitment from within the store0Employees received stock ownership plans

Target Business Strategy

0Target’s strategy revolves around the choices the company was faced with0 Focus on specialization or differentiation0 Avoided focus on specialization of a single product,

business would not continue to grow0 Target chose differentiation strategy


0Affordable Chic Goods0 Chic goods that the everyday worker could afford0 Avoided marketing against Wal-Mart0 Store cleanliness, shorter wait times in lines, and

shopping environment


0 Design and Advertising0 To compete with Wal-Mart’s low price strategy, Target

focused on quality of product and style0 Target spends 2.3 percent of revenue on advertising as

oppose to Wal-Mart’s .3 percent0 All advertising is centered around Target’s stylish trends

instead of low prices0 Bull’s Eye became a trend for pop culture0 Target offered designer brands

0 Fostered partnerships with Cherokee, Merona, etc0 This image led Target to be perceived as the store for more

affluent customers with upscale style

What are your 10K questions?

REFERENCESBarwise, P., & Meehan, S. (2004). Bullseye: Target's cheap chic strategy. Retrieved from http://hbswk.hbs.edu/archive/4319.htmlBrea-Solis, H., Casadesus-Masanell, R., & Grifel-Tatje, E. (2012). Business model evaluation: Quatifying Wal-mart's sources of advantage. Retrieved from http://www.hbs.edu/faculty/Publication Files/13-039 Nov 2012_612ce7e2-7f81-4eea-9126- 3c0964f2be2f.pdfCostco's Profit Soars to $459 Million as Low-Wage Competitors Struggle. (2013, May 31). Huffington Post. Retrieved http://www.huffingtonpost.com/2013/05/30/costco-profits_n_3359033.html?utm_hp_ref=businessFridson, M., & Alvarez, F. (2002). Credit analysis, Equity analysis. In Financial statement analysis: A practitioner's guide. New York: John Wiley & Sons. (pp. 267-325)Mission: Walmart 2013 Annual Report. (2013). Retrieved from http://az204679.vo.msecnd.net/media/documents/2013-annual-report-for-walmart-stores- inc_130221024708579502.pdfSolutions.Next step: Your stocks annual report 10-K. (2013). Retrieved from http://www.stockhomework101.com/220.htmNickels, W., McHugh, J., & McHugh, S. (2013). Understanding business. Boston: McGraw-Hill Learning One Our Story. (2013). Retrieved from http://corporate.walmart.com/our-story/Say hello to brightspot, Target’s new mobile service. (2013, October 7). Retrieved https://corporate.target.com/discover/article/say-hello-to-Brightspot-Target-s-new-mobile-servic Strauss, M. (2013, April 5). Target Canada prices 0.2 per cent higher than Wal-Mart's: Survey. The Globe and Mail. Retrieved http://www.theglobeandmail.com/report-on-business/target-canada-prices-02-per-cent-higher-than-wal-marts-survey/article10823259/Target: 2012 annual report. (2013). Retrieved from https://corporate.target.com/_media/TargetCorp/annualreports/content/download/pdf/Annual-Report.pdf?ext=.pdfTarget. Target. (2013, March 20). SEC filings. Retrieved http://investors.target.com/phoenix.zhtml?c=65828&p=irol-sec&secCat01.28_rs=31&secCat01.28_rc=10&control_selectgroup=0&x=51,42,38,11,47,41,28&y=7,12,10,10, 10,10,6Target introduces target ticket, a family-friendly digital video service. (2013, September 25). Retrieved http://pressroom.target.com/news/target-introduces-target-ticket-a-family-friendly-digital-video-serviceBehind the bullseye: Gregg Steinhafel talks Target's approach to corporate responsibility. (2013, June 24). [Video file] Retrieved http://www.youtube.com/watch?v=vC2yFblskccTarget Salaries. (2013). Retrieved http://www.glassdoor.com/Salary/Target-Salaries-E194.htm

interpreting a 10-k tanya burnside, jyothsna kodali, ashley pleasant, and james totten bellevue...

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