Discount Store and Sears Credit Card
Sears, Roebuck and Co. vs Wal-Mart Stores
Case Background
Sears, Roebuck and Co. Wal-Mart Stores
Started as a company dealing in catalogue sales Diversification into 3 types of business – Retail, Service and Credit Retail store types – Full line stores, Auto stores, Home and lifestyle stores
Started as a franchisee type variety store Primarily Retail business – Discount stores, Supercenters, Sam’s club warehouses
Focus on price conscious consumers
Comparison of Retail Strategy
Parameters Sears, Roebuck and Co.
Increase of 15% from 3070 in 1995 to 3530 in 1997
Walmart Stores
Increase of 5% from 2558 in 1995 to 2740 in 1997
Comments
No. of stores
Retail selling space has increased more for Walmart as compared to Sears Retail space Increase of 13% from 81 to 93 mn sq ft Increase of 12.5% from 278 to 313 mn sq ft
Revenue per sq. ft. Operating lease Capital lease
Decrease from $323 to $318
Increase from $335 to $348
Increase of 23% from 357 to 439 Increase of 12% from 531 to 596 mn mn
Increase of 15% from 433 to 498 Increase of 9% from 2782 to 3040 mn mn
Higher rentals and lower depreciation for Sears
Credit card
56.6% of total sales come from Sears charge business
Risk of delinquencies borne by Manhattan chase bank
Credit payment default risk is higher for Sears
Accounting Policies
Depreciation – Straight Line Method
• SEARS 5-10 years on furniture and 40-50 years on buildings • WALMART 5-12 years on furniture and 5-33 on buildings
Pre – opening Costs Long term lease obligations
• Operating leases • Capital leases
Comparative P&L account
Fixed years ended jan 31th Current Assets Total Costs and Expenses operating income other income Income before Income Taxes Income Taxes Income from continuningoperations continuing Discounted Operations Net Income(PAT) Sears,Roebuck 1997 1996 41296 38064 39302 1994 106 2100 912 1188 1188 35981 2083 22 2105 834 1271 1271 Wallmart Stores 1997 1996 106178 94773
Case Background
Sears, Roebuck and Co. Wal-Mart Stores
Started as a company dealing in catalogue sales Diversification into 3 types of business – Retail, Service and Credit Retail store types – Full line stores, Auto stores, Home and lifestyle stores
Started as a franchisee type variety store Primarily Retail business – Discount stores, Supercenters, Sam’s club warehouses
Focus on price conscious consumers
Comparison of Retail Strategy
Parameters Sears, Roebuck and Co.
Increase of 15% from 3070 in 1995 to 3530 in 1997
Walmart Stores
Increase of 5% from 2558 in 1995 to 2740 in 1997
Comments
No. of stores
Retail selling space has increased more for Walmart as compared to Sears Retail space Increase of 13% from 81 to 93 mn sq ft Increase of 12.5% from 278 to 313 mn sq ft
Revenue per sq. ft. Operating lease Capital lease
Decrease from $323 to $318
Increase from $335 to $348
Increase of 23% from 357 to 439 Increase of 12% from 531 to 596 mn mn
Increase of 15% from 433 to 498 Increase of 9% from 2782 to 3040 mn mn
Higher rentals and lower depreciation for Sears
Credit card
56.6% of total sales come from Sears charge business
Risk of delinquencies borne by Manhattan chase bank
Credit payment default risk is higher for Sears
Accounting Policies
Depreciation – Straight Line Method
• SEARS 5-10 years on furniture and 40-50 years on buildings • WALMART 5-12 years on furniture and 5-33 on buildings
Pre – opening Costs Long term lease obligations
• Operating leases • Capital leases
Comparative P&L account
Fixed years ended jan 31th Current Assets Total Costs and Expenses operating income other income Income before Income Taxes Income Taxes Income from continuningoperations continuing Discounted Operations Net Income(PAT) Sears,Roebuck 1997 1996 41296 38064 39302 1994 106 2100 912 1188 1188 35981 2083 22 2105 834 1271 1271 Wallmart Stores 1997 1996 106178 94773