Walmart Valuation
1.0 Executive Summary
In part 1 of this document we analyze Wal-Mart financial condition and results of operations based primarily on its audited financial statements information from 2009-2013.
Wal-Mart overshadows its competitors, with its US retail sales being over three times those of its nearest rival (in FY2013). We attempt to identify what is driving this business model by analyzing the firm’s asset management, capital structure and its ability to generate cash. In doing so we include 2 peer comparisons, namely Costco and Target.
1.1 The company and the industry. Wal-Mart market position.
Wal-Mart is the largest retailer in the world. The company has retail stores worldwide, with 10,773 stores recorded across 27 countries at the end of January 2013. Wal-Mart operates through three business segments, namely Wal-Mart US, Wal-Mart international, and Sam’s Club. The company also operates through various online retail sites including walmart.com. In the US, the company operates as a range of retail formats, including supercenters, discount stores, and neighborhood markets.
The US Hypermarkets and Supercenters Industry comprise large retailers of consumer staples goods. The three key players in the industry include Walmart, Costco and Target. Walmart leads the market with nearly 72% of the market share, but Costco has been able to outpace Walmart and Target’s revenue growth rates over the last few years due to its better customer service. Walmart and Target have lagged behind in terms of customer satisfaction largely because they pay their employees lower wages compared to Costco, which is a significant demotivating factor. Target operates with the highest margins in the industry, as a higher percentage of its revenues are generated from sales of private label brands as compared to its competitors.
Wal-Mart has established itself as a value retailer by providing low prices for the largest choice. Every Day Low Price (EDLP) is its pricing philosophy
In part 1 of this document we analyze Wal-Mart financial condition and results of operations based primarily on its audited financial statements information from 2009-2013.
Wal-Mart overshadows its competitors, with its US retail sales being over three times those of its nearest rival (in FY2013). We attempt to identify what is driving this business model by analyzing the firm’s asset management, capital structure and its ability to generate cash. In doing so we include 2 peer comparisons, namely Costco and Target.
1.1 The company and the industry. Wal-Mart market position.
Wal-Mart is the largest retailer in the world. The company has retail stores worldwide, with 10,773 stores recorded across 27 countries at the end of January 2013. Wal-Mart operates through three business segments, namely Wal-Mart US, Wal-Mart international, and Sam’s Club. The company also operates through various online retail sites including walmart.com. In the US, the company operates as a range of retail formats, including supercenters, discount stores, and neighborhood markets.
The US Hypermarkets and Supercenters Industry comprise large retailers of consumer staples goods. The three key players in the industry include Walmart, Costco and Target. Walmart leads the market with nearly 72% of the market share, but Costco has been able to outpace Walmart and Target’s revenue growth rates over the last few years due to its better customer service. Walmart and Target have lagged behind in terms of customer satisfaction largely because they pay their employees lower wages compared to Costco, which is a significant demotivating factor. Target operates with the highest margins in the industry, as a higher percentage of its revenues are generated from sales of private label brands as compared to its competitors.
Wal-Mart has established itself as a value retailer by providing low prices for the largest choice. Every Day Low Price (EDLP) is its pricing philosophy