Appendix A SWOT Analysis The following SWOT analysis is based on Wal-Mart Stores, Inc. (WMT), which operates in the discount retail industry. Strengths and weaknesses focus on internal factors within the company, whereas opportunities and threats are based on external industry aspects. Strengths Weaknesses Low-cost Leader Declining Sales Growth Power over Suppliers International Markets International Acquisitions Comparative Stores Sales Diversity of Employees Employee Turnover Rate Employee Compensation/Benefits Opportunities Threats Internet Sales Increased Oil/Energy Prices Digital Movie Downloads Decline in Housing Market Banking Industry Pharmacy Industry Strengths Low-cost Leader Wal-Mart‟s low cost leadership stems from a combination of leveraging power over suppliers, and efficient operations that combine to put the lowest cost items on store shelves.1 Wal-Mart‟s enjoys retail profits unmatched by competitors allowing them to mass purchase goods from suppliers at lower costs. The exploitation of well located distribution centers permits Wal-Mart to maximize its product supply its stores. Continually adapting stores reveal advancements made in store efficiencies. These procedures allow Wal-Mart to exploit its low cost implementation effectively. Power over Suppliers Wal-Mart has gained gradual strength in dictating more power over its suppliers.2 Wal-Mart‟s massive size has decreased its reliance on fewer suppliers and expanded stores push the number of suppliers even higher. Wal-Mart gains their power over suppliers as they impose strict demands on product sizes and prices. The price dictation by Wal-Mart empowers them because suppliers can no longer manipulate the price and are forced into cheaper compliance. International Acquisitions Wal-Mart‟s success within the United States is prevalent, but now with the acquisition of Trust- Mart they have become the largest foreign chain.3 International acquisitions allow for a smoother transition into the foreign markets. Foreign markets present different customers and regulations and purchasing already existing stores allow instant success opposed to pushing new stores in. Diversity of Employees Wal-Mart‟s belief of “Respect for the Individual” is backed through its diversity of staff appealing to the American culture. Wal-Mart‟s mixture of employees has been extended in numbers of women and minorities. A thrust has been made toward universities recruitment and expansion developing intelligent employees.4 The push toward employee diversification backs Wal-Mart‟s commitment toward becoming a total corporation. Weaknesses Declining sales growth Over the past six years, Wal-Mart‟s net sales increase has been declining. In 2006, net sales increase reached an all-time low of 9.5%.5 Wal-Mart managers see this as an extremely serious problem and are focusing all of their efforts to regain double-digit sales growth. If their sales growth continues to decrease Wal-Mart could face major issues in the future and need to increase the growth of their sales. Weak performance in some international markets Wal-Mart has experienced some issues when expanding overseas. In Germany the stores performed poorly and eventually needed to be shutdown. Wal-Mart may be trying to expand overseas too fast and not paying enough attention to the cultural differences between the United States and the foreign country. If Wal-Mart wants to succeed overseas they need to spend more time researching foreign markets and gathering information. Declining comparative store sales Comparative store sales is a measure that indicates the performance of existing stores by measuring the growth in sales for such stores for a particular period over the corresponding period in the prior year. Wal-Mart has seen a 1% annual decrease in comparative stores sales that they are attributing to the opening of large amounts of stores. Employee Turnover Rate Wal-Mart has an annual employee turnover rate of 45-50% compared to competitors like COSTCO who have a turnover rate of 25%.6 This difference wastes huge amounts of money for hiring screening and training employees. Also, most of the new employees are not staying at Wal-Mart long enough to learn how to do their jobs properly. Employee Compensation/Benefits Wal-Mart pays its employees on average five dollars less than their competitors.7 This creates employee morale problems and contributes to the high turnover rate. Wal-Mart also provides medical benefits to fewer employees than their competitors. If Wal-Mart wants to have happy employees who enjoy their job, they need to consider raising their pay and benefits packages. Opportunities Internet Sales The average Internet purchaser has an average household income of $63,000, compared to the average $33,000 household income of a non-Internet purchaser8. Wal-Mart has implemented www.walmart.com, along with their store site www.walmartstores.com, for customer shopping on the internet. This site allows customers to obtain Wal-Mart‟s low prices from the comforts of their home. Digital Movie Downloads Wal-Mart is looking to seize on the opportunity of online movie services. The company currently makes up 40% of the United States “hard copy” DVD sales9. By venturing into the online downloading service, Wal-Mart looks to compete with Apple, the leader in downloadable movies. Wal-Mart is looking to enter the digital download market by offering a free download of a movie when it is purchased at the retail location. The Company is also considering installing in-store kiosks where films can be downloaded onto portable discs. Banking Industry The financial services industry offers a new opportunity for Wal-Mart. The Company is trying to break into the market in order to capitalize on the low-income families that already shop at the store10. Wal-Mart management feels this segment is unable to afford many financial services. Law makers are trying to keep the giant out of the banking industry, but Wal-Mart states that it will not pose a threat to the high-end banking firms. The Company currently offers limited financial services such as money orders and wire transfers. This is made possible through partnerships with MoneyGram International and SunTrust banks. Pharmacy Industry This fall Wal-Mart announced its plan to begin offer $4 prescription drugs to consumers11. The plan covers 291 prescription drugs, and no insurance is needed to take advantage of the prices. This program is part of a plan to offer incredibly low priced drugs to Wal-Mart shoppers. The program is starting in 65 Florida locations and is slated to expand to the whole state by the end of 2007. Threats Increased Oil/Energy Prices Wal-Mart‟s customer base focuses on discount value-seekers, and these customers are much more likely to be affected by increased gas and energy prices. The increase on this type of customer‟s gas budget will decrease their budget on Wal-Mart. Also, the increased energy bills will shrink Wal-Mart‟s margins on household appliances. Declining Housing Market The economy has recently experienced record-lows in housing sales and soaring mortgage rates over the last five years12. This is a threat to Wal-Mart‟s home improvement products, and will shrink their margins in this segment. Appendix B Porter’s Five Forces Industry Analysis I. Power of Buyers The power of buyers in the retail industry is low. There are so many customers that shop at retail stores, and specifically Wal-Mart, that an individual does not have ability to leverage price, product or service offerings. Wal-Mart controls over 2% of the United States economy, and over 100 million customers shop at Wal-Mart a week13. The average Wal-Mart store has over $100 million in sales a year, and offers products in over 40 different departments. The Company also owns and operates 3,400 stores domestically. The sheer size of the retailer allows them to control what products and prices they offer to customers. Wal-Mart must monitor customer buying trends in order to maintain its strong position. In 2006 Wal-Mart tested an upscale clothing line in its stores14. The Metro 7 initially did well in 600 test stores, but not when expanded to new stores, the sales dropped off. Wal-Mart simply pulled the line and took note. The Company recognizes it is a low price leader and that is what they continue to offer customers. II. Power of Suppliers The economic power of suppliers in the retail industry is low. On a daily basis, Wal-Mart has tens of thousands of items on their store shelves15. Competition for this shelf space is extremely intense, which gives power to the retailer. The majority of products supplied by retailers can be easily imitated because they are not unique. This takes power away from the suppliers. When a supplier receives shelf space from Wal-Mart, they must make certain that Wal-Mart becomes a top priority for their company. If they do not provide Wal-Mart with high quality merchandise for a reasonable price then Wal-Mart will begin its search for a supplier that will follow their terms in their strict business relationship. III. Threat of New Entrants The threat of new entrants into the discount retail market is low. In order to make an impact in this industry you must have billions of dollars just to compete with the top competitors. Even if you were able to get past the enormous amount of money necessary to open up stores, the prices of your supplies would more than likely be much more expensive than that of Wal-Mart‟s. This is because of their massive orders from their suppliers. Wal-Mart has also built unbreakable ties with many companies because of their long-standing business over the years. These relationships have made companies dependent on Wal-Mart rather than Wal-Mart depending on their suppliers. An example of this is Wal-Mart insisting that their suppliers begin using RFID tags16. Wal-Mart has single-handedly changed the way discount retailers operate and they are much too strong for new entrants to steal their thunder. If companies do gain on Wal-Mart, it will be companies who are already in the industry like Target, Kroger, or Best Buy. IV. Threat of Rivalry Threat of rivalry in the retail industry is high. The competition taking place in the retail industry is healthy. Rivalry is requiring stores to continue to change and better suit the customer. This industry is consolidated because each store does not serve a specific niche. They serve several different types of customers and do not concentrate on one particular area. Demand for products sold in retail stores is very high because most of the goods are necessary for survival. Demand for items could fluctuate by shortages in supply or having too much of one item. Exit barriers are increased in rival firms because competitiveness pushes firms deeper into the industry, increasing losses toward leaving the industry. Pushes to gain product differentiation and brand identity increase the fight over an expanded industry. However, regardless of the industry as a whole, the threat of rivalry for Wal-Mart specifically is extremely low. The threat is low due to unequally sized competitors with one clear market leader, Wal-Mart. The threat of rivalry is also very low because the industry is growing slower due to Wal-Mart‟s domestic density. With the differentiation and completeness of the industry leader competitors are further from being immediate qualified rivals. Extensive pursuit by Wal- Mart toward advantages in a low competitive industry leads to a reduction in rivalry. The overall breakdown of the dispersion of the target market will be bigger per section than more competitive industries. A few stores are provided to wide consumer bases, but densely located domestic stores leave minimal room for capturing or stealing target markets. Each retailer has similar techniques toward developing final products leading toward fewer advantages. Lower selling costs decrease the abilities for profit of competitors to the cost leader because the higher costs prevent companies from making as much per product. The differentiation of the cost leader Wal-Mart in expanding and maintaining efficient operations establishes a competitive advantage that‟s hard to match in size and structure17. Wal-Mart‟s power in their ability to dictate the buying price from suppliers prevents smaller firms from making the same impact. V. Threat of Substitutes In the discount retail industry, there is a relatively high risk for substitutes. As long as a company can successfully thrive in any given segment at a similar low-cost, they can be considered to be selling a substitute for the retailer‟s products. However, the truth is, there is not a discount retailer quite like Wal-Mart, reducing their threat for substitutes. Other competitors would rather have higher price elasticity, but when you have a power over suppliers as high as Wal-Mart, the price elasticity and ability to have substitutes at a similar price is low. Wal-Mart is an adaptable retail giant, making it dangerous to companies that sell similar products. When companies adopt a new, innovative technology, Wal-Mart is quick to add it to their repertoire. For example, Amazon and Apple recently teamed up to offer movie downloads—posing a threat to Wal-Mart‟s movie sales. The Company already leads the U.S. in DVD sales18, but it assumes the role as a protector of its market share. Wal-Mart immediately began talks about how customers can cheaply receive free digital movie downloads with a purchase of the hard copy in DVD form. Although, Wal-Mart causes other company‟s to conform to their standards. Kroger knows that Wal-Mart poses a threat to their grocery market, so they prepared to compete with their own Naturally Preferred brand of produce19—a reinvigorated segment for the Cincinnati-based grocer. These types of moves by Wal-Mart‟s competitors can create similar substitutes and actually increase substitutes. There are many segments in the discount retail industry—a list that includes groceries, hardware, candy, appliances, jewelry, apparel, furniture, toys, and office supplies. A customer that is in the process of purchasing from these segments has an endless amount of possibilities when it comes to substitutes. Wal-Mart, which offers 100,000 household products with an average of 60 different brands for each product20, is no exception. However, with the specific type of customer that Wal-Mart targets (discount, value seekers), there isn‟t a better company to find everything under one warehouse. Appendix C Wal-Mart vs. Costco Figure 1: Average Hourly Wage $18.00 Dollar Amount (per Hour) $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Wal-Mart Costco Company Figure 2: Employee Turnover Rate 60% 50% 40% Percentage 30% 20% 10% 0% Wal-Mart Costco Company Figure 3: Employee Sales per Square Foot $900 $800 $700 Dollar Amount $600 $500 $400 $300 $200 $100 $0 Sam's Club Costco Membership Warehouse Figure 4: Health Care Coverage (% of employees) 90% 80% 70% 60% Percentage 50% 40% 30% 20% 10% 0% Wal-Mart Costco Company Appendix D Supply Chain Analysis Executives of Wal-Mart continue to focus mainly in one area—supply chain management. For almost half a century, Wal-Mart, or “the Company”, has followed founder Sam Walton‟s vision and dream in becoming the low-cost leader in retail. Their structural components, such as distribution centers and shipping, utilize innovative technology such as Radio Frequency Identification (RFID) to reduce excess traveling and inventory costs. Also, their focus on infrastructural aspects, such as purchasing, inventory policies, and logistics planning, further saves Wal-Mart millions in social and environmental operational effectiveness and efficiency. All these elements work together to help maintain Wal-Mart‟s competitive advantage—being a low-cost leader for customers and suppliers. Purpose of Distribution Centers Wal-Mart has approximately 120 distribution center locations within the United States and 146 worldwide. Having the largest grouping of distribution centers in the world presents many challenges for the Company. Wal-Mart has maintained its low-cost business edge through extremely efficient supply chain operations21. To preserve this advantage Wal-Mart must continue to drive down costs and sustain control over suppliers through dictating their prices. The retailer must continually integrate new ideas and advancements into their operations to sustain their status. Distribution Efficiency The evolution of Wal-Mart distribution centers creates many opportunities to increase efficiency. Wal-Mart realizes that the amount, size, and location of distribution centers are vital to running their corporation effectively within a specific geographic area. As distribution centers are added, changes are implemented through prior mistakes and differences are integrated to better cater each region. These additions in size to new distribution centers include adjustments accounted for in consumer tendencies, new products, and seasonality factors. Strategically locating distribution centers allows Wal-Mart to maximize the amount of stores supplied with as much efficiency as possible. Well located distribution centers minimize trucking costs and total time taken to supply local stores. New distribution centers may cause overlaps in store trucking supply resulting in different distributions in total stores supplied but more efficient delivery times. There is a „domino-effect‟ on adding new distribution centers. The Company can realign the distribution to shorten the distance that certain trucks have to travel for delivery. This in-turn allows the company to shorten crucial lead times, which means less safety stock. This leads to Wal-Mart stores moving the products through their stores quicker and more efficiently. Centers added may open up closer routes to store suppliers generating lower costs to supply distribution centers. Wal-Mart continues to search for the most efficient utilization of its distribution centers and will continue to modify the centers until they prove to be total maximized. Shipping Wal-Mart‟s shipping methods are leading the industry with their efficiency. Wal-Mart is currently experimenting with plans to expand their RFID tag usage to 1000 stores by January 200722. When a pallet is received by Wal-Mart from one of their suppliers, it contains an RFID tag which is then scanned as it enters the building. The pallet is then organized in the distribution center based on the item. Every item purchased from a Wal-Mart store is recorded and the information in immediately sent to the nearest distribution center. Wal-Mart tracks its items to know exactly how much inventory per item is at each store. When one of these items begins to fall below quantity standards, the distribution center retrieves a pallet full of inventory for that item. When the pallet leaves the distribution center it is scanned and recorded. The RFID tag which was scanned sends a message to the supplier that Wal-Mart is in need of another pallet. It is then the supplier‟s responsibility to dispatch another pallet to Wal-Mart. Online Shipping Methods Wal-Mart offers three main shipping methods: standard (3 to 7 business days), 2- to 3-Day (business days), and 1-Day (business day). For heavy or oversized items, freight shipping is used. This takes between 7 and 14 business days23. There are two parts of the online shipping method which determine the length of the chosen shipping time. The first part is the processing time. This is the time from when the order is submitted to when the item leaves the warehouse. The second part of the online shipping method is the shipping time. The shipping time is generally the same for most products. An item can only travel so fast through the mailing system or through Wal-Mart‟s trucking system. The chosen shipping method will determine the speed of the processing time for the item. The more a customer is willing to pay for shipping, the faster they will receive their item. The shipping time will generally be consistent throughout the process except for heavy or oversized items. Purchasing Policy Throughout Wal-Mart‟s history, the discount retailer has needed to employ very strict policies for the purchasing of inventory. This is because of the huge amounts of inventory that go through the company every day. The beginning of the process requires a supplier to fill out a submission form and return it to Wal-Mart. After the product is reviewed a decision will be made to begin using that product or to reject it. If the product will indeed be used, the next step in the process is requiring the supplier to gain a better understanding of Wal-Mart and their core values. This is a vital part of the process because it allows the supplier to really get to know the company and the people they serve. Next, the supplier is required to fill out several sheets and return them to the company. Besides looking at just the product, Wal-Mart also requires the possible supplier to submit their most recent financial statements. This is so they can determine if the company is financially stable. Wal-Mart uses Universal Product Codes on all inventories so suppliers need to be able to fulfill that need. After all of these tasks a supplier is allowed to begin a business relationship with Wal-Mart. Wal-Mart has become one of the largest firms in the world. Over the last few years they have begun purchasing more of their inventory from overseas and that has affected their inventory growth rate. Wal-Mart uses purchase orders to authorize any purchases that the company will make. The purchase orders are based on the current needs of the company and are expected to be filled by their suppliers within short time periods24. All of their purchasing contracts are different, but most require Wal-Mart to pay the supplier once the merchandise has already been delivered. The Company uses the retail-method to value their inventory which means that it is stated at cost. Using the retail-method requires Wal-Mart management to make certain judgments and estimates that could significantly impact the ending balance of inventory. One judgment management must make would be to determine mark-down items. The items are recorded at the time of the decision not at the point-of-sale. Wal-Mart has become is one of the most efficient retail companies in the world. Holding large amounts of inventory for an extended period of time can cost a retail giant like Wal-Mart hundreds of millions of dollars per year. That is why the need for such strict purchasing policies is needed. Wal-Mart makes sure they are only receiving inventory that they absolutely need. They were not always this efficient with inventory management but over time they have developed the skills necessary to run an enormous company with relative ease. Inventory Policy When analyzing companies supply chain efficiency, it is critical to evaluate the management of inventory levels. Wal-Mart employs a low-cost strategy that maintains a focus on efficiency. The company is one of the best in the world at managing its inventory. Wal-Mart utilizes its extensive network of distribution centers and nearly 7,000 trucks to maintain just-in-time inventory. The placement of the distribution centers and their efficient management allow for many Wal-Mart stores to receive inventory within a few hours of levels running low. Wal-Mart has traditionally allowed inventory to grow at rates extremely close to its sales growth. The company‟s inventory levels were growing at a rate of 70% in 200125. This number rose to an all-time high in 2004 when inventory grew at rate of over 90% of sales. This has resulted in slowing Wal-Mart‟s inventory turnover in those years. The company‟s inventory turnover was at 9.63 in 2004. This means that Wal-Mart was able to completely sell through its inventory 9.63 times a year, or roughly every 38 days. Wal-Mart plans to implement strategies to bring this number down and slow the growth rate of inventory in comparison to sales. In 2005, Wal-Mart announced that it plans to begin reducing its inventory growth. The Company would ideally like to see its inventory growth equal half of its sales growth. In order to achieve this goal, Wal-Mart introduced “The Remix Program” in 2005. This program intends to speed the movement of high-volume products through the distribution centers and allow for more effective ordering and delivery. The Remix Program specifically involves: Increasing speed that the fastest selling goods move through Distribution Centers Newly designed pallets for faster loading/unloading More mechanization in the freezer section of the Distribution Centers The Remix Program is currently in the testing stage in a Florida Distribution Center, but plans to be fully integrated into Wal-Mart‟s inventory control activities by the end of 2007. This program is expected to work hand-in-hand with Wal-Mart‟s use of RFID technology. In addition to The Remix Program, Wal-Mart also plans to begin lowering its Stock Keeping Unit (SKU) count and triple its private label branding. This plan would reduce Wal-Mart‟s reliance on suppliers for products. The Company could control its just-in-time inventory much more effectively. Wal-Mart intends for this to also greatly reduce the number of items damaged during delivery, and lower the chances of running out of items. The cutting out of certain items will also narrow the range of brands of Wal-Mart deals with and make inventory more manageable. Logistics Wal-Mart‟s trucks drive 872,025,520 miles a week, which is why this efficiency is so important for The Company, financially and environmentally. Within Wal-Mart‟s massive trucking division, nearly 7,000 trucks to be exact, the retail company has found even more ways to save millions. Throughout their entire fleet, they look to increase their logistics efficiency by 25% by 2008. They intend to do this by creating lighter, more aerodynamic trucks with fuel efficient engines and tires. Also, a hybrid drive system would further help with the cost of gasoline. An increase in supply chain aspects of the fleet can come from avoiding empty trucks at all times— filled with recyclables or excess inventory if necessary. These innovative ideas alone will save the company $277 million a year. On the topic of environmental emissions, Wal-Mart also looks to improve their carbon output. Auxilliary Power Units (APUs) allows the inside of an idle truck to maintain a comfortable temperature, without use of the main engine. With the first fleet to have 100% installation of APUs, Wal-Mart was able to save $25 million a year and reduce 100,000 metric tons of their carbon output. Wal-Mart has 120 distribution centers that manage 2,800 discount stores and 525 Sam‟s Clubs, not to mention their international segment that expands across nine countries26. With six new facilities in the plans for the near future, Wal-Mart now focuses on “reoptimization” in supply chain management. Former vice president of logistics Ted Wade says that “every time you roll out another distribution center you have to realign the network to make the system more efficient.” And that‟s exactly what the company intends on doing. The discount retailer has a powerful commitment to logistic efficiency, which is why they already have more plans for the future. By 2020, Wal-Mart hopes to reduce packaging size in half—allowing them to ship twice as much on the same amount of fuel. Appendix E Wal-Mart 2006 Actual Balance Sheet Financial Statements 2006-2011 Wal-Mart Stores, Inc. Assets: Current Assets Wal-Mart 2006 Cash and Cash Equivalents $6,414 Actual Income Statement Receivables 2,662 Inventories 32,191 Prepaid expenses and other 2,557 Revenues: Total Current Assets 43,824 Net Sales $312,427 Property and Equipment, at cost Other Income, net 3,227 Land 16,643 315,654 Buildings and Improvements 56,163 Costs and Expenses: Fixtures and Equipment 22,750 Cost of Sales 240,391 Transportation Equipment 1,746 Operating, Selling, General and Admin. Property and Equipment, at cost 97,302 Expenses 56,733 Less accumulated depreciation 21,427 Operating Income 18,530 Property and Equipment, net 75,875 Property under Capital Lease Interest: Property under Capital Lease 5,578 Debt 1,171 Less accumulated amortization 2,163 Capital Leases 249 Property under capital lease, net 3,415 Interest Income (248) Interest, net 1,172 Goodwill 12,188 Other assets and deferred charges 2,885 Income from continuing operations before taxes and minority interest 17,358 Total Assets $138,187 Liabilities and shareholders' equity: Provision for Income Taxes: Current Liabilities Current 5,932 Commercial paper $3,754 Deferred (129) Accounts payable 25,373 Accrued liabilities 13,465 Income from continuing operations Accrued income taxes 1,340 before minority interest 11,555 Long-term debt due within one year 4,595 Minority interest (324) Obligations under capital leases due within Income from continuing operations 11,231 one year 299 Total Current Liabilities 48,826 Net Income $11,231 Long-term debt 26,429 Long-term obligations under capital leases 3,742 Deferred income taxes and other 4,552 Minority interest 1,467 Shareholders' equity Preferred stock 0 Common stock 417 Capital in excess of par value 2,596 Accumulated other comprehensive income 1,053 Retained earnings 49,105 Total shareholders' equity 53,171 Total liabilities and shareholders' equity $138,187 Wal-Mart 2007 Wal-Mart 2007 Forecasted Income Statement Forecasted Balance Sheet Assets: Current Assets Revenues: Cash and Cash Equivalents $6,936 Net Sales $346,794 Receivables 2,601 Other Income, net 3,537 Inventories 37,801 350,331 Prepaid expenses and other 2,428 Costs and Expenses: Total Current Assets 49,765 Cost of Sales 269,112 Property and Equipment, at cost Operating, Selling, General and Land 18,033 Admin. Expenses 60,342 Buildings and Improvements 59,510 Operating Income 20,877 Fixtures and Equipment 25,663 Transportation Equipment 1,907 Interest: Property and Equipment, at cost 105,113 Debt 1,283 Less accumulated depreciation 23,125 Capital Leases 276 Property and Equipment, net 81,988 Interest Income (274) Property under Capital Lease Interest, net 1,286 Property under Capital Lease 5,878 Less accumulated amortization 2,292 Income from continuing operations Property under capital lease, net 3,586 before taxes and minority interest 19,591 Goodwill 13,178 Other assets and deferred charges 2,948 Provision for Income Taxes: Current 6,694 Total Assets $151,465 Deferred (145) Liabilities and shareholders' equity: Income from continuing operations Current Liabilities Commercial paper $4,404 before minority interest 13,042 Accounts payable 27,431 Minority interest (365) Accrued liabilities 14,565 Income from continuing operations 12,677 Accrued income taxes 1,491 Long-term debt due within one year 4,595 Net Income $12,677 Obligations under capital leases due within one year 277 Total Current Liabilities 52,765 Long-term debt 27,609 Long-term obligations under capital leases 3,988 Deferred income taxes and other 4,162 Minority interest 1,630 Shareholders' equity Preferred stock 0 Common stock 417 Capital in excess of par value 2,596 Accumulated other comprehensive income 2,081 Retained earnings 56,218 Total shareholders' equity 61,312 Total liabilities and shareholders' equity $151,465 Wal-Mart 2008 Wal-Mart 2008 Forecasted Income Statement Forecasted Balance Sheet Assets: Current Assets Revenues: Cash and Cash Equivalents $7,776 Net Sales $388,790 Receivables 2,916 Other Income, net 3,966 Inventories 42,378 392,756 Prepaid expenses and other 2,722 Costs and Expenses: Total Current Assets 55,791 Cost of Sales 304,041 Operating, Selling, General and Admin. Property and Equipment, at cost Expenses 67,448 Land 20,217 Operating Income 21,267 Buildings and Improvements 66,716 Fixtures and Equipment 28,770 Interest: Transportation Equipment 2,138 Property and Equipment, at cost 117,842 Debt 1,439 Less accumulated depreciation 25,925 Capital Leases 310 Property and Equipment, net 91,917 Interest Income (305) Interest, net 1,443 Property under Capital Lease Property under Capital Lease 6,590 Income from continuing operations Less accumulated amortization 2,570 before taxes and minority interest 19,823 Property under capital lease, net 4,020 Goodwill 14,774 Provision for Income Taxes: Other assets and deferred charges 3,305 Current 6,740 Deferred (147) Total Assets $169,807 Income from continuing operations Liabilities and shareholders' equity: before minority interest 13,230 Current Liabilities Minority interest (370) Commercial paper $4,938 Income from continuing operations 12,860 Accounts payable 30,753 Accrued liabilities 16,329 Net Income $12,860 Accrued income taxes 1,672 Long-term debt due within one year 3,320 Obligations under capital leases due within one year 311 Total Current Liabilities 57,323 Long-term debt 33,047 Long-term obligations under capital leases 4,471 Deferred income taxes and other 4,665 Minority interest 1,827 Shareholders' equity Preferred stock Common stock 417 Capital in excess of par value 2,596 Accumulated other comprehensive income 2,333 Retained earnings 63,127 Total shareholders' equity 68,473 Total liabilities and shareholders' equity $169,807 Wal-Mart 2009 Wal-Mart 2009 Forecasted Income Statement Forecasted Balance Sheet Assets: Revenues: Current Assets Net Sales $435,873 Cash and Cash Equivalents $8,717 Other Income, net 4,446 Receivables 3,269 Inventories 47,510 440,319 Prepaid expenses and other 3,051 Costs and Expenses: Total Current Assets 62,548 Cost of Sales 340,577 Operating, Selling, General and Property and Equipment, at cost Admin. Expenses 75,441 Land 22,665 Operating Income 24,301 Buildings and Improvements 74,796 Fixtures and Equipment 32,255 Interest: Transportation Equipment 2,397 Debt 1,613 Property and Equipment, at cost 132,113 Capital Leases 347 Less accumulated depreciation 29,065 Interest Income (340) Property and Equipment, net 103,048 Interest, net 1,620 Property under Capital Lease Income from continuing operations Property under Capital Lease 7,388 Less accumulated amortization 2,881 before taxes and minority interest 22,680 Property under capital lease, net 4,507 Provision for Income Taxes: Goodwill 16,563 Current 7,711 Other assets and deferred charges 3,705 Deferred (168) Total Assets $190,371 Income from continuing operations before minority interest 15,137 Liabilities and shareholders' equity: Minority interest (424) Current Liabilities Income from continuing operations 14,713 Commercial paper $5,536 Accounts payable 34,478 Net Income $14,713 Accrued liabilities 18,307 Accrued income taxes 1,874 Long-term debt due within one year 2,858 Obligations under capital leases due within one year 349 Total Current Liabilities 63,401 Long-term debt 37,049 Long-term obligations under capital leases 5,013 Deferred income taxes and other 5,230 Minority interest 2,049 Shareholders' equity Preferred stock Common stock 417 Capital in excess of par value 2,596 Accumulated other comprehensive income 2,615 Retained earnings 72,001 Total shareholders' equity 77,629 Total liabilities and shareholders' equity $190,371 Wal-Mart 2010 Wal-Mart 2010 Forecasted Income Statement Forecasted Balance Sheet Assets: Revenues: Current Assets Net Sales $488,657 Cash and Cash Equivalents $9,773 Other Income, net 4,984 Receivables 3,665 Inventories 53,264 493,641 Prepaid expenses and other 3,421 Costs and Expenses: Total Current Assets 70,122 Cost of Sales 381,538 Operating, Selling, General and Property and Equipment, at cost Admin. Expenses 84,424 Land 25,410 Operating Income 27,679 Buildings and Improvements 83,854 Fixtures and Equipment 36,161 Interest: Transportation Equipment 2,688 Debt 1,808 Property and Equipment, at cost 148,112 Capital Leases 389 Less accumulated depreciation 32,585 Interest Income (381) Property and Equipment, net 115,527 Interest, net 1,816 Property under Capital Lease Property under Capital Lease 8,283 Income from continuing operations Less accumulated amortization 3,230 before taxes and minority interest 25,863 Property under capital lease, net 5,052 Provision for Income Taxes: Goodwill 18,569 Current 8,793 Other assets and deferred charges 4,154 Deferred (191) Total Assets $213,425 Income from continuing operations before minority interest 17,261 Liabilities and shareholders' equity: Minority interest (483) Current Liabilities Income from continuing operations 16,777 Commercial paper $6,206 Accounts payable 38,653 Net Income $16,777 Accrued liabilities 20,524 Accrued income taxes 2,101 Long-term debt due within one year 4,639 Obligations under capital leases due within one year 391 Total Current Liabilities 72,513 Long-term debt 41,536 Long-term obligations under capital leases 5,620 Deferred income taxes and other 5,864 Minority interest 2,297 Shareholders' equity Preferred stock Common stock 417 Capital in excess of par value 2,596 Accumulated other comprehensive income 2,932 Retained earnings 79,650 Total shareholders' equity 85,595 Total liabilities and shareholders' equity $213,424 Wal-Mart 2011 Wal-Mart 2011 Forecasted Income Statement Forecasted Balance Sheet Assets: Revenues: Current Assets Net Sales $547,833 Cash and Cash Equivalents $10,957 Other Income, net 5,588 Receivables 4,109 Inventories 59,714 553,421 Prepaid expenses and other 3,835 Costs and Expenses: Total Current Assets 78,614 Cost of Sales 427,458 Operating, Selling, General and Property and Equipment, at cost Admin. Expenses 94,520 Land 28,487 Operating Income 31,443 Buildings and Improvements 94,008 Fixtures and Equipment 40,540 Interest: Transportation Equipment 3,013 Debt 2,027 Property and Equipment, at cost 166,048 Capital Leases 437 Less accumulated depreciation 36,531 Interest Income (430) Property and Equipment, net 129,518 Interest, net 2,034 Property under Capital Lease Income from continuing operations Property under Capital Lease 9,286 before taxes and minority interest 29,409 Less accumulated amortization 3,621 Property under capital lease, net 5,664 Provision for Income Taxes: Goodwill 20,818 Current 9,999 Other assets and deferred charges 4,657 Deferred (218) Total Assets $239,270 Income from continuing operations before minority interest 19,628 Liabilities and shareholders' equity: Minority interest (550) Current Liabilities Income from continuing operations 19,078 Commercial paper $6,957 Accounts payable 43,334 Net Income $19,078 Accrued liabilities 23,009 Accrued income taxes 2,356 Long-term debt due within one year 2,877 Obligations under capital leases due within one year 438 Total Current Liabilities 78,971 Long-term debt 46,566 Long-term obligations under capital leases 6,300 Deferred income taxes and other 6,574 Minority interest 2,575 Shareholders' equity Preferred stock Common stock 417 Capital in excess of par value 2,596 Accumulated other comprehensive income 3,287 Retained earnings 91,984 Total shareholders' equity 98,284 Total liabilities and shareholders' equity $239,270 Appendix F Key Financial Statistics Wal-Mart Stores, Inc. Key Financial Statistics 2006 2007 2008 2009 2010 2011 Sales 312,427 346,794 388,790 435,873 488,657 547,833 Gross Income 72,036 77,682 84,749 95,296 107,119 120,375 Operating Income 18,530 20,877 21,267 24,301 27,679 31,443 Net Income 11,231 12,677 12,860 14,713 16,777 19,078 Total Current Assets 43,824 49,765 55,791 62,548 70,122 78,614 Total Current Liabilities 48,826 52,765 57,323 63,401 72,513 78,971 Total Assets 138,187 151,465 169,807 190,371 213,425 239,270 Total Liabilities 85,016 90,154 101,333 112,742 127,830 140,986 Total Shareholders Equity 53,171 61,312 68,473 77,629 85,595 98,284 Net Sales Growth 9.54% 11.00% 12.11% 12.11% 12.11% 12.11% Gross Margin 23.06% 22.40% 21.80% 21.86% 21.92% 21.97% Operating Margin 5.93% 6.02% 5.47% 5.58% 5.66% 5.74% Net Margin 3.59% 3.66% 3.31% 3.38% 3.43% 3.48% Current Ratio 89.76% 94.31% 97.33% 98.65% 96.70% 99.55% Basic Earning Power 13.41% 13.78% 12.52% 12.77% 12.97% 13.14% Return on Assets 8.13% 8.37% 7.57% 7.73% 7.86% 7.97% Total Asset Turnover 2.26 2.29 2.29 2.29 2.29 2.29 Leverage 2.60 2.47 2.48 2.45 2.49 2.43 Debt Ratio 61.52% 59.52% 59.68% 59.22% 59.89% 58.92% 1 Evans, Nicholas D. 2004. 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