Walmart and Target Harvard Case Solution & Analysis

Introduction 

Walmart is an international retail store chain that operates in 27 countries around the world with the United States of America as the place of origin. It has more than 6,100 stores internationally and they pour their global resources to meet local needs. It is growing at a very fast rate and has the objective to meet the needs of every community globally(Walmart International, 2015).

Analysis

The three items that would be looked by investors in the income statement would be the sales revenue, operating profit and the net profit attributable to the company. In the Balance sheet, the items would be total assets, total liabilities and the equity.

Sales Revenue

            The sales revenue includes the sales of goods at their stores and the revenue they receive from membership fee and the sales of shopping cards. The revenue from membership fee revenue is recognized over the term of the membership that is normally 12 months. The revenue from sales of shopping cards are not recognized as revenue until the card is redeemed and the customer purchases goods using the shopping cards.

            The overall revenue has risen by 6% from 2012 to 2014. The main revenue from sales at stores has risen by 6%, but the other revenue has only risen by 4%s. The other revenue (except sales at stores) forms only 0.67% of overall revenue in 2014. The revenue shows the growth of the company to investors. The growth has slowed down as the rise revenue from 2012 to 2013 was 5%, while it increases by 2% in 2014. As the sales revenue has risen, this should improve the image of the company amongst the investors(Walmart).

Operating Profit

                This depends on the level of sales, cost of sales and the administrative and selling expenses. The Trend analysis shows that it rose by 4% from 2012 to 2013 but declined by 3% in 2014. Overall, there is only a slight rise in the figure from 2012 to 2014. The Operating margin has fallen from 5.9% to 5.6% as the operating return on assets also shows the decline from 13.7% to 13.1%. Although, the decline is small, however, it may continue in the future. The reason for this decline is the rise in the cost of sales by 4.2% in 2013 from 2012 and there is also an overall rise from 111 million to 118 million from 2012 to 2014. Furthermore, the operating expenses are also increasing. It seems that the management of Walmart were not able to control its costs over the period. It should try to control overheads and identify areas where actions can be taken to reduce overheads. Over the three years, the costs of sales has been 75% of sales and the operating expenses has been 19%. The company seems not to be performing well with regard to this parameter(Walmart).

Net profit attributable to Walmart

            This figure is arrived after deducting taxes, interest and the amount attributable to Non-controlling interest. The return on total assets and the return on total equity has fallen slightly. Although, the decline is small but if it continues for a long time, it would be a worry for investors. As shown by vertical analysis, the interest and tax percentage as of sales has been constant at 0.47% and 1.70%, therefore it has been affected by increasing costs of the company. This figure has fallen by 2% over the three year period. To conclude, it is a sign of worry for investors(Walmart).Walmart and Target Case Solution

Total Assets

            These assets are made up of current assets, fixed assets, and intangible assets;comprising values of about 29.88%, 57.59%, and 12.53% respectively. If the company wants to do well, it should effectively use its fixed assets to generate revenues and manage current assets in a way that the current liabilities can be paid. Both the ratios of total assets and fixed asset turnover have been declined from 2013 to 2014. Total Assets have fallen to 2.34 from 2.37 and the fixed asset turnover has declined to 4.06 from 4.10. This shows that assets have not been utilized effectively. The fixed assets may also not have been repaired affecting their performance.

            As far as the current assets are concerned, the collection period for receivables have been slightly improved. The inventories are building up adding to the cost of holding them. The inventory turnover ratio shows the decrease in the ratio from 8.3 to 8.1. Investors may not be happy with this item because assets have not been used effectively(Walmart).....................

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