MEMO

Wal-Mart Stores

Wal-Mart Stores

Introduction

The study is related to the organizational analysis which particularly focuses on the financial analysis of Wal-Mart Stores as the Behemoth Industries intends to buy Wal-Mart Stores. Wal-Mart Stores operates retail stores in a range of formats. Company's operations comprise three business segments; Walmart U.S., which operates retail stores in different formats in the U.S. under the Walmart or Wal-Mart brand, as well as Walmart's online retail operations, walmart.com; International, which consists of retail operations in 14 countries, and comprises of retail stores and restaurants including discount stores, supercenters and Sam's Clubs; and Sam's Club, which consists of membership warehouse clubs in the U.S. and the segment's online retail operations, samsclub.com. As of Jan 31 2011, company had a total of 4,413 domestic stores and 4,557 international stores.

Financial Performance Analysis

In the five years to 2011, revenue generated from Walmart US's general merchandise stores is expected to decline at an average annual rate of 5.8% to $52.0 billion. Walmart slowly exiting the Department Stores industry and entering the Warehouse Clubs and Supercenters industry is mainly driving this drop. Despite this change in the company's operations, Walmart's US division's revenue is anticipated to increase on average 3.0% annually to total $262.3 billion over the five years. The company's strong performance can be attributed to rising traffic during the recession; as households faced high unemployment and low disposable income, they redirected their purchases toward low-priced items Walmart sells. The retailer's same-store sales increased during the height of the recession 3.2% and 1.0% in 2009 and 2008, respectively, and leading to positive sales when most retailers experienced considerable declines in sales.

With growing sales, Walmart US operating income also remained positive, steadily rising from $16.6 billion in 2006 to $20.0 billion in 2010. Income is expected to further increase slightly in 2011 about 1.4%. Nonetheless, ...