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Financial analysis of Wal-Mart and Target

Problem:
Select two companies that trade on the New York Stock Exchange and are competitors in a similar field. Using the public financial information available to discuss, describe, and explain the direction the firm is planning to go in the marketplace. In your evaluation, be sure to discuss if you feel this is the right direction for each of the firms to take.

Then using financial ratios of your choice and other published information compare and discuss the following information for the two firms:
liquidity and adequate profits on the assets of the company.

How is the company financing its assets? With debt finance or equity financing? Is this the best way to the finance the debt, in your mind? If they have no debt, do you see them as a cash rich take-over target? Compare the overall financials strengths of each company.

Are the firm's managers providing a good return on the capital provided by the company's shareholders?

Evaluate the strategic plan you for each company for the next three years.

Solution Preview

Select two companies that trade on the New York Stock Exchange and are competitors in a similar field. Using the public financial information available to discuss, describe, and explain the direction the firm is planning to go in the marketplace. In your evaluation, be sure to discuss if you feel this is the right direction for each of the firms to take.

Then using financial ratios of your choice and other published information compare and discuss the following information for the two firms:
Liquidity and adequate profits on the assets of the company.

How is the company financing its assets? With debt finance or equity financing? Is this the best way to the finance the debt, in your mind? If they have no debt, do you see them as a cash rich take-over target? Compare the overall financials strengths of each company.

Are the firm's managers providing a good return on the capital provided by the company's shareholders?

Evaluate the strategic plan you for each company for the next three years.

I have selected Wal-Mart and Target as companies

About Wal-Mart

Wal-Mart Stores, Inc. (Wal-Mart) operates retail stores in various formats worldwide. The Company organizes its business into three principal segments: Wal-Mart Stores, SAM'S CLUB and International. The Wal-Mart Stores segment is the largest segment of Wal-Mart's business, accounting for 67.3% sales during the fiscal year ended January 31, 2005 (fiscal 2005). The segment consists of three different retail formats, all of which operate in the United States. The Company's SAM'S CLUB segment consists of membership warehouse clubs that operate in the United States, and accounts for 13% of fiscal 2005 sales. The international segment consists of retail operations in eight countries and Puerto Rico, and generated 19.7% of Wal-Mart's fiscal 2005 sales. In addition, the Company owns an unconsolidated minority interest of approximately 37% of The Seiyu, Ltd., a retailer in Japan.
(Source: www.msn.com)

About Target
Target Corporation was founded in Minnesota in 1902. It is the sixth largest retailer in the United States and is ranked 27th on the 2005 Fortune 500. Target is performing very well in the market place though its stock's performance is subdued. The company operates over 1,450 stores in 47 states in USA.
(Wikipedia)

Strategic Plan of Wal-Mart

PRODUCTS
Wal-Mart operates discount retail department stores selling a broad range of products. It typically stocks basic, rather than premium products. Wal-Mart also operates "Supercenters" which include a full line of grocery items. Wal-Mart also operates Sam's Club; these are "warehouse clubs" which, like Costco, require membership dues and sell merchandise in large and inexpensive sizes and quantities.

Wal-Mart operates 5 major retail formats under 3 retail divisions:

* Wal-Mart Stores USA
o Wal-Mart Discount Stores ? Average 100,000 square feet (9,290 m²) and include a selection of general merchandise, including apparel, electronics, health and beauty aids, toys, sporting goods, and household products.
o Wal-Mart Supercenter ? Average 187,000 square feet (17,400 m²) and combine a standard Wal-Mart Discount Store with a full-line supermarket. (commonly known as big box stores)
o Wal-Mart Neighborhood Market ? Average 43,000 square feet (4,000 m²) and include grocery, pharmacy, and limited general merchandise products.
o Walmart.com ? Online shopping site that offers merchandise different from that in stores. The walmart.com site also offers digital music downloads with digital rights management (DRM) and online photo processing.
* SAM'S CLUB ? a membership-only wholesale warehouse club focused mainly on serving small business owners. Clubs average 128,000 square feet (11,891 m²).
* Wal-Mart International ? operates various formats internationally, including (but not limited to) SAM'S CLUB, Discount Stores, Supercenters, Supermarkets, and restaurants.

Differentiation from competitors

Thus the single most important differentiation aspect of Wal-Mart is that they create the ideal one-stop shopping experience by providing goods and services at value for money prices. Wal-Mart is organized into ten distinct divisions. These include: Wal-Mart stores, SAM'S CLUBS, Neighborhood Markets, International, walmart.com, Tire & Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, and Wal-Mart's Used Fixture Auctions. Through these divisions, Wal-Mart offers thousands of products. The Wal-Mart stores contain groceries, clothes, healthcare products, toys, electronics, bedding, sports and recreation, automotive, among other items. Because of this conglomeration of products, the typical consumer can go into any Wal-Mart and walk out without ...

Solution Summary

This discusses the financial analysis of Wal-Mart and Target in detail.

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