Wal-Mart Stores (Walmart) is the world’s largest retailer. It employs an ?oeveryday low price?? strategy and operates stores as three business segments: Wal-Mart Stores U.S., International, and Sam’s Club.
1. Wal-Mart Stores U.S.: This segment represented 63.7 percent of all 2008 sales and operates stores in three different formats: Discount stores (approximately 108,000 square feet), Supercenters (approximately 186,000 square feet), and Neighborhood Markets (approximately 42,000 square feet). Each format carries a variety of clothing, house-wares, electronic equipment, pharmaceuticals, health and beauty products, sporting goods, and similar items, and Supercenters including a full-line supermarket.40 WalMart U.S. Stores are in all 50 states, Discount stores are in 47 states, Supercenters are in 48 states, and Neighborhood Markets are in 16 states. Customers also can purchase many items through the company’s website at http://www.walmart.com.
2. International: The International segment includes wholly owned subsidiaries in Argentina, Brazil, Canada, Japan, Puerto Rico, and the United Kingdom; majority-owned subsidiaries in five countries in Central America, Chile, and Mexico; and joint ventures in India and China. The merchandising strategy for the International segment is similar to that of the Walmart U.S. segment.
3. Sam’s Clubs: Sam’s Clubs are membership club warehouses that operate in 48 states.
The average Sam’s Club is approximately 133,000 square feet, and customers can purchase many items through the company’s website at http://www.samsclub.com. These warehouses offer bulk displays of brand name merchandise, including hardgoods, some softgoods, institutional-size grocery items, and certain private-label items. Gross margins for Sam’s Clubs stores are lower than those of the U.S. and International segments.
Required
a. What are the likely reasons for the changes in Walmart’s rate of ROA during the three-year period? Analyze the financial ratios to the maximum depth possible.
b. What are the likely reasons for the changes in Walmart’s rate of ROCE during the three-year period?
c. How has the short-term liquidity risk of Walmart changed during the three-year period?
d. How has the long-term solvency risk of Walmart changed during the three-year period?