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Interpreting a 10-K. Tanya Burnside, Jyothsna Kodali , Ashley Pleasant, and James Totten Bellevue University MBA605-T201. TO BE INTERPRETED. Corporate Outlook of Wal-Mart (WMT) and Target (TGT) 10-K reports for Wal-Mart (WMT) and Target (TGT) - PowerPoint PPT Presentation
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Interpreting a
10-KTanya Burnside, Jyothsna Kodali, Ashley Pleasant, and James Totten
Bellevue University MBA605-T201
TO BE INTERPRETED
0Corporate Outlook of Wal-Mart (WMT) and Target (TGT)
010-K reports for Wal-Mart (WMT) and Target (TGT)
0Financials for Wal-Mart (WMT) and Target (TGT)
0Wal-Mart (WMT) and Target (TGT) business strategies/business models
CORPORATE OUTLOOK WALMART(WMT)
Save Money. Live Better
CORPORATE OUTLOOK WALMART(WMT)
0World’s largest retailer – 10,900 retail units in 27 countries.
0Third largest publicly traded company
0Three business segments: Wal-mart U.S., Wal-mart International and Sam’s Club
0World’s largest private employer: 1.3 million U.S. associates - 2.2 million associates worldwide
CORPORATE OUTLOOK WALMART(WMT)
02013 revenues $469.2 billion with net sales of $466.1 billion.
0 Wal-Mart U.S. - 59% of net sales
0 Wal-Mart International - 29% of net sales
0 Sam’s Club - 12% of net sales
0High revenues require strategic merchandising, nobody does it better
CORPORATE OUTLOOK WALMART(WMT)
0Wal-Mart U.S. strategic merchandise units in Fiscal 2013:
CORPORATE OUTLOOK WALMART(WMT)0Competitors Include:
0 Target Corporation
0 Costco Wholesale Corporation
0 Kohl’s Corporation
0 Dollar General Corporation.
CORPORATE OUTLOOK WALMART(WMT)
SWOT
Strengths Weaknesses Vast operations- power player able to negotiate pricing etc.
High employee turnover- low pay, even lower benefits
Large group of suppliers – dictate price demands
Poor product quality- several brands made with substandard products.
Low product cost- mass quantities Negative public perception- Shuts down towns. Diverse products- meets customer needs. One stop shop.
Lawsuits involving labor issues – Discrimination against women.
Opportunities Threats Additional business formats meeting demographic needs of customers.
Competition from other retailers like Dollar General
Community investments of local distributers and business partners
Lack of specialty products because of too many different product lines
E-commerce expansion in the U.S. and abroad Unions may form resulting in cost-per hire and labor costs.
International Government shut-down – War/Terriorism
CORPORATE OUTLOOK WALMART(WMT)
0 Formats to meet customer needs and market demands:
0 Supercenters
0 Discount stores
0 Neighborhood Markets
0 walmart.com
0 “Everyday low prices” (EDLP) pricing philosophy
0 Programs: “Rollbacks”, “Save Even More/Ad Match”, “Store of the Community”, and “Clean, Fast, and Friendly”
0 Corporate slogan “Save money. Live better”
http://stock.walmart.com/microsites/annual-report-2013/ceoLetter.aspx
CORPORATE OUTLOOK FOR TARGET (TGT)
Expect More. Pay Less.®
CORPORATE OUTLOOK FOR TARGET (TGT)
0 Stores0 1,788 stores in the United States0 82 stores in Canada0 37 distribution centers0 361,000 team members worldwide
0 Guests0 Median age of 400 Median household income of approximately $64,0000 Approximately 43% have children at home0 About 57% have completed college
CORPORATE OUTLOOK FOR TARGET (TGT)
0 Consolidated revenues were $73,301 million for 2012
0 2012 net sales $71,960 million
0 Target stores in Canada just opened this fiscal year0 Projected to have 124 open
by EOY 2013
CORPORATE OUTLOOK FOR TARGET (TGT)
Household Essentials
25%
Hardlines18%
Apparel & Accessories19%
Food & Pet Supplies
20%
Home Furnish-ings
& Décor 18%
Target Percentage of Sales
CORPORATE OUTLOOK FOR TARGET (TGT)
0Competitors Include:0 Best Buy0 Costco0 Macy's0 Walgreens0 Walmart
CORPORATE OUTLOOK FOR TARGET (TGT)
Strengths Weaknesses
Designer brands and exclusives Less store brand products than WMT
REDCard debit and credit card Wages lower than some competitors
Customer loyalty Perceived as more expensive than WMT
Nationwide presence Less international presence than WMT
Opportunities Threats
Expansion into new markets (Canada) Failure to effectively execute plans for Canada expansion
Increasing number of products and services (Exclusives, Brightspot, Ticket)
Disruptions (third party providers, supply chain, computer systems)
Improve competitive pricing perception Macroeconomic (Credit freezes, consumer confidence, effective tax rates)
Increasing social media presence (Pinterest, Facebook, Apps)
Failure to develop and maintain multichannel experience
CORPORATE OUTLOOK FOR TARGET (TGT)
Expect More. Pay Less.®
http://www.youtube.com/watch?v=vC2yFblskcc
THE 10-K
http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000010416913000011-
29T7QR984CV72K8HUI23G5JV18&docFormat=HTM&formType=10-K
http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000104746913003100-3HVR622FHI91HVP82G9RJG0EU8&docFormat=HTM&formType=10-K
Ratio AnalysisRatio Analysis Ratio Analysis is used for the assessment of firm’s financial
condition.Liquidity RatioLeverage Ratio ( Debt)Profitability Ratio ( Performance)Activity Ratio
Ratio Analysis*Based on financial statements for Jan 2013
Liquidity RatioCompany’s ability to turn assets in to cash.
Current Ratio = Current Assets / Current LiabilitiesAcid Test Ratio = (Cash + Accounts Receivable + Marketable Security ) /
Current Liabilities
Ratio Wal-Mart TargetCurrent Ratio 0.835 1.168Acid Test Ratio 0.203 0.54
Leverage RatioThe degree on which company relies on borrowed funds in its operations.
Debt to Equity Ratio = Total Liabilities / Owners Equity
Ratio Wal-Mart TargetDebt to Equity Ratio 0.71 1.066
Ratio AnalysisProfitability Ratio (Performance)This ratio measures how effectively a firm’s manager uses resources to
achieve profits.Return on Sales= Net Income/Net SalesReturn on Equity= Net Income after Tax/Total Owner’s Equity
Activity RatioThis ratio tells how effectively inventory is converted into sales. Inventory Turnover Ratio=Cost of Goods Sold/Average Inventory
Ratio Wal-Mart TargetReturn on Sales 3.65% 4.09%Return on Equity 22.27% 18.11%
Ratio Wal-Mart TargetInventory Turnover Ratio 10.64 9.11
Ratio AnalysisGross Profit RatioThis ratio will mark up on inventory sold.Gross Profit Ratio= Gross Profit/Sales
Ratio Wal-Mart TargetGross Profit Ratio 24.38% 30.38%
Asset Turnover RatioAsset Turnover Ratio= Sales/Company’s Average Total Assets
Ratio Wal-Mart Target
Asset Turnover Ratio 2.29 1.52
Ratio Analysis*Based on financial statements for October 3, 2013
Basic Earnings Per Share
Price to Earnings Ratio (P/E)Price to Earning Ratio= current per share stock price/latest basic earnings per share
Ratio Wal-Mart Target
Price to earnings ratio 14.010 13.570
Ratio Wal-Mart TargetBasic Earnings Per Share 5.220 4.680
MONTLY STOCK PRICES
http://finance.yahoo.com/q;_ylt=AoWSH2Q64tqxug2kBT4E4JwgBrgF?uhb=uhb2&fr=uh3_finance_vert&type=2button&s=WMT
http://finance.yahoo.com/q;_ylt=AoWSH2Q64tqxug2kBT4E4Jwnv7gF?uhb=uhb2&fr=uh3_finance_vert&type=2button&s=TGT
Wal-Mart Strategy vs.
Target Strategy
Wal-Mart Business Strategy
Wal-Mart Business Strategy
Wal-Mart Business Strategy
0Low-price model0 Sam Walton’s slogan “Everyday low prices” set Wal-Mart
apart 0 Even though the product is marked down in price, sales
growth causes Wal-Mart to be profitable
Wal-Mart Business Strategy
0Selection of Vendors0 Wal-Mart carefully chose the location of its distribution
centers, resulting in faster replenishing time0 Because of rapid sales growth, all of the vendors want to
work with Wal-Mart0Allow Wal-Mart to receive major discounts on product
Wal-Mart Business Strategy
0Technology 0 Advantage of technology before many retailers and used
the UPCs to keep track of inventory0 Use of UPCs improved communications between stores
and vendors0 Lowered inventory costs
Wal-Mart Business Strategy
0Human Resource practices0 Initially employees offered a portion of Wal-Mart’s profit0 Recruitment from within the store0Employees received stock ownership plans
Target Business Strategy
0Target’s strategy revolves around the choices the company was faced with0 Focus on specialization or differentiation0 Avoided focus on specialization of a single product,
business would not continue to grow0 Target chose differentiation strategy
Target Business Strategy
0Affordable Chic Goods0 Chic goods that the everyday worker could afford0 Avoided marketing against Wal-Mart0 Store cleanliness, shorter wait times in lines, and
shopping environment
Target Business Strategy
0 Design and Advertising0 To compete with Wal-Mart’s low price strategy, Target focused
on quality of product and style0 Target spends 2.3 percent of revenue on advertising as oppose
to Wal-Mart’s .3 percent0 All advertising is centered around Target’s stylish trends
instead of low prices0 Bull’s Eye became a trend for pop culture0 Target offered designer brands
0 Fostered partnerships with Cherokee, Merona, etc0This image led Target to be perceived as the store for more affluent
customers with upscale style
What are your 10K questions?
REFERENCESBarwise, P., & Meehan, S. (2004). Bullseye: Target's cheap chic strategy. Retrieved from http://hbswk.hbs.edu/archive/4319.htmlBrea-Solis, H., Casadesus-Masanell, R., & Grifel-Tatje, E. (2012). Business model evaluation: Quatifying Wal-mart's sources of advantage. Retrieved from http://www.hbs.edu/faculty/Publication Files/13-039 Nov 2012_612ce7e2-7f81-4eea-9126- 3c0964f2be2f.pdfCostco's Profit Soars to $459 Million as Low-Wage Competitors Struggle. (2013, May 31). Huffington Post. Retrieved http://www.huffingtonpost.com/2013/05/30/costco-profits_n_3359033.html?utm_hp_ref=businessFridson, M., & Alvarez, F. (2002). Credit analysis, Equity analysis. In Financial statement analysis: A practitioner's guide. New York: John Wiley & Sons. (pp. 267-325)Mission: Walmart 2013 Annual Report. (2013). Retrieved from http://az204679.vo.msecnd.net/media/documents/2013-annual-report-for-walmart-stores- inc_130221024708579502.pdfSolutions.Next step: Your stocks annual report 10-K. (2013). Retrieved from http://www.stockhomework101.com/220.htmNickels, W., McHugh, J., & McHugh, S. (2013). Understanding business. Boston: McGraw-Hill Learning One Our Story. (2013). Retrieved from http://corporate.walmart.com/our-story/Say hello to brightspot, Target’s new mobile service. (2013, October 7). Retrieved https://corporate.target.com/discover/article/say-hello-to-Brightspot-Target-s-new-mobile-servic Strauss, M. (2013, April 5). Target Canada prices 0.2 per cent higher than Wal-Mart's: Survey. The Globe and Mail. Retrieved http://www.theglobeandmail.com/report-on-business/target-canada-prices-02-per-cent-higher-than-wal-marts-survey/article10823259/Target: 2012 annual report. (2013). Retrieved from https://corporate.target.com/_media/TargetCorp/annualreports/content/download/pdf/Annual-Report.pdf?ext=.pdfTarget. Target. (2013, March 20). SEC filings. Retrieved http://investors.target.com/phoenix.zhtml?c=65828&p=irol-sec&secCat01.28_rs=31&secCat01.28_rc=10&control_selectgroup=0&x=51,42,38,11,47,41,28&y=7,12,10,10, 10,10,6Target introduces target ticket, a family-friendly digital video service. (2013, September 25). Retrieved http://pressroom.target.com/news/target-introduces-target-ticket-a-family-friendly-digital-video-serviceBehind the bullseye: Gregg Steinhafel talks Target's approach to corporate responsibility. (2013, June 24). [Video file] Retrieved http://www.youtube.com/watch?v=vC2yFblskccTarget Salaries. (2013). Retrieved http://www.glassdoor.com/Salary/Target-Salaries-E194.htm
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