Walmart Financial Analysis Project Essay Example

the largest retailer in the world.

Walmart always tries to suggest low prices and high quality products to its customers. It has slogan “always low prices-always”. The founder of Walmart stated this vision and still the company follows it. Walmart believes that main factor in customers’ decision making is low price; it mostly determines people’s choice. In a word their vision is to provide good quality products and service for reasonable price to the customers while remaining the market leader and striving daily to be the most admired company. “The secret of successful retailing is to give your customers what they want, and really, if you think about it from your point of view as a customer, you want everything as:  A wide assortiment of good quality merchandise; the lowest possible prices. Guaranteed satisfaction with what you buy; friendly, knowledgeable service.

That's why they offer the best quality merchandise at the lowest prices in all the stores, from school supplies, to household items and top quality groceries. Their mission is to respect for the individual and to strive for excellence. With their innovative technologies they strive to have merchandise ranging from food, music and etc on hand every day. Walmart tries to have best, to be best and to provide quality and assurance to their customers. The fact that Walmart is so successful company is value of its employees; they are the biggest assets for the company.

Walmart also looks at savings that go beyond the prices in the stores. Their first mission is to provide good and services for the buyers at low prices. For example, they are working with the

suppliers to introduce more energy efficient products that can save customers money for years to come. And because every Walmart store or Sam's Club is designed to reflect the local community, the customers know they will find the lowest prices around on the products that match their lifestyle.

Saving money is a mean to helping the customers live better. By offering the best possible prices on the products the customers need, they can help them afford something a little extra. Whether it's a grandmother who can buy her grandchildren a special gift because she saved money on her prescriptions, or a young family saving money to buy their first home, they see their mission come to life every day. Walmart also sees opportunities to help people live better beyond the walls of the stores and Sam's Club locations.

That’s why it supports causes that are important to the communities, like education, and why they are working hard to do their part in protecting the planet and conserving the natural resources for generations to come. By working closely with the communities and suppliers, Walmart can reach beyond just the customers to help improve the lives of people around the globe. Saving people money so they can live better is at the heart of everything they do, and these are just a few examples of the many ways they bring that mission to the community each and every day.

Simply put, helping people live better is more than something they do - it’s who they are. Walmart is a public company and its stocks are traded on stock exchange markets. It has 11,000m stock

authorized and 3,780m outstanding. The owners of the company change time by time. Nowadays the major direct holders are: Other shareholders are some institutions and mutual funds. Organizational structure

Wal-Mart was constructed into a three product divisional structure. The successful world retailer’s business categories include Wal-Mart Stores (U. S. ), Sam's Club (U. S. ), and International stores. The International segment yields about 20% of the company’s overall business income and is responsible for several different types of restaurants and stores including Wal-Mart and Sam's Club in 13 countries. This divisional structure and approach works to Wal-Mart's advantage because each division is open to focus its efforts on specific goals such as product, service, or customers.

Narrowing the focus really allows the company to perform more effectively because they are allowed to pinpoint specific areas needing change and adjust appropriately. The basic responsibility of the members of the Executive Committee is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareholders. In discharging that obligation, members should be entitled to rely on the honesty and integrity of the Company’s senior executives and its outside advisors and auditors, to the fullest extent permitted by law.

The company's shares began trading on OTC markets in 1970 and were listed on the New York Stock Exchange two years later. The company grew to 276 stores in 11 states by the end of the decade. In 1983, the company opened its first Sam’s Club membership warehouse and in 1988 opened the first supercenter -- now the company’s dominant format -- featuring a

complete grocery in addition to general merchandise. Walmart became an international company in 1991 when it opened its first Sam's Club near Mexico City. The birth of discount retailing

Most people think discount retailing began in 1962 – the year that Kmart, Target, and Walmart first opened. But actually, the chain of variety stores Sam Walton owned during the 1950s faced stiff competition from many regional discount stores. 1962 – Walmart begins Before opening Walmart, Sam traveled the country studying everything he could about discount retailing. He became convinced American consumers wanted a new type of store.

Trusting his vision, Sam and his wife Helen put up 95 percent of the money for the first Walmart store in Rogers, Ark. 972 – Walmart goes public Discounters such as Kmart quickly expanded in the 1960s, while Sam only had enough money to build 15 Walmart stores. In 1972, Walmart stock was offered for the first time on the New York Stock Exchange. With this infusion of capital, our company grew to 276 stores in 11 states by the end of the decade. The 1980s – Walmart comes of age In 1983, the first Sam’s Club members-warehouse store opened. The first Supercenter opened in 1988, featuring a complete grocery, and 36 departments of general merchandise.

By 1989, there were 1,402 Walmart stores and 123 Sam’s Club locations. Employment had increased tenfold. Sales had grown from $1 billion in 1980, to $26 billion. The 21st century – one of the most successful retailers in the world Today, 8,692 stores and club locations in 15 countries employ 2. 1 million associates, serving more than 176 million

customers a year. Our history is a perfect example of how to manage growth without losing sight of your values. Our most basic value has always been, and always will be, customer service. Sam’s secret — give your customers what they want

In his autobiography, Sam said, "… if you think about it from the point of view of the customer, you want everything: a wide assortment of quality merchandise; the lowest possible prices; guaranteed satisfaction; friendly, knowledgeable service; convenient hours; and a pleasant shopping experience. You love it when a store exceeds your expectations, and you hate it when a store inconveniences you, gives you a hard time, or pretends you're invisible. "

INDUSTRY ANALYSIS

Retail is the second-largest industry in the United States both in number of establishments and number of employees. The U. S. retail industry generates $3. 8 trillion in retail sales annually ($4. 2 trillion if food service sales are included), approximately $11,993 per capita. The retail sector is also one of the largest worldwide. Retail trade accounts for about 12. 4% of all business establishments in the United States. Single-store businesses account for over 95% of all U. S. retailers, but generate less than 50% of all retail store sales. Gross margin typically runs between 31 and 33% of sales for the industry but varies widely by segment. Average industry revenue growth rate in 2010 was -0. 8%.

Walmart is very selective in their choices of suppliers. Walmart forms partnerships with individual entrepreneurs. Suppliers are asked to keep up with demand and to provide a continuum of quality products. Walmart has the standards

for suppliers, if they don’t satisfy the requirements no chance to become the supplier. All suppliers must have competitive prices, financial stability, proven success in the marketplace, and offer excellent products in order to receive contracts with Walmart. Being the largest retailer in the country, many local suppliers can only play by Walmart's rules in order to get a piece of the pie.

Walmart imported over 15 billion dollars worth of goods. The suppliers to Walmart and other discounters have almost no power. Walmart is notorious for pressuring suppliers to cut their margins lower and lower, and often receives criticism for this practice. Unfortunately, there is no way around this given the consumer demand for quality goods at low prices. And while a supplier might sell half of its volume through Walmart, this brand probably makes up less than 5% of Walmart’s sales. Also Walmart can easily switch to new suppliers and it reduces bargaining power of suppliers.

Relentlessly cutting costs all the time, wholesalers deal directly with suppliers and hold all the power. Walmart does deal with some large suppliers like Proctor & Gamble, Coca-Cola who has more bargaining power than small suppliers. As we know Walmart has millions of buyers, there are at least 200 million customers per week. Walmart has great power over his consumers because each buyer has little portion of his sales. Walmart does not sell unique products, we can say that its goods are homogenous to all other retailers, but it maintains the customers by offering low prices.

Walmart always emphasize on his low price level and this way increases loyalty of the buyers, they believe

that nowhere can buy cheaper than in its stores. It's imperative that Walmart does not only look at what its direct competitors are doing, but what other types of products people could buy instead. Walmart offers always low prices and cozy environment. There are a lot of competitors which fulfill similar need to buyers, but there are not many substitutes that offer convenience and low pricing. The customer has the choice of going to many specialty stores to get their desired products but is not going to find Walmart’s low pricing.

Online shopping proves another alternative because it is so different and the customer can gain price advantages because the company does not necessarily have to have a brick and mortar store, passing the savings onto the consumer. Substitutes are available but Walmart tends to build in locations where they eat up small competitors. We can say that substitute level is medium because it depends on where you live and what type of Walmart stores are closer to you. The Grocery/Discount retailer industry’s threat of new entrants is very low. New firms would be faced with the task of beating the prices of giant merchandiser immediate upon entry.

Given the economies of scale, brand recognition, service, and variety of product offerings that Walmart, Target, and others continue to improve on each day, this seems very unlikely. In addition, existing firms could afford to temporarily drop prices even lower in order to force a new competitor out of the market. Barriers to entry in retail industry are high because it is hard to form a large organization that will be competitive at the same

size as Walmart with such low prices. This industry has high barriers because it is too expensive for new firms to enter and to be competitive.

The biggest threat in the retailer industry is competition. In particular, the main players are Walmart, Carrefour, Sears Holdings and Target. These firms also face competition from wholesalers such as BJ’s and Costco. Walmart, as the industry leader, has adopted a cost leadership strategy. In the past, most firms have not been able to match Walmart’s everyday low prices. The problem is that Walmart’s barrier to entry (economies of scale) and strength (supply-chain management) can be easily replicated with sufficient resources. By definition, discount retailers are competing to see who can offer the lowest prices.

This places a heavy burden on all firms to maintain a profit margin as they do so. Walmart has 6 times more revenue ($408,214m) than his strongest competitor Target ($65,357m). Target has well positioned itself in the market by developing strong customer base, positive marketing, credit card business and exclusive product lines. Target pays attention to and chooses its distribution and retailing very carefully. The company focuses on "consistency of experience" and makes it stores and products easily accessible for the customers. The company has identical stores while differentiating it from Walmart.

One of the strongest features about Target is that the consumer enjoys being there. Their store is always clean and the way it is set up is so aesthetically pleasing it's as if each shelf were specifically shelved just for you. Target is continuously working to make its distribution channels stronger and makes its offerings accessible for existing as

well as potential customers. Target as a company has several weak areas to work on and develop. These include its strategies about pricing, dealing with their two other divisions, strategic operations, supply chain. One of them is that they do not have as many stores as their competitor Walmart.

Even with Target's great advertising, it makes it difficult for the consumers to shop here when there aren't that any around. Another weakness with Target is that although their prices are low, they just aren't as low as Walmart's prices. AS a matter of fact, compared to Walmart's prices, Target may even seem expensive. Another problem with Target is that they keep a low overhead of items, so they run out of items very often. Target also focuses a lot on self service so it can be difficult to find what you are looking for sometimes. One great opportunity for target would be to start a club card kind of like what grocery stores do.

This way people would shop more to get more points on their cards and would not worry so much about the high prices. This would take away from the fact that it is more expensive than Walmart. But still Walmart is a company that threats target, despite the fact that they are the number one retailer in the world; they also have very low prices. And nowadays during the crisis period the low prices are the most important competitive advantage. Walmart has a compelling competitive advantage, especially in its pricing strategy that pulls shoppers from greater distances, past other chains, to its stores.

Walmart is the price leader

among discounters. A low-price position is the number one consumer choice determinant. Quality and value are the other intangibles that also trigger consumer response. Walmart is the undisputed leader in this area. One of the keys success factors is the strong supply chain management, by which it keeps low prices. Walmart pushed the retail industry to establish the universal bar code, which forced manufacturers to adopt common labeling. The bar allowed retailers to generate all kinds of information - creating a subtle shift of power from manufacturers to retailers.

Walmart became especially good at exploiting the information behind the bar code and is considered a pioneer in developing sophisticated technology to track its inventory and cut the fat out of its supply chain. Great number of stores plays great role in success of Walmart. Walmart always tries to reduce cost of each store, the company has been criticized for the relatively meager wages and health care plans that it offers to rank-and-file employees. Often they are expected to pinch pennies wherever they can, even on things like the heating and cooling of the stores.

Also one more Key Success Factors are that “low price” image is backed by strong marketing strategy. Marketing Analysis The customer is always number one Every day, everywhere Walmart does business, the customer always comes first. They take pride in serving the 200 million people in the U. S. who shop their stores each week striving to exceed their expectations so they can save money and live better. Serving customers – one neighborhood at a time Walmart is committed to always enhancing the shopping experience of their diverse customers

by looking through the lens of the communities in which they serve.

They use comprehensive data to better understand the various needs of consumer base, and the Store of the Community approach drives decisions in key areas of the business, including store layout, design and communication. By offering the right product, at the right place, at the right price, and at the right time, Walmart remains relevant to its customers and meet the demands of the diverse communities it serves.

The greatest measure of Walmart’s success is how well we please the customer, ‘our boss. ’ Let’s all support hands-on hospitality and have customers leave 100 percent satisfied every day. Sam Walton Marketing Walmart’s marketing group keeps the message simple and remembers their mission: to save people money and help them live better. The marketing department at Walmart connects with the American consumer on an unprecedented scale. "Save Money. Live Better,” they communicate with more than 200 million customers who shop their stores every week. And they operate on a world-class level while adhering to the values and culture of respect on which their company was founded.

Walmart people have expertise in a diverse range of advertising and marketing specialties, from brand trategy to creative services. They bring unique customer insights to life through a wide range of seasons, categories and brands. By offering the best possible prices on the products the customers need, they can help them afford something a little extra. Whether it's a grandmother who can buy her grandchildren a special gift because she saved money on her prescriptions or a young family saving money to buy their first

home. Market Segment Walmart serves customers and members more than 200 million times per week at more than 8,692 retail units under 55 different banners in 15 countries.

Market share Due to Wal-Mart's low prices, consumers gravitate to Wal-Mart stores during economic downturns. As a result, the company's comparable store sales increased by 3. 5% during the worst toughest year. However, as the global economy emerges from recession, stands to lose a lot as consumers opt to buy higher quality and more expensive items. Over 54% of the company's stores are located in the United States, with the majority of international stores located in Central and South America and China.

The company focuses on offering the lowest prices across its business segments, which together earned $408 billion in revenue in 2010, a 1% increase from sales in 2009. Wal-Mart's largest business segment is its namesake Wal-Mart stores, which accounted for 63. 8% of the company's revenue in 2010. The company also earns revenue through its Sam's Club and international business segments which accounted for 11. 5% and 24. 7% of the company's 2010 net revenue each. Wal-Mart's marketplace clout is hard to overstate.

In household staples such as toothpaste, shampoo, and paper towels, the company commands about 30% of the U. S. market, and analysts predict that its share of many such goods could hit 50% before decade's end. Wal-Mart also is Hollywood's biggest outlet, accounting for 15% to 20% of all sales of CDs, videos, and DVDs. The mega-retailer did not add magazines to its mix until the mid-1990s, but it now makes 15% of all single-copy sales in the U.

S. In books, too, Wal-Mart has quickly become a force. Tesco, which operates superstores similar to Wal-Mart's, is Britain's largest retailer.

Scott's call for government intervention was prompted by figures released last week showing that Tesco now captures 31 percent of UK grocery sales, up from 28 percent last year. Meanwhile, Wal-Mart's share of the British food market (through its Asda subsidiary) has fallen from 27 to 17 percent. Wal-Mart has about one-third of the U. S. market for numerous household staples, such as toothpaste, diapers, and shampoo.

According to industry analysts at Retail Forward, Wal-Mart is on track to control 35 percent of the U. S. rocery market within the next few years. Domestic Competitors Target is Wal-Mart's most direct competitor, offering a range of general merchandise in a similar store format (standard Targets, with limited food offerings, compare to Wal-Mart's discount stores, and Supertargets compare directly to supercenters). Target’s major competitive advantage over Wal-Mart lies in its customer base: the average household income for Target customers is about $50,000 a year, whereas the average yearly income for a Wal-Mart customer is only $35,000.

Finally, because of its focus on low prices, Wal-Mart has found it difficult to promote higher-quality items or private labels that come in at a higher price point; meanwhile, Target has had success with its quality-at-value-prices strategy among higher-income demographics, where price is not the only influence on sales. This higher-income customer base gives Target more stability than Wal-Mart, particularly as energy costs rise and the real estate market slows. Kmart, as the third discount retailer of the "Big Three", has seen steadily declining sales since 2000,

losing considerable market share to both Wal-Mart and Target.

Other Retailers As a large-scale retailer, Wal-Mart competes with a wide variety of other, specialized retailers, such as Safeway in groceries, Best Buy (BBY) in consumer electronics, and department stores such as Macy’s in apparel and home decor. Wal-Mart’s focus on price differentiation means that these companies, while competing in overall market share, are not necessarily competing for the same type of customer; however, in more volatile or price-sensitive markets, such as consumer electronics, discounters like Wal-Mart are able to leverage their pricing advantage and apply increasing pressure on other retailers.

International Competitors Wal-Mart's major international competitors are Britain's Tesco, France's Carrefour, and Germany's Metro. Each of these companies has a competing presence in China, the UK, and Japan, with Wal-Mart contending with at least one of them in many of its other markets. Walmart Supercenters were developed in 1988 to meet the growing demand for convenient, one-stop family shopping featuring our famous Every Day Low Prices. There are 2,882 Supercenters nationwide, and most are open 24 hours.

Supercenters average 185,000 square feet and employ about 350 or more associates. Supercenter groceries feature:

• Bakery goods
• Meat and dairy products
• Fresh produce
• Dry goods and staples
• Beverages
• Deli foods
• Frozen foods
• Canned and packaged goods
• Condiments and spices
• Household supplies Sam's Club

The first Sam’s Club opened its doors in Midwest City, Oklahoma, in 1983. Today, Sam’s Club operates 608 locations nationwide. Typical clubs are about 132,000 square feet and employ about 175

associates.

We also have more than 100 international Sam’s Clubs in Brazil, China, Mexico and Puerto Rico. Membership only, cash and carry operations. Financial service card program (discovery Card) available at all clubs. Annual membership has additional benefits like automotive service contracts, roadside assistance, home improvements, auto brokering and pharmacy discounts. Walmart Neighborhood Markets Neighborhood Markets offer a quick and convenient shopping experience for customers who need groceries, pharmaceuticals, and general merchandise all at our famous Every Day Low Prices.

First opened in 1998, there are now 181 Neighborhood Markets, each employing about 95 associates. A typical store is about 42,000 square feet. Neighborhood Markets feature a wide variety of products, including:

• Fresh produce
• Meat and Dairy products
• Frozen foods
• Dry goods and staples
• Health and beauty aids
• Stationery and paper goods
• Drive-through pharmacy
• Deli foods
• Bakery items
• Canned and packaged goods
• Condiments and spices
• Pet supplies
• Household supplies.

Wal-mart expended so that customers everywhere would associate its name with low cost, best value, greatest selection of quality merchandise and highest standards of customer service. In 1991, Walmart became an international company when we opened a Sam's Club near Mexico City. Just two years later, Walmart International was created. We’ve created stores with different styles and formats to fit in with local customer needs, desires, and customs. More than 75 percent of our international stores operate under a different banner than Walmart.

But, whether we’re Pali in Costa Rica, Todo Dia in Brazil, or Despensa

Familiar in Central America, all of our stores share a common goal: Save people money, so they can live better. Today, Walmart International is a fast-growing part of Walmart's overall operations, with 4,292 stores and more than 700,000 associates in 15 countries outside the continental U. S. Strategy and implementation summery Competitive Edge As much as we would believe that productivity improvements brought to us by technological innovations will transform into corporate profitability, historically that has not been the case.

Wal-Mart has changed the retail landscape by installing the most (at the time) revolutionary inventory management and distribution systems, passing the cost savings to the consumer, and driving less efficient competitors out of business. Also Walmart created the best supply chain in the industry. However, Wal-Mart-like technology is available off the shelf to any retailer aspiring to coexist in today's competitive landscape. Even companies like Dollar General, with stores the size of several Wal-Mart bathrooms put together, wrote sizable checks and installed perpetual inventory and automatic reordering systems.

Marketing and Sales Strategy Wal-Mart’s marketing strategies are based upon a set of two main objectives that have guided the firm through their growth years. The customer is featured in the first objective; “Customers would be provided what they want, when they want it, all at a value”. Team spirit was emphasized in the second objective, “Treating each other as we would hope to be treated acknowledging our total dependency on our associate – partners to sustain our success”. The customer objective includes giving the customer what they want at a reasonable value.

Wal-Mart has launched successful marketing strategies that considered factors like social

and environmental causes. Walmart is a company famous for its adaptive and dynamic marketing strategy. Without a wise marketing campaign, Walmart would not have achieved spectacular growth that made the largest company in the US. We will analyze this strategy using four P's of marketing. The cornerstone of Walmart's strategy has been its low prices. The company continues to undercut its competitor's sales by offering comparable merchandise at lower cost. Its slogan is ”always low prices-always”.

Walmart is truly present all over the globe. Today even remote nations like China have their Walmart stores. In the US, Walmart stores are all over the place, covering the nation with a dense network. Many of them are located out of town so that consumers have to allocate some time driving there, but this inconvenience is offset by the pleasure of one-stop shopping and low prices. At the time, the retailer is reaching into global markets with stores in Brazil, Canada, Germany, South Korea, Mexico, Puerto Rico, the United Kingdom and China (Knowledge Wharton.

Although Walmart prices are already an attraction, the company also takes effort to entice consumers with promotion. Right now, for instance, on its website it advertises 97 cent shipping on selected items and offers consumers an opportunity to donate to Salvation Army. When Walmart enters a foreign country it makes necessary modifications such as merchandise offerings. However, Walmart did not change three main ingredients Brand names, every day low price strategy and high ethical standards. Cost Strategy Wal-Mart has achieved almost legendary status for its low-priced goods.

The company aggressively maintains efficient distribution systems, lower labor costs, and firm-level economies that

give it leverage with suppliers. Combined with managerial innovations and the big-box format, which leads to in-store scale economies, these advantages help Wal-Mart cut costs and passes savings on to consumers. Labor productivity was 44% higher in Wal-Mart stores than in other general merchandise retail stores in 1987. In 1999, Wal-Mart still maintained labor productivity 41% greater than competitors.

The company's price advantage extends to groceries, particularly in the large footprint format. Summarized the evidence on scale economies in grocery sales, arguing that larger stores enjoy cost economies, have more room for high-margin items and may be more attractive to some consumers. A study by found that the price of a market basket of grocery items at Wal-Mart supercenters was between 17 and 29% lower than prices at major supermarket chains in the same urban area. Moreover, grocery chains competing in the same market will normally be forced to lower their prices in response.

With Wal-Mart’s single purpose to bring the lowest prices to customers, Wal-Mart has turn to China. China's south was always famous for business savvy; that talent was enhanced almost from the day in 1980 when five "special economic zones" were formed, most famously Guangdong, which boasted the first "joint venture" firms. China's relentless improvement of infrastructure, and endless cheap labor, explains why Wal-Mart has relied its goods on the country. It's a complex market and certainly the opportunities are overwhelming.

One of the strengths of the strategy of Wal-Mart in resorting to China in its goods is because with China, manufacturing of the goods are of low prices because of labor expenses are low in which in return

would cause low prices of products. Reducing labor expense is the main cause of savings and in trimming the prices of the products. According to, more than 10 percent of what China ships to the U. S. end up on Wal-Mart's shelves. With Wal-Mart’ strategy of outsourcing in China, the company has saved money. Low cost-country outsourcing is a strategy that enables innovation.

However, China lifted its restrictions on where Wal-Mart and other foreign businesses to open stores. Wal-Mart's stores are "in their infancy in China Walmart always shared these savings with customers by charging them lower prices, thus giving them the maximum value for their money. Walton's pricing strategy led to increased loyalty from price-conscious rural customers. It helped the company to generate more profits due to larger volumes.In company’s capital structure, there is a balance in company’s financing with debt, as it appears to be stable. But the company’s strategy is to reduce debt portion in capital structure. In 2009, long term debt to total capitalization ratio decreased from 43. 38% to 40. 92%.

FINANCIAL ANALYSIS

General overview Operating Expenses and Net sales In 2010, operating expenses increased by 2. 7% from 2009, while net sales increased by 1%. Operating expense grew at faster rate because of higher health benefit costs, restructuring charges and higher advertising expenses. In 2009 operating expenses increased 9. 3% compared to 2008 and sales increased by 7. 3% only. Higher increase in operating expenses was caused by higher utility costs, legal matters, higher health benefit cost and increased corporate expenses. Net sales in 2010 increased due to increased customer traffic, continued global expansion activities, offset

by a $9. 8 billion unfavorable currency exchange rate impact in international segment and price deflation in certain merchandise categories in Walmart U. S. segment . Net sales in 2009 increased due to global store expansion activities, offset by a $2. 3 billion unfavorable exchange rate impact.

Higher change in operating income in 2010 relative to lower change in sales was due to improved operating results and inventory management. The reason of increase the sales may be several. 2010 year is post crisis period and people still try to save money. In fiscal 2010, Walmart added more than 500 units, all from organic growth. Walmart Canada continues to increase sales through its supercentre expansion program. Free cash flow

Walmart generated positive free cash flow of $14. 1 billion, $11. 6 billion and $5. 7 billion for the year ended January 31 in 2010, 2009, and 2008, respectively. The increase in free cash flow is a result of improved operating results and inventory management. Accounting assumptions and methods Walmart uses GAAP standards for preparing financial statements. Its fiscal year ends at Jan. 31.

The Consolidated Financial Statements include the accounts of Wal-Mart Stores, Inc. and its subsidiaries. Intercompany transactions have been eliminated in consolidation. Investments in which the company has a 20% to 50% voting interest and where the company exercises significant influence over the investee are accounted for using the equity method. These investments are immaterial to our company. Inventories The company values inventories at the lower of cost or market as determined primarily by the retail method of accounting, using the last-in, first-out (“LIFO ”) method for substantially all of the

Walmart U. S. egment’s merchandise inventories.

Sam’s Club merchandise and merchandise in our distribution warehouses are valued based on the weighted-average cost using the LIFO method. Inventories of International operations are primarily valued by the retail method of accounting,using the first-in, first-out (“FIFO ”) method. At January 31, 2010 and 2009, our inventories valued at LIFO approximate those inventories as if they were valued at FIFO. Depreciation and Amortization Depreciation and amortization for financial statement purposes are provided on the straight-line method over the estimated useful lives of the various assets.

Evolution and Reasons OF Changes (strengths and weaknesses of WLM’s financial statements) General Strength Walmart is notorious for pressuring suppliers to cut their margins lower. Walmart has a compelling competitive advantage, especially in its pricing strategy that pulls shoppers from greater distances, past other chains, to its stores. Walmart is the price leader among discounters. A low-price position is the number one consumer choice determinant. Quality and value are the other intangibles that also trigger consumer response. Walmart is the undisputed leader in this area.

One of the key success factors is the strong supply chain management, by which it keeps low prices. Labor productivity was 44% higher in Wal-Mart stores than in other general merchandise retail stores in 1987. In 1999, Wal-Mart still maintained labor productivity 41% greater than competitors. The company's price advantage extends to groceries, particularly in the large footprint format. Summarized the evidence on scale economies in grocery sales, arguing that larger stores enjoy cost economies, have more room for high-margin items and may be more attractive to some consumers.

A study by found that the

price of a market basket of grocery items at Wal-Mart supercenters was between 17 and 29% lower than prices at major supermarket chains in the same urban area. Moreover, grocery chains competing in the same market will normally be forced to lower their prices in response. The return on equity numbers show average ROE of 20% over the 10 year period. Wal Mart is successfully using debt. Total debt is 41% of capital. Management has used this debt effectively to increase their returns. Equity growth rate has been steady.

The 9 year average is 15. 10%, the 5 year average is 13. 37%, the 3 year average is 13. 34% and last year’s growth rate was 16. 76%. All in all, pretty consistent equity growth. Earnings per share growth rate have been on the decline over the 10 year period. The 9 year average is 15. 10%, the 5 year average is 14. 23%, the 3 year average is 12. 40%, and last year’s EPS growth rate was 9. 02%. As you can see, a slow and steady decline. WalMart has had a stellar dividend growth rate over these 10 years. The 9 year average is 19. 91%, the 5 year average is 21. 8%, the 3 year average is an even better 22. 22%. But the ride ends there, and the last 2 years have had growth rates of 7. 95% and 14. 74% respectively. Still respectable. But this makes sense when you look at the fundamentals.  The interesting part is Wal Mart’s low dividend payout ratio. The ratio is currently 29. 00%. That is quite normal for a steady dividend payer.