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FutureStarrA Comprehensive Look at Walmart Inc. (NYSE: WMT)
If you're contemplating investing in Walmart Inc. (NYSE: WMT), it would be prudent to gain an understanding of both its history and current performance.
Sam Walton was a pioneer of retailing who developed an unconventional business model to compete against large chains at that time, becoming one of the world's premier corporations today.
Walmart was established by Sam Walton in 1950 with the vision of providing essentials at low prices to local communities.
Wal-Mart achieved this by opening warehouses near his stores to make stocking and distribution simpler, as well as employing an unconventional business model of purchasing goods wholesale before offering them at discounted prices to customers at retail. This strategy enabled Wal-Mart to reduce its costs structure while simultaneously charging lower prices than its rivals.
Walmart eventually used this strategy as the foundation of its success, growing to become the largest private employer in America and still the world's biggest retailer, surpassing $100 billion for the first time ever in fiscal 1997.
Wal-Mart was under heavy fire from all kinds of groups at this time. Many felt its business practices were detrimental to society and discriminatory against women; Wal-Mart responded with an intensive public relations campaign against such complaints.
In each community it served, the company began offering $1,000 scholarships to high school students - this effort proved especially significant during times of segregation during civil rights movements.
Wal-Mart started purchasing grocery and general merchandise stores across the US in the early 1970s as part of a strategy to expand into the southeastern market. Starting in 1977 with Mohr-Value stores in Missouri and Illinois; then in 1978 with Hutcheson Shoe Company acquisition; finally in 1981 when purchasing 92 Kuhn's Big K stores; in 1982 opening their first Sam's Club membership discount wholesale warehouse store located in Midwest City Oklahoma.
These acquisitions provided Wal-Mart with access to an immense consumer spending power pool, enabling it to lower prices and expand profit margins while competing more effectively with rival retailers Sears and Kmart.
At the end of the 1990s, Wal-Mart was beginning to experience slower growth due both to recessionary effects and slow international market expansion.
Walmart operates an expansive global network of discount stores, supercenters and neighborhood markets as well as numerous services like grocery delivery and fueling stations.
Wal-Mart Stores Inc has long been considered a leader in retail since it was established by Sam Walton in 1962. At first, its focus was delivering top quality merchandise at reasonable prices - now, however, its global brand serves more than 36 million customers daily across 36 markets!
Wal-Mart is the largest retailer in the United States and a market leader in numerous areas such as groceries, consumer packaged goods, electronics, apparel and home furnishings. Along with their brick-and-mortar operations, they have also successfully expanded into online retailing - experiencing enormous growth as an online retailing service provider.
Wal-Mart experienced double-digit sales growth from 1980-1989; however, competition from Kmart and Sears caused sales to diminish gradually in the 1990s. To combat these threats, the company adjusted operations, reduced costs, and began purchasing more from domestic producers rather than foreign suppliers.
As a result, revenue grew steadily both domestically and abroad; however, overall net income began to decrease during the mid-1990s.
Walmart remains one of the world's most profitable businesses, thanks to strong margins and productivity growth.
Walmart is a multinational retail corporation, operating across five continents - US, China, India, Mexico and Europe. Their international operations contribute 18.5 percent of their total revenues.
Sam's Club operates over 10,500 stores globally under 46 banners and multiple e-commerce websites. Additionally, it provides services through Sam's Club Membership Warehouse Club membership programs.
One of the world's largest private employers, with nearly 1.6 million U.S. workers employed, Walmart stands out by providing superior benefits and working conditions.
Walmart maintains an expansive global presence through acquisition. For example, they entered Europe by purchasing the 21-unit Wertkauf hypermarket chain from Germany in 1998. Their operations in the United Kingdom primarily utilize ASDA Group plc while it owns 36% stake of The Seiyu Ltd in Japan. Furthermore, Walmart operates Bodegas discount stores, Suburbias specialty department stores, Superamas supermarkets in Mexico; Todo Dias supermarkets in Brazil; Neighborhood Markets grocery stores in China and Vips restaurants in Puerto Rico among many others.
Walmart saw earnings per share climb last year thanks to strong global revenue and sales gains across stores and eCommerce. Their adjusted EPS for the fourth quarter came in above Wall Street expectations and exceeded their guidance; additionally, customers spent more money at stores during holiday seasons which contributed to higher earnings per share results.
Walmart is making waves in the apparel industry, having acquired ModCloth and Bonobos over recent years. This trend may continue as Walmart looks to expand its online shopping channels.
Walmart's acquisition strategy faces some uncertainties in the long-run. A major risk is customers purchasing lower priced merchandise and trading down quality; this requires more investment by Walmart in order to retain them as customers.
Walmart is also facing cost inflation as inventory levels increase due to demand and surplus stock is being liquidated through markdowns and reduced shipping containers, according to Chief Financial Officer John Rainey's comments during an earnings call.
Although a company invests in new technology such as automated warehouses, it may not experience immediate cost savings. Instead, automation should help reduce expenses by eliminating labor-intensive jobs within its warehouses.
Also striving to reduce its carbon footprint are initiatives like its electric car program and plans to install solar panels at its retail stores to offset energy needs.
While Walmart's overall sales growth remains strong, earnings per share have seen some slight reduction since reaching record levels last year due to higher costs and supply chain pressures. Nevertheless, Walmart remains on track to meet its financial targets for this fiscal year which call for adjusted EPS growth in the mid single digits.
Although EPS is often used as a benchmark of company performance, its values can easily be altered by non-recurring items (NRI). Therefore, for accurate representation of earnings power it would be better to focus on an EPS figure without NRI.
Walmart is one of the world's best-known and most successful retailers, operating an omni-channel retail business featuring everyday low prices (EDLP). Walmart U.S., International and Sam's Club make up its three divisions.
Market Capitalization for Apple stands at just over $270 billion, reflecting their total common shares and preferred stock holdings that have not been converted to common shares; not counting any outstanding debt or equity securities convertible into common stock. Market Cap is used as an indicator of liquidity and financial health of companies.
Walmart, as a multifaceted business with multiple activities and subsidiaries, is always searching for opportunities to broaden its reach and increase profitability. This may involve purchasing businesses or partnerships as well as divesting non-core or unprofitable units. Over recent years, Walmart has made notable acquisitions of high-tech and fast-growth companies, which may contribute to its impressive market capitalisation.
One of the company's most notable transactions was its acquisition of Whole Foods in late June, prompting headlines in Forbes, Fortune and CNBC. Even though this merger has yet to close its effects have already been felt by rivals like Kroger and Albertsons. Not only has the deal increased its competitive position but also helped increase overall sales volume and bottom line profits.