Walmart vs Sears: Profitability Analysis

A snapshot of the Net Margins for Wal-Mart Stores Inc. is shown below: Net Margin Wal-Mart 2010 3.90% 2011 3.50% 2012 3.60%

J. Rate of return on common stockholder’s equity: The ratio of return on common stockholder’s equity measures rate of return on the interest of ownership for the common stock owners. Company G’s rate of return ratio diminished (20.20% down to 18.46%). Although percentage decreased does not represents a negative, compared to quartile benchmarks of 12.80% and 16.30%. Rate of Return on Common Stockholder’s Equity

Wal-Mart’s current ratio is 0.93, Target current ratio is 1.11 and the industry ratio is 3.04.

It is normal with the industry with everything ranged in the normal range, no obsolete ratio for further investigation.

It is important for stockholders to continuously re-evaluate their investments. Although some investors do this more frequently and thoroughly than others, the majority of shareholders do so at least once each year. Therefore, Torres’ desire to update her analysis in order to determine whether Costco was still operating efficiently makes perfect sense. After thorough examination, my analysis proves that Costco remains one of the industry’s leading competitors and there seems to be no reason for Torres to sell her shares as long as she wishes to retain holdings of a retail wholesale club in her portfolio.

Liquidity ratio. The firm’s liquidity shows a downward trend through time. The current ratio is decreasing because the growth in current liabilities outpaces the growth of current assets. The quick ratio is also declining but not as fast as the current ratio. From 1991 to 1992, it only decreased 0.35 units while the current ratio decreased 0.93 units. Looking at the common size balance sheet, we also see that the percentage of inventory is growing from 33% to 48% indicating Mark X could not convert its inventory to cash.

A good store layout helps customer to find and purchase merchandise. (Michael Levy, 2014). Both stores use the free form designs, which arrange fixtures and aisles asymmetrically. Sears and The Bay have a variety of departments to make the customer experience more pleasant; free form helps in forming a pleasant atmosphere. When both of the stores are compared, The Bay definitely has more appealing free form than Sears. The bay offers more of digital signage for their merchandise than Sears. Another important factor that is necessary for merchandise is the location of merchandise categories and design elements. The Bay does a very fine job when it comes to impulse merchandising. The impulse products, like fragrances and cosmetics, which Bay

Nonetheless, an improvement in age of receivables for a single company over multiple periods suggests a company is becoming more efficient or effective at managing its receivables (Bujaki & Durocher, 2012; Gibson, 2011).

As the creditors’ view, they prefer the high current ratio. The current ratio provides the best single indicator of the extent, which assets that are expected to be converted to cash fairly quickly cover the claims of short-term creditors. However, consider the current ratio from the perspective of a shareholder. A high current ratio could mean that the company has a lot of money tied up in nonproductive assets.

Cash conversion period is use to analyze cash cycle and it is an approach measure liquidity. Days inventory held is the number of days from receiving the item until they actually sell it. Just for Feet held its inventory for 268.88 days in 1998 and 322.69 in 1999 between the receipt days an item until it was sold to the customer. Days of sales outstanding average of days that it takes for customers to pay for merchandise. Just for Feet took 12.08 days to pay for the merchandize in 1998 and 8.89 days in 1999, the day of sale outstanding average show that just for feet has a strict policy on the payment of their product. Day pay outstanding is the days between the inventory is received and when payments are made, Just for Feet took 66.74 days to pay their outstanding in 1998 and 80.95 in 1999. Just for Feet is taking longer to pay their supplies. Operation Cycle is an indicator of management performance efficiency, Just for Feet operation cycle is $28,096 in 1998 and 331.58 in 1999.Cash operation cycle is the elapse between the firm’s payment for their inventory and

We can observe that Wal-Mart and Sears performed the costs and expenses controlling effectively almost in average situations. However, Wal-Mart has a little bit higher than Sears in 1998. But Sears had caught up in 1999 and still growing up in 2002.

The long-term liquidity risk ratio such as LT debt/Equity, D/E, and Total Liabilities to Total Assets all show a decline from year 2005 due to the repayment of debts. The interest coverage ratio also shows a healthy number of 29.45 in comparison to the industrial average of 15.04 indicating a high ability to pay out its interest expense. Such a low relative risk is not surprising due to the nature of its business depending heavily in R&D development and large intangible assets.

will save of challenges and cost in the long run. Both companies possess strengths that helped The Sears Roebuck Co. And Kmart Holding Corp. Companies were an unsuccessful acquisition. The CEOs of Sears, Roebuck, and Kmart Holding, planned to merge into a fifty-five-billion-dollar retail company believing it would produce stronger brands, greater productiveness in operations and higher returns than either company could achieve alone. At the time of the merger, both companies were struggling. Some of their problems were the recession, poor investments, and shrinking revenues. They also could not keep up with superstores like Walmart. With this union, they would both benefit different ways. Kmart was going to benefit from the planned cost sharing of several of Sears proprietary brands as well as grant freedom to obtain significant profit and cost synergies including merchandise and non-merchandise purchasing, distribution, and other SG&A expenses. Sears would move out of malls, and would benefit from Kmart’ store's locations were are in the high-income customer target of Sears. Moving out of malls meant that Sears would sell some of it real estates which would have brought money to the company. Two struggling companies coming together potentially make a bigger struggling company.

These two are both magnificent retailers and have many interesting different characteristics. That’s why we decide to pick them up for comparison, in order to understand their operations’ management and to point out the similarity or differences between these two in how they manage their business.

Current Ratio assesses whether the business has enough short-term assets to cover its short-term debts. The acid test ratio is quite similar to the current ratio yet excluding stock. In this case as Starhill REIT do not has stock therefore the calculation for both of the ratios will be the same. The ratio increased year by year from 2008 to 2010, i.e. 2.25 times, 2.26 times, and 4.61 times respectively. The ratio indicated that the company had approximately two times of short-term assets to secure its short-term liabilities in 2008 and 2009. In 2010, the ratio boosted up and it was doubled compared to prior year. This was due to the increment of other receivables amounted to RM625 million (cash proceeds from the disposal)