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Sears vs. Walmart
322
Transcript
Sears vs. Wal-Mart
$1.25
Vol XCIII, No. 311
Tuesday, October 20, 2015
Driving Performance
Difference in Retail Strategies
Wal-Mart
- Sears issued 24 million new credit card accounts over a 3 year period
- 27 million active customer credit accounts with an average balance of $1058
- Total revenues from credit card operations accounted for 11% of total revenues
- Sears reduced risk and generated revenues by converting receivables into securitization certificates
- Non collectible account rose 39%; Sears profit margin suffered drop from 3.77% to 3.27%
- Wal-Mart's main drivers were their merchandise inventory that accounted for 40% of total assets.
- Wal-Mart's sales grew 12% from $93.6 billion to $104.8 billion
- Wal-mart’s increased sales and kept cost the same 78%
- Wal-Mart had a higher fixed asset turnover of 4.52 compared to Sears 3.72 ratio
- Favored contender, acknowledged as the powerhouse of the U.S. retailing industry
- Sam Walton opened the first Wal-Mart 1962
- It began as small convenience store in a small town that later grew into the retailing powerhouse it is known for today
- Took the title of world’s largest retailer, posting net sales of $43.9 billion in 1991 and later broke a $100 billion
- Operated Sam’s Club membership warehouses and Wal-Mart Supercenters
Ratios
CONCLUSION
Ratios Analysis
Sears
- Wal-Mart prominent company
- Profit Margin: Stayed steady from 1996 to 1997
- Less risk
- Growth Increasing: 12% revenue growth
- Greater income with less debt
- Although ROE is higher for Sears, explained by Advantis
- Higher asset turnover and overall efficiency
- Return On Sales: Net income for every dollar sold
- Return on Assets: Measuring Profit and asset efficiency
- Return on Equity: Net Income for every dollar invested
- Total Asset Turnover: The amount of sales for every dollar invested in assets
- Fixed Asset Turnover: The amount you receive in sales for every dollar invested in fixed assets
- Debt Ratio: The percentage of assets financed by debt
- Equity Multiplier: Measure of leverage
- Internal growth rate: Growth based on retained earnings
- Sustainable growth rate: Growth based on retained earnings and debt
- Earnings Retention:Percentage of net income that is retained to grow the business
- Days in Inventory
- Days Receivable Outstanding:
- The underdog; made great progress to revive lost costs from failing stores
- Founded in 1891, originally operated only as a catalog business, but later expanded into retail stores
- Sears grew to become the world’s largest retailer based off of annual sales.
- Sold a variety of merchandise including apparel, cosmetics, jewelry, electronics, household appliances, cookware, bedding, and hand tools.
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