Analysis Of Wal-Mart's 2004 Financial Statements

ANALYSIS OF A FIRM’S FINANCIAL STATEMENTS

An Analysis of Wal-Mart’s 2004 Financial Statements

LeTourneau University

I. Executive Summary

A. Objective of paper

My objective is to analyze financial statements from the 2004 Wal-Mart Annual Report. Based on my findings and any relevant supplementary information provided about Wal-Mart and its operating environment, I will identify areas in which the company is performing well and advise management of any problem areas.

B. Summary of findings

Based on the information that I found on the financial statements, Wal-Mart Stores, Inc. is currently on the rise. They have increased their cash flow while decreasing their long-term debt. Their investing activities have decreased, but can be remedied with a good solid investment.

II. Firm, Industry, and Environment

A. Description of firm and its management

Wal-Mart Stores, Inc. (Wal-Mart), incorporated in October 1969, operates retail stores in various formats around the world. The Company operates through three segments: Wal-Mart Stores segment, which includes Supercenters, Discount Stores and Neighborhood Markets, Sam's Club segment and International segment. The Wal-Mart Stores segment segment consists of three different traditional retail formats, all of which operate in the United States, and Wal-Mart's online retail format, walmart.com. The Sam's Club segment consists of membership warehouse clubs, which operate in the United States, and the segment's online retail format, samsclub.com. At January 31, 2007, its International segment consisted of retail operations in 12 countries and Puerto Rico. In October 2006, the Company disposed of its South Korean and German operations (Reuters, 2007).

At January 31, 2007, the Company operated 1,075 discount stores, 2,256 supercenters, 579 Sam's Clubs and 112 Neighborhood Markets in the United States. Internationally, at January 31, 2007, the Company operated units in Argentina (13), Brazil (299), Canada (289), Costa Rica (137), El Salvador (63), Guatemala (132), Honduras (41), Japan (392), Mexico (889), Nicaragua (40), Puerto Rico (54), and the United Kingdom (335). It also operated 73 stores through joint ventures in China at January 31, 2007 (Reuters, 2007).

Wal-Mart’s executive team consists of:

*President, CEO, Director Scott H. Lee

*Chairman of the Board S. Robson Walton

*Vice Chairman John B. Menzer

*Vice Chairman Michael T. Duke

*CFO, Executive VP Thomas M. Schoewe

*President and CEO of Walmart.com Raul Vazquez

*Executive VP, CMO Stephen Quinn

*Executive VP and Corporate Secretary Thomas D. Hyde

*Executive VP; President and CEO,

Sam’s Club C. Douglas McMillon

*Executive VP; President and CEO,

Wal-Mart Stores Division Eduardo Castro-Wright

*Executive VP-People Division M. Susan Chambers

*Executive VP-Corporate Affairs

and Government Relations Leslie A. Dach

*Senior VP, Controller Steven P. Whaley

*Senior VP, Global Procurement Jeff Mach

The following are Directors:

David D. Glass

Roland Hernandez

Jack C. Shewmaker

James W. Breyer

M. Michele Burns

Christopher J. Williams

Douglas Daft

Jim C. Walton

Linda S. Wolf

Aida M. Alvarez

James I. Cash

Roger C. Corbett

Allen I. Questrom (Reuters, 2007)

The store management team consists of:

Divisional VP

Regional VP

Operations Coordinator

District Manager

Store Manager

Co-Manager

Assistant Manager

Assistant Manager Trainee

Department Manager/CSM

Associate/Cashier (Wal-Mart, 2007)

B. Discussion of competitive environment

In North America Wal-Mart's primary competition includes department stores like Kmart, Target, Meijer, or Canada's Zellers, Winners, or Giant Tiger. Wal-Mart's move into the grocery business in the late 1990s has also positioned it against major supermarket chains in both the United States and Canada. Several smaller retailers, primarily dollar stores, such as Family Dollar and Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales. In 2004, Wal-Mart responded by testing their own dollar store concept, a subsection of some stores known as "Pennies-n-Cents."

Wal-Mart has struggled in other foreign markets. For example, in Germany, it had captured just 2% of German food sales following its entry into the market in 1997 and had remained "a secondary player" compared to competitor Aldi which boasts 19%