Walmart Essay

Although Walmart closed the twentieth century as the United States’ largest generator of sales and the world’s largest private-sector employer, its growth ambitions showed no signs of abating. It targeted an increase in its share of U.S. retail sales from 8% to 15%. To reach this target, Walmart company officials bet on growth of its Supercenter stores, which were larger versions of its flagship stores that added groceries to the normal product offerings. By 2000, Walmart had become the nation’s third largest grocer despite having introduced the Superstore format only two years earlier.1 Analysts were bullish about the company’s grocery business in 2000: “Walmart continues to flex its muscle in food categories, with same store food sales up 10% across the division, which continues the double-digit trend seen in 2001 and should continue in 2002.”2

Having firmly established itself as the preeminent U.S. retailer, Walmart sought to build on the international expansion it began in the 1990s. In 2000, Walmart announced that international sales would account for 30% of total sales by 2005.3 Analysts believed that Walmart was well on its way to reaching that goal. As early as 2000, Walmart’s international division, if considered as a separate entity, was large enough to have ranked 45th on the Fortune 500.4 Operations were profitable in Mexico, Canada, Puerto Rico, and the U.K. that year and analysts predicted that Walmart would be one of the few truly global retailers in the subsequent decade.5

Between 2000 and 2005, Walmart experienced tremendous growth (see Exhibit 1 for comparative financial statements). With almost $288 billion in sales, Walmart was the largest company in the world in 2005, a title that it had held for four years.6 Profits and sales increased each year and the company consistently met analyst expectations. By 2005, the company’s profits had topped $10 billion for the first time in its history.7 Walmart’s Supercenter strategy proved quite successful. Since 2000, Walmart had opened an average of 16 Supercenter stores every month and planned to open another 4,000 in the U.S. over the next 10 to 15 years (see Exhibit 2 for store counts).8 By 2005, Walmart was the nation’s largest grocer, controlling about 16% of the grocery market. Of the 31 grocery chains that filed for bankruptcy between 1998 and 2006, 27 cited their inability to compete with Walmart’s prices, which tended to be 15% lower than other grocers’.9