79 in 2003 to 7.27% in 2009. In addition, Revenue Per Employee increased from $176,089 in 2003 to $192,618 in 2009. Wal-Mart has defined a series of internal strategies that allow them to capitalize on asset efficiencies and coordinate them to increase profits over the long-term. An example of this type of strategy is the reliance on continual supplier relationship management significantly improving the company's asset turnover from 10.38 in 2003 to 11.61 in 2009. Wal-Mart also relies on an intensive knowledge and information sharing network that includes pricing and sales uploads every night from each of their stores via satellite link. This data is then analyzed in the Bentonville, Arkansas headquarters and used for managing inventories, pricing, and suppliers more effectively than their competitors. This is also the factor leading to the company's higher inventory turns and more efficient use of assets as well.
Assessing the Price/Earnings Ratio
In the latest fiscal period Wal-Mart reported a P/E Ratio of 15.92 compared to Target's 16.2 and Costco at 23.74. Wal-Mart's P/E Ratio is correlating to its revenue growth. The P/E Ratio has slide significantly over the last nine years as has revenue growth. Despite this relatively slow growth however of the P/E Ratio, the investments in supplier management and the continual focus on price reductions in their operations, and the automation of their warehousing and distribution centers have all contributed to the company staying profitable despite a challenging economic environment.
Appendix A: Wal-Mart Stores Ratio Analysis (2003- 2009)
Profitability Ratios
1/31/2009
1/31/2008
1/31/2007
1/31/2006
1/31/2005
1/31/2004
1/31/2003
ROA % (Net)
8.17
8.09
7.8
8.69
9.1
9.07
9.03
ROE % (Net)
20.58
20.18
19.67
21.9
22.01
21.83
21.6
ROI % (Operating)
20.98
20.96
21.29
21.44
22.58
22.29
22.42
EBITDA Margin %
7.27
7.47
7.46
7.36
7.46
7.3
6.79
Calculated Tax Rate %
34.19
34.2
33.56
33.43
34.7
36.06
35.28
Revenue per Employee
192,618
180,380
183,500
175,363
168,942
172,454
176,089
Liquidity Indicators
Quick Ratio
0.2
0.16
0.2
0.19
0.17
0.17
0.15
Current Ratio
0.88
0.81
0.9
0.9
0.9
0.92
0.93
Net Current Assets % TA
-3.94
-6.65
-3.42
-3.62
-3.66
-2.86
-2.25
Debt Management
LT Debt to Equity
0.53
0.52
0.5
0.57
0.48
0.46
0.5
Total Debt to Equity
0.65
0.69
0.63
0.73
0.64
0.61
0.65
Interest Coverage
12
12.23
13.41
15.81
17.33
18.06
14.75
Asset Management
Total Asset Turnover
2.47
2.41
2.41
2.44
2.55…
Sample Source(s) Used
References
Chiou, L. "Empirical Analysis of Competition between Wal-Mart and Other Retail Channels." Journal of Economics & Management Strategy 18.2 (2009): 285.
Mya Frazier. "Marketing in Bentonville: Now it's serious. " Advertising Age 13 Feb. 2006: 34
Mottner, S., and S. Smith. "Wal-Mart: Supplier performance and market power " Journal of Business Research 62.5 (2009): 535.
Sodhi, M., and B. Son. "Supply-chain partnership performance. " Transportation Research. Part E, Logistics & Transportation Review 45.6 (2009): 937.
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