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Wal-Mart Stores' Discount Operations

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191 views5 pages

Wal-Mart Stores' Discount Operations

Uploaded by

gaurav sahu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Wal-Mart Stores' Discount Operations

Harvard Business School Case #387-018


Case Software #XLS-163

Copyright © 2011 President and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic,
mechanical, photocopying, recording or otherwise—without the permission of Harvard Business
School.
Exhibit 1 Corporate History ($ in millions)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985
Operating Flows
Net sales $479 $678 $900 $1,248 $1,643 $2,445 $3,376 $4,667 $6,401 $8,451
License fees and other income 5 8 10 10 12 18 22 36 52 55
Cost of goods sold 353 504 661 919 1,208 1,787 2,458 3,418 4,722 6,361
Operating, selling, general and 95 135 182 252 332 495 677 893 1,181 1,485
administrative expenses
Interest cost 5 7 10 13 17 31 39 35 48 57
Taxes 15 20 27 33 44 66 100 161 231 276
Net income 16 21 29 41 56 83 124 196 271 327
Balances
Current assets 99 151 192 267 345 589 721 1,006 1,303 1,784
Property, plant, equipment, and capital 68 101 131 191 246 333 458 628 870 1,303
leases
Current liabilities 43 75 99 170 178 340 347 503 689 993
Long-term debt 19 21 26 25 30 105 106 41 41 181
Long-term obligations under capital 41 59 72 97 135 154 223 340 450 595
leases
Common shareholders' equity $64 $96 $127 $165 $248 $324 $488 $738 $985 $1,278
No. of Stores at End of Period
Discount stores 153 195 229 275 330 491 551 642 745 859
Sam's Wholesale Clubs 0 0 0 0 0 0 0 3 11 23

Source: Annual reports.


Note: Numbers may not add due to rounding, deferred income taxes, etc.
Exhibit 2 Financial Performance of Selected Discounters, 1974–1984 (%)

Return on Equity Sales Growth Earnings-per-Share Growth


Dayton-Hudson 20.6% 17.0% 18.8%
Heck's 14.1 11.7 NMa
K mart 15.9 14.3 13.9
Rose's Stores 14.1 11.2 22.5
Wal-Mart 33.0 40.3 38.8
Zayre 13.1% 11.5% 21.2%

Source: Forbes.
a
NM indicates not meaningful.
Exhibit 3 The Industrywide Economics of Discounting in 1984
(% of net sales)

Net sales 100.0%


License fees and other income 1.1
Cost of goods sold 71.9
Payroll expense 11.2
Advertising expense 2.3
Rental expense 2.2
Miscellaneous expense 7.6
Operating income 5.9
Net income 2.7%

Source: Operating Results of Self-Service Discount Department Stores


(National Mass Retailing Institute, August 1985).
Exhibit 4 Geographic Distribution of Wal-Mart's Discount Stores at Year-End, 1976–1985

% of Total
Discount Stores
State 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 (1985)
Alabama 0 0 0 1 9 37 40 42 47 51 23%
Arkansas 47 50 54 57 64 69 70 71 70 71 45
Colorado 0 0 0 0 0 0 0 0 0 2 2
Florida 0 0 0 0 0 0 1 8 23 37 9
Georgia 0 0 0 0 0 6 7 16 28 39 17
Illinois 0 6 11 16 20 24 30 33 37 47 12
Indiana 0 0 0 0 0 0 0 1 2 6 2
Iowa 0 0 0 0 0 0 0 2 6 13 8
Kansas 7 8 9 10 16 19 20 24 28 31 21
Kentucky 2 2 3 4 7 28 28 35 40 43 22
Louisiana 4 6 6 7 12 20 26 43 44 49 22
Mississippi 7 12 13 18 20 25 27 28 28 34 27
Missouri 44 57 61 64 71 76 78 79 82 90 40
Nebraska 0 0 0 0 0 0 1 1 4 8 9
New Mexico 0 0 0 0 0 0 0 1 2 11 17
North Carolina 0 0 0 0 0 0 0 1 1 1 0
Oklahoma 29 34 42 46 48 56 59 66 69 71 36
South Carolina 0 0 0 0 0 18 18 18 23 25 19
Tennessee 7 10 10 17 18 54 56 59 67 67 30
Texas 6 10 20 36 45 59 90 114 143 160 27
Virginia 0 0 0 0 0 0 0 0 1 1 1
Wisconsin 0 0 0 0 0 0 0 0 0 2 2
Total 153 195 229 276 330 491 551 642 745 859 18%

Source: Annual reports.

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