Hi, ******************* MBA Discussion question: For WALMART Company: What is the most important financial data you intend to evaluate and interpret? What is that data telling you about the current...

Running Head: CAPSTONE PROJECT PART II: FINANCIAL ANALYSIS - WALMART 1
Capstone Project Part II: Walmart Financial Analysis
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CAPSTONE PROJECT PART II: FINANCIAL ANALYSIS - WALMART 2
Executive Summary
Walmart is the world number one retailer in terms of sales and holds the top seventeenth
position in the global retail market. Acquisition of Jet in September 2016 has provided a better
foothold into the e-commerce industry. This report will provide the primary information about
the current financial performance and position of Walmart and the future strategy. The report
will provide information about the cost, benefit and investment strategy for the proposed new
future strategy for boosting the performance and position of Walmart.
Financial Overview
We will evaluate the five-key metrics for measuring the financial strength and weakness
of Walmart. Walmart is a retail giant and has to pay attention to the current financial
performance and position before making any strategic decisions. The five key evaluation metrics
are growth rate, profitability ratio, solvency ratio, Inventory turnover ratio and cash-flow
analysis. Comparing Walmart with the competitors Target and Costco will indicate our position
in the industry and the area of improvement.
Growth Rate - Revenue and Net income:
There is stiff competition prevailing in the entire retail industry. The advent of e-
commerce has made the market highly competitive and fragmented. Walmart’s revenue growth
is fluctuating over the last three years. Walmart achieved higher growth rate during 2015
(1.96%) when compared to 2016 and 2017. Our performance during 2016 was weak when
compared to 2015. The revenue growth rate of Costco is considerably higher at 2.17% for 2017
when compared to 0.78% of Walmart and -5.81% of Target (Figure 1) (Morningstar, 2017).
There is negative growth rate in the net income of our company which is similar to the
trend of our competitor Target. Our profit generating ability is better than Target. Costco was a
CAPSTONE PROJECT PART II: FINANCIAL ANALYSIS - WALMART 3
new addition to this negative net income growth trend during 2017. We are facing more
fluctuating growth rate in the revenue and net income similar to the other players in the industry.
The entire retail industry is facing a tough time.
Profitability Ratio - Gross Margin, Operating Margin and Net Margin:
Gross profit margin of Walmart is stabilized around 25%, and we focus on maintaining
the same level in the future. Walmart is holding 17th rank in the world of retailing, and the e-
commerce platform shares the first places. Walmart holds world’s number one position regarding
sales as per Forbes with $485.25 billion sales (Forbes, 2017). The operating margin of the
company is continuously decreasing which is inverse to our competitor's trend.
Target and Costco have improving operating margin, and Target has higher gross profit
margin than Walmart (Figure 2). The net profit margin follows the same trend of operating profit
margin for Walmart. Target’s profit margin has improved over the period. Walmart is holding
the 19th position regarding profitability in the world retail market and 11th position in the US
retail market. It indicates that we are incurring a higher cost for business operations than the
other retail companies in the world resulting in a lower position in terms of profitability.
Solvency:
Walmart has a significant proportion of debt in the capital structure; therefore, it is
essential to pay more attention towards the solvency ratio. Walmart is maintaining a stable debt
to equity ratio over the period to maintain the level of times interest ratio (Figure 3). The...