Interpreting a 10-K Tanya Burnside, Jyothsna Kodali, Ashley Pleasant, and James Totten Bellevue University MBA605-T201

TO BE INTERPRETED 0 Corporate Outlook of Wal-Mart (WMT) and Target (TGT) 0 10-K reports for Wal-Mart (WMT) and Target (TGT) 0 Financials for Wal-Mart (WMT) and Target (TGT) 0 Wal-Mart (WMT) and Target (TGT) business strategies/business models

CORPORATE OUTLOOK WALMART(WMT) Save Money. Live Better

CORPORATE OUTLOOK WALMART(WMT) 0 World’s largest retailer – 10,900 retail units in 27 countries. 0 Third largest publicly traded company 0 Three business segments: Wal-mart U.S., Wal-mart International and Sam’s Club 0 World’s largest private employer: 1.3 million U.S. associates million associates worldwide

CORPORATE OUTLOOK WALMART(WMT) revenues $469.2 billion with net sales of $466.1 billion. 0 Wal-Mart U.S. - 59% of net sales 0 Wal-Mart International - 29% of net sales 0 Sam’s Club - 12% of net sales 0 High revenues require strategic merchandising, nobody does it better

CORPORATE OUTLOOK WALMART(WMT) 0 Wal-Mart U.S. strategic merchandise units in Fiscal 2013:

CORPORATE OUTLOOK WALMART(WMT) 0 Competitors Include: 0 Target Corporation 0 Costco Wholesale Corporation 0 Kohl’s Corporation 0 Dollar General Corporation.

CORPORATE OUTLOOK WALMART(WMT)

0 Formats to meet customer needs and market demands: 0 Supercenters 0 Discount stores 0 Neighborhood Markets 0 walmart.com 0 “Everyday low prices” (EDLP) pricing philosophy 0 Programs: “Rollbacks”, “Save Even More/Ad Match”, “Store of the Community”, and “Clean, Fast, and Friendly” 0 Corporate slogan “Save money. Live better”

CORPORATE OUTLOOK FOR TARGET (TGT) Expect More. Pay Less. ®

CORPORATE OUTLOOK FOR TARGET (TGT) 0 Stores 0 1,788 stores in the United States 0 82 stores in Canada 0 37 distribution centers 0 361,000 team members worldwide 0 Guests 0 Median age of 40 0 Median household income of approximately $64,000 0 Approximately 43% have children at home 0 About 57% have completed college

CORPORATE OUTLOOK FOR TARGET (TGT) 0 Consolidated revenues were $73,301 million for net sales $71,960 million 0 Target stores in Canada just opened this fiscal year 0 Projected to have 124 open by EOY 2013

CORPORATE OUTLOOK FOR TARGET (TGT)

0 Competitors Include: 0 Best Buy 0 Costco 0 Macy's 0 Walgreens 0 Walmart

CORPORATE OUTLOOK FOR TARGET (TGT) StrengthsWeaknesses Designer brands and exclusivesLess store brand products than WMT REDCard debit and credit cardWages lower than some competitors Customer loyaltyPerceived as more expensive than WMT Nationwide presenceLess international presence than WMT OpportunitiesThreats Expansion into new markets (Canada)Failure to effectively execute plans for Canada expansion Increasing number of products and services (Exclusives, Brightspot, Ticket) Disruptions (third party providers, supply chain, computer systems) Improve competitive pricing perceptionMacroeconomic (Credit freezes, consumer confidence, effective tax rates) Increasing social media presence (Pinterest, Facebook, Apps) Failure to develop and maintain multichannel experience

CORPORATE OUTLOOK FOR TARGET (TGT) Expect More. Pay Less. ®

THE 10-K y= T7QR984CV72K8HUI23G5JV18&docFormat=HTM&formType=10-K HVR622FHI91HVP82G9RJG0EU8&docFormat=HTM&formType=10-K

Ratio Analysis Ratio Analysis is used for the assessment of firm’s financial condition.  Liquidity Ratio  Leverage Ratio ( Debt)  Profitability Ratio ( Performance)  Activity Ratio

Ratio Analysis *Based on financial statements for Jan 2013 Liquidity Ratio Company’s ability to turn assets in to cash.  Current Ratio = Current Assets / Current Liabilities  Acid Test Ratio = (Cash + Accounts Receivable + Marketable Security ) / Current Liabilities RatioWal-MartTarget Current Ratio Acid Test Ratio Leverage Ratio The degree on which company relies on borrowed funds in its operations. Debt to Equity Ratio = Total Liabilities / Owners Equity RatioWal-MartTarget Debt to Equity Ratio

Ratio Analysis Profitability Ratio (Performance) This ratio measures how effectively a firm’s manager uses resources to achieve profits.  Return on Sales= Net Income/Net Sales  Return on Equity= Net Income after Tax/Total Owner’s Equity Activity Ratio This ratio tells how effectively inventory is converted into sales.  Inventory Turnover Ratio=Cost of Goods Sold/Average Inventory RatioWal-MartTarget Return on Sales 3.65%4.09% Return on Equity 22.27%18.11% RatioWal-MartTarget Inventory Turnover Ratio

Ratio Analysis Gross Profit Ratio This ratio will mark up on inventory sold. Gross Profit Ratio= Gross Profit/Sales RatioWal-MartTarget Gross Profit Ratio24.38%30.38% Asset Turnover Ratio Asset Turnover Ratio= Sales/Company’s Average Total Assets RatioWal-MartTarget Asset Turnover Ratio

Ratio Analysis *Based on financial statements for October 3, 2013 Basic Earnings Per Share Price to Earnings Ratio (P/E) Price to Earning Ratio= current per share stock price/latest basic earnings per share RatioWal-MartTarget Price to earnings ratio RatioWal-MartTarget Basic Earnings Per Share

MONTLY STOCK PRICES =uhb2&fr=uh3_finance_vert&type=2button&s=WMT r=uh3_finance_vert&type=2button&s=TGT

Wal-Mart Strategy vs. Target Strategy

Wal-Mart Business Strategy

0 Low-price model 0 Sam Walton’s slogan “Everyday low prices” set Wal-Mart apart 0 Even though the product is marked down in price, sales growth causes Wal-Mart to be profitable

Wal-Mart Business Strategy 0 Selection of Vendors 0 Wal-Mart carefully chose the location of its distribution centers, resulting in faster replenishing time 0 Because of rapid sales growth, all of the vendors want to work with Wal-Mart 0 Allow Wal-Mart to receive major discounts on product

Wal-Mart Business Strategy 0 Technology 0 Advantage of technology before many retailers and used the UPCs to keep track of inventory 0 Use of UPCs improved communications between stores and vendors 0 Lowered inventory costs

Wal-Mart Business Strategy 0 Human Resource practices 0 Initially employees offered a portion of Wal-Mart’s profit 0 Recruitment from within the store 0 Employees received stock ownership plans

Target Business Strategy 0 Target’s strategy revolves around the choices the company was faced with 0 Focus on specialization or differentiation 0 Avoided focus on specialization of a single product, business would not continue to grow 0 Target chose differentiation strategy

Target Business Strategy 0 Affordable Chic Goods 0 Chic goods that the everyday worker could afford 0 Avoided marketing against Wal-Mart 0 Store cleanliness, shorter wait times in lines, and shopping environment

Target Business Strategy 0 Design and Advertising 0 To compete with Wal-Mart’s low price strategy, Target focused on quality of product and style 0 Target spends 2.3 percent of revenue on advertising as oppose to Wal-Mart’s.3 percent 0 All advertising is centered around Target’s stylish trends instead of low prices 0 Bull’s Eye became a trend for pop culture 0 Target offered designer brands 0 Fostered partnerships with Cherokee, Merona, etc 0 This image led Target to be perceived as the store for more affluent customers with upscale style

What are your 10K questions?

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