Wal-Mart's Performance in the Context of the American Economy – Statistics Project Example
Wal-Mart has grown over the years to be the world’s biggest company in terms of sales and revenue. This growth however has been mostly centered in the American markets. Thus we can say that fate of Wal-Mart is usually tied to the performance of American Economy. The performance of Wal-Mart over the years has not been far from impeccable. The company has used its excellent management systems along with its superb human resources to build a competitive advantage, which is still for the most part unchallenged. The credit crunch in the American economy however has played a very a very negative role for the American economy. The effected part was indeed the financial sector itself. Some of the world’s largest financial institutions were totally destroyed. The banking and financial institutions such as AIG and Lehman brothers were totally destroyed by this financial crisis. The effects on the Detroit car industry were even worse. Falling demand and unavailability of credit reduced sales and forced bankruptcies and closures. The focus therefore automatically shifted to Wal-Mart. The industry gurus had their close eye on performance of Wal-Mart. The company was being scrutinized for its performance in wake of the financial recession. In this lies the importance of the financial statements of the year 2009.
In the year under question the revenues showed a considerable increase. The net revenue showed an almost 7% percent increase and increased to $255.7 billion. The increase of revenue is meaningless until the profits also show an increase. This is because revenues are sometimes increased due to inflation factors. The operating income for Wal-Mart however also showed a considerable increase. The amount showed a 7.1%, by increasing to an incredible 18.8 billion dollars. This increase in revenue and operating income has also been due to better customer services by Wal-Mart. The company currently owns almost 3600 hundred stores in more than 50 different states of America. The company announced that it would add another 700 stores to this already formidable distribution chain. This would increase the amount of stores to almost four thousand. This is because the total amount of seven hundred also includes a few remodels.
Another important factor in Wal-Mart performance for the year of 2009 was the consistent performance shown by the business. A very good judge of consistent performance is analyzing the US segment sales of the business. The segment sales increase by a staggering 9.1% percent in the year 2009. Thus crossing the 90 billion dollar barrier and resulting in total segment sales of 98 billion dollars for the year fiscal 2009. The operating income also showed a very positive trend. The segment operating income increased almost five percent to result in segment operating income of five billion dollars. According to Wal-Mart management committee the results were greatly undermined by negative currency valuation due to a depreciating dollar. During the year currency fluctuations has an almost 2.3 billion dollar impact on the company’s total revenues. The company showed resilience against all odds during the recession environment, and even showed a steady growth in its US segment.
There was a considerable increase in the diluted income per share for the company. The increase can be attributed to two different factors. The increase in operating income had a direct impact on increase the diluted earnings per share value. The company undertook share repurchases in the year 2008 and 2009 which had an impact on reducing increase the value as well. Thus the value of diluted income per share rose from $3.16 in the year 2008 to 3.35 for the year 2009. Another important metric of analyzing a company’s performance is ROI (Return on Investment). It helps in analyzing the efficiency of a shareholder’s investment, therefore also judging the success of a business. Thus it plays an important decision metric for new investors. The company undertook investments in Chile during the year 2009 which have yet to start giving a return. Due to this capital expenditure the Return on Investment for the year 2009 was lower as compared to 2008. The value decreased from 19.6% (2008) to 19.3% for the year 2009. The payment regarding the class action lawsuit against the company also resulted in this reduction of ROI.
The company has an effective tax rate of 34 % for the year 2009. Another metric for measuring the performance of any company is Cash flows. In the credit crunch economy, the biggest problem being faced by most businesses is a lack of cash or negative cash flows. Therefore to manage and maintain cash flows was one of the most important metric of performance for Wal-Mart. The company had reported a Cash flow of $5 billion dollars in the year 2008. This was only a 200 million increase to the previous year 2007. However Wal-Mart has shows an almost hundred percent increase in Free Cash Flows for the year 2009. The cash flows have increase $11 billion dollars for the year 2009.
The financial statements of Wal-Mart are comprehensive and very well formatted. The company through these statements does not only fulfil regulation requirement of SEC but also markets itself to potential investors. The performance of the business for the year 2009 has been excellent as compared to other American companies which have been suffering with cash flow problems. The positive cash flows of Wal-Mart however still ensure that it is by far the leading retail chain in the world.