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Interpreting a 10-K

Interpreting a 10-K. Tanya Burnside, Jyothsna Kodali , Ashley Pleasant, and James Totten Bellevue University MBA605-T201. TO BE INTERPRETED. Corporate Outlook of Wal-Mart (WMT) and Target (TGT) 10-K reports for Wal-Mart (WMT) and Target (TGT)

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Interpreting a 10-K

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  1. Interpreting a 10-K Tanya Burnside, JyothsnaKodali, Ashley Pleasant, and James Totten Bellevue University MBA605-T201

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

  3. CORPORATE OUTLOOK WALMART(WMT) Save Money. Live Better

  4. CORPORATE OUTLOOK WALMART(WMT) • World’s largest retailer – 10,900 retail units in 27 countries. • Third largest publicly traded company • Three business segments: Wal-mart U.S., Wal-mart International and Sam’s Club • World’s largest private employer: 1.3 million U.S. associates - 2.2 million associates worldwide

  5. CORPORATE OUTLOOK WALMART(WMT) • 2013 revenues $469.2 billion with net sales of $466.1 billion. • Wal-Mart U.S. - 59% of net sales • Wal-Mart International - 29% of net sales • Sam’s Club - 12% of net sales • High revenues require strategic merchandising, nobody does it better

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

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

  8. CORPORATE OUTLOOK WALMART(WMT)

  9. CORPORATE OUTLOOK WALMART(WMT) • Formats to meet customer needs and market demands: • Supercenters • Discount stores • Neighborhood Markets • walmart.com • “Everyday low prices” (EDLP) pricing philosophy • Programs: “Rollbacks”, “Save Even More/Ad Match”, “Store of the Community”, and “Clean, Fast, and Friendly” • Corporate slogan “Save money. Live better” http://stock.walmart.com/microsites/annual-report-2013/ceoLetter.aspx

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

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

  12. CORPORATE OUTLOOK FOR TARGET (TGT) • Consolidated revenues were $73,301 million for 2012 • 2012 net sales $71,960 million • Target stores in Canada just opened this fiscal year • Projected to have 124 open by EOY 2013

  13. CORPORATE OUTLOOK FOR TARGET (TGT)

  14. CORPORATE OUTLOOK FOR TARGET (TGT) • Competitors Include: • Best Buy • Costco • Macy's • Walgreens • Walmart

  15. CORPORATE OUTLOOK FOR TARGET (TGT)

  16. CORPORATE OUTLOOK FOR TARGET (TGT) • Expect More. Pay Less.® • http://www.youtube.com/watch?v=vC2yFblskcc

  17. THE 10-K http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000010416913000011-29T7QR984CV72K8HUI23G5JV18&docFormat=HTM&formType=10-K http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000104746913003100-3HVR622FHI91HVP82G9RJG0EU8&docFormat=HTM&formType=10-K

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

  19. 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 Leverage Ratio The degree on which company relies on borrowed funds in its operations. • Debt to Equity Ratio = Total Liabilities / Owners Equity

  20. 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

  21. Ratio Analysis Gross Profit Ratio This ratio will mark up on inventory sold. Gross Profit Ratio= Gross Profit/Sales Asset Turnover Ratio Asset Turnover Ratio= Sales/Company’s Average Total Assets

  22. 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

  23. MONTLY STOCK PRICES http://finance.yahoo.com/q;_ylt=AoWSH2Q64tqxug2kBT4E4JwgBrgF?uhb=uhb2&fr=uh3_finance_vert&type=2button&s=WMT http://finance.yahoo.com/q;_ylt=AoWSH2Q64tqxug2kBT4E4Jwnv7gF?uhb=uhb2&fr=uh3_finance_vert&type=2button&s=TGT

  24. Wal-Mart Strategy vs. Target Strategy

  25. Wal-Mart Business Strategy

  26. Wal-Mart Business Strategy

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

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

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

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

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

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

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

  34. What are your 10K questions?

  35. REFERENCES Barwise, P., & Meehan, S. (2004). Bullseye: Target's cheap chic strategy. Retrieved from http://hbswk.hbs.edu/archive/4319.html Brea-Solis, H., Casadesus-Masanell, R., & Grifel-Tatje, E. (2012). Business model evaluation: QuatifyingWal-mart's sources of advantage. Retrieved from http://www.hbs.edu/faculty/Publication Files/13-039 Nov 2012_612ce7e2-7f81-4eea-9126- 3c0964f2be2f.pdf Costco's Profit Soars to $459 Million as Low-Wage Competitors Struggle. (2013, May 31). Huffington Post. Retrieved http://www.huffingtonpost.com/2013/05/30/costco-profits_n_3359033.html?utm_hp_ref=business Fridson, M., & Alvarez, F. (2002). Credit analysis, Equity analysis. In Financial statement analysis: A practitioner's guide. New York: John Wiley & Sons. (pp. 267-325) Mission: Walmart 2013 Annual Report. (2013). Retrieved from http://az204679.vo.msecnd.net/media/documents/2013-annual-report-for-walmart-stores- inc_130221024708579502.pdfSolutions.Next step: Your stocks annual report 10-K. (2013). Retrieved from http://www.stockhomework101.com/220.htm Nickels, W., McHugh, J., & McHugh, S. (2013). Understanding business. Boston: McGraw-Hill Learning One Our Story. (2013). Retrieved from http://corporate.walmart.com/our-story/ Say hello to brightspot, Target’s new mobile service. (2013, October 7). Retrieved https://corporate.target.com/discover/article/say-hello-to-Brightspot-Target-s-new-mobile-servic Strauss, M. (2013, April 5). Target Canada prices 0.2 per cent higher than Wal-Mart's: Survey. The Globe and Mail. Retrieved http://www.theglobeandmail.com/report-on-business/target-canada-prices-02-per-cent-higher-than-wal-marts-survey/article10823259/ Target: 2012 annual report. (2013). Retrieved from https://corporate.target.com/_media/TargetCorp/annualreports/content/download/pdf/Annual-Report.pdf?ext=.pdfTarget. Target. (2013, March 20). SEC filings. Retrieved http://investors.target.com/phoenix.zhtml?c=65828&p=irol-sec&secCat01.28_rs=31&secCat01.28_rc=10&control_selectgroup=0&x=51,42,38,11,47,41,28&y=7,12,10,10, 10,10,6 Target introduces target ticket, a family-friendly digital video service. (2013, September 25). Retrieved http://pressroom.target.com/news/target-introduces-target-ticket-a-family-friendly-digital-video-service Behind the bullseye: Gregg Steinhafel talks Target's approach to corporate responsibility. (2013, June 24). [Video file] Retrieved http://www.youtube.com/watch?v=vC2yFblskcc Target Salaries. (2013). Retrieved http://www.glassdoor.com/Salary/Target-Salaries-E194.htm

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