Retail Business Organization. Financial Performance and Valuation of “Walmart” in the USA

TABLE OF CONTENTS

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

LIST OF EQUATION

ABSTRACT

SECTION-A: INTRODUCTION

SECTION-B: THEORETICAL FRAMEWORK
Overview of Retailing
Retailing in the World vs. USA
Walmart Analysis: Critics and Praise

SECTION-C: PRESENTATION OF WALMART
Brief History
Corporate Profile
Business Dynamics and Financial Trends

SECTION-D: WALMART MARKET ANALYSIS
Performance Metrics
Competitive Circumstances
Major Competitors Profile
Competitive Advantage
SWOT Analysis of Walmart
Micro Level analysis (Porter´s five forces Model)
Threat of substitute products and services
Threat of new entrants
Competitive rivalry within the industry
Bargaining power of customers
Bargaining power of suppliers
Market Risk
Currency Risk
Strategy and Competitive Forces

SECTION- E: HISTORICAL FINANCIAL DATA AND FREE CASH FLOW FORECASTS
Financials
Key Ratios
Free Cash Flow Forecasts
Persistence and Sustainability of Historical Financial Data

SECTION-F: WALMART VALUATION AND COMPARISON
Conceptual Approach to Valuation
Perpetual Growth Rate
Weighted Average Cost of Capital (WACC)
Calculating Cost of Equity, Ke
Calculating Cost of Debt, Kd
Calculating Weighted Average Cost of Capital (WACC)
Terminal Value
Fundamental Value
Market Value (MV)
Market Capitalization
Enterprise Value (EV)
Comparison

SECTION-G: ANALYSIS, RECOMMENDATION AND CONCLUSION
Fundamental Analysis and Recommendation
Concluding Remarks

REFERENCES

APPENDIX

Appendix 1: Retail business in the World vs. USA

Appendix 2: FCF Forecast and Valuation of Walmart from 2016-2046

LIST OF FIGURES

1. Fundamental analysis of capital market orientation

2. Organizational Framework of Walmart Financial Analysis

3. Different segments of Walmart

5. Type of currency risk

6. Walmart revenue flow for different years

7. Walmart operating and net income for different years

8. Walmart gross margin and operating margin of different years

9. Walmart historical earnings per share and dividend per share

10. Walmart historical free cash flow

11. Walmart FCF per share, FCF percentage of sales and net income

12. Walmart forecasted free cash flow from 2017 to 2026

13. Input source of cost of equity and cost of debt

14. Walmart historical dividend yield

LIST OF TABLES

1. UK retail sector in 2014

2. Wholesale and retail sector in the UK, 2014

3. Retail Industry volume insider and institutional holdings at % of total share outstanding

4. Top 10 retailers worldwide, 2012

5. E-commerce activity among the top 250, 2012

6. Product Sector Profile and Level of globalization by product sector, 2012

7. The USA retail industry's direct and total national impact, 2009

8. Walmart debt ratings by different rating agency

9. Walmart different segments’ sales revenue

10. Walmart’s net income proposition

11. Comparison with fundamental ratios for 2 years

12. Annual rates of change (per share)

13. Earnings per share and dividend paid

14. Walmart financial performance

15. Walmart financial performance and industry and sector wise comparison

16. Walmart Profitability

17. Current valuation

18. Comparison of the top 4 retailers in the world in 2015

19. Competitive rivalry within the industry

20. Walmart competitors

21. Walmart growth and comparison with major competitors

22. Walmart SWOT analysis

23. Walmart strategic direction

24. Historical FCF from 2006 to 2016

25. Forecasted FCF from 2017 to 2026

26. Wal-Mart Month Covered Call Option Return Model

27. Pro Forma Financial Performance

28. Walmart tax rate for 5 consecutive years

29. Walmart historical WACC

30. Walmart terminal value and important value calculation

31. Walmart terminal value calculation

32. Walmart terminal value and fundamental value for different estimated years

33. Comparison of Historical Enterprise Value

34. Walmart peer group in food & staples retailing

35. Most recent ratings changes of Walmart

36. Walmart Multiple Valuation Model

37. Related retail business recommendation

38. Investment decision for Walmart and its major competitors

LIST OF EQUATION

1. Price vs. Value calculation

2. Calculation of free cash flow

3. Value calculation

4. Compound annual growth rate calculation

5. Beta calculation

6. Cost of equity calculation

7. Cost of debt calculation

8. Calculation of effective tax rate

9. Terminal value calculation fro Walmart

10. Fundamental value calculation for Walmart

11. Market value calculation

Financial Analysis of Retail Business Organization: A case of Wal-Mart Stores, Inc.

ABSTRACT

Wal-Mart Stores, Inc., the world’s largest retail company, has been operating its business under critical situation by being matured for some market segments which is concentrating on the earning stagnation by changing sentiment towards stalwart in the coming days. The main objective of this study is to present the ins and outs of retail business in the world especially in the United States of America (USA) and present Walmart’s financial performance making the important valuation of the company as well as showing competitive circumstances which is essential in the eye of the financial market analyst, investors and customers. The finding of this detailed descriptive study with sufficient financial analysis and comparative variables is that Walmart is the lucrative choice for the past, present and future investors with the estimation of terminal value at the end of the fiscal year 2026 estimated US $580 billion and the fundamental value of US $735 billion. The assumption is made on in-depth financial analysis with reliable data and calculation. The result of this study shows that due to the emergence of stronger competitors and for being matured, Walmart is not performing as expected by investors but its gigantic market size and capital will make it capable of doing business profitably over a longer period of time. The ultimate decision given in this study for the investors is to buy. This study gives the future researcher a basis on doing further theoretical and empirical research basis on this industry leading company.

Key Words: Walmart, Financial Analysis, Retail Industry, Market Analysis, Valuation

RESUMEN

Wal-Mart Stores, Inc., la mayor empresa minorista del mundo, ha estado operando su negocio bajo situación crítica en algunos segmentos del mercado. El objetivo principal de este estudio es presentar los comercio al por menor en el mundo, especialmente en los Estados Unidos de América y el rendimiento financiero actual de Walmart, así como hacer la valoración importante de la empresa, que para los analistas del mercado financiero, inversores y clientes. El hallazgo de este estudio descriptivo detallado con análisis financiero y las variables comparativas, muestra que Walmart es la opción lucrativa del pasado. La estimación del valor terminal del año 2026 para Walmart, estima un valor de US $580 millones y el valor fundamental de US $735 millones. Se hace la suposición de análisis financiero en profundidad con datos fiables y cálculo. Este estudio muestra que, debido a la aparición de competidores más fuertes y por ser madurado, Walmart no está funcionando como se esperaba por los inversores, pero su tamaño de mercado y el capital harán que sea capaz de hacer negocios de manera rentable en un período de tiempo más largo. La decisión última propuesta en este estudio para los inversores es comprar. Este estudio proporciona el futuro investigador una base sobre la que hace aún más base de investigación teórica y empírica de esta empresa líder en la industria.

Palabras Clave: Walmart, análisis financiero, la industria al por menor, análisis de mercado, valoración

SECTION-A: INTRODUCTION

Retail business is one of the prominent sectors worldwide. Privately owned multi-store retail chain in the USA can publicly trade on the stock exchange although about 90% of USA retail store are single-store but they account for less than half of all retail sales. It is the USA 2nd largest sector contributing about 12% of employment, US $3.8 trillion and US $4.2 trillion including foods in sales (Marcilla, 2014). Retail trade ranked second out of the seven industries studied on the preparedness index. This index provides an overall benchmark of how Australian industries compare, based on their rates of digital adoption and relative preparedness for the future (Optus, 2013). The retail sector spends by consumers in shop and online that consumers in UK spent around US $605 billion in 2014 where the wholesale sector involves those businesses that supply shops. Retail sector in recent year is in pressure because of the evolution and growth of supermarkets, online retailing and recession. The data provided for retail sector for UK in 2014 found output US $144 billion (5.6%), employment 2,789,000 (10%), business 300000 (5.7%) where for Wholesale sector it is found that the wholesale output was US $94 billion (3.7%), employment 1,123,000 (4%), business 300000 (2.5%) (Rhodes, 2015). In 2015, e-commerce sales were US $341.7 billion, a 14.6% increase from 2014 where total retail sales increased 1.4% which was 7.3% of total retail sales. USA retail e-commerce sales for 4th quarter of 2015 calculated was US $107.1 billion, a 32.2% increase from 3rd quarter of 2015 that is 14.5% increase from 4th quarter of 2014 while total increase of sales increased 1.6%. E-commerce sales accounted for 8.6% of total sales in the 4th quarter of 2015 (U.S. Department of Commerce, 2016). Multichannel retailers dominate today’s retail landscape. These multiple channels operations enjoy both benefits and face many challenges (Zhang et al., 2010). The ever growing sector needs frequent analysis, hence there are numerous researches done based on the retail business. Realizing the need of analyzing retail business, the researcher takes into account the world’s largest retail business, Walmart Stores, Inc.

This study attempts to present Walmart in depth especially showing the financial data analysis and future growth prospects and possible forecasts. The objective of this study is to present the fundamental analysis in industry level and company level showing in depth the financial condition of Wal-Mart Stores, Inc. and give an overview for the retail market for sustainability and consistency for growth (market efficiency). Again, this study aims at helping enhance financial concerns’ (investors, competitors, and market analyst) understanding about the company. There is also shown the SWOT analysis and at the end, given recommendation for future expansion strategy for Walmart and purchasing decision for investors.

The study has a contribution in the related sector, retail firms, Walmart itself, and other stakeholders by providing important past financial performance, and future forecasts. The valuation is essentially important for financial investors as well as the retail sector analyst. The overall research is a source for conducting future study in the related field for financial analysts and other business researchers.

The financial performance of a retail company should be analyzed in light of how its segment and competitors fared and the analysis should be based on both qualitative (business strategy such as concept and format, target market, real estate, merchandising and store presentation, technology, management expertise) defining where the company stands and quantitative (The income statement: sales, gross profit margin, operating profit margin, net income and net profit margin; The statement of cash flows; The balance sheet: liquidity, inventory trends, other items) getting down to basics-that may vary from company to company and from segment to segment. The company’s future prospects should be assessed with the outlook for the segment, retail industry, and the economy (Souers, 2011, March 24).

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This is a descriptive study based solely on secondary data. These data are based on the company website, annual reports of different years, different financial websites, journal articles, newspapers, and book chapters. These were both quantitative and qualitative data used to prepare the whole report. This report is based on two analyses (Financial & Fundamental) as follows:

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Figure 1: Fundamental analysis of capital market orientation

This report is based on some scholar in the field of financial investment approach and theory. British born American economist and professional Benjamin Graham (1894-1976) considered as the father of “value investing”, who taught an investment approach at Columbia Business School in 1928 and wrote a book published in 1949, The “Intelligent Investor” ("Benjamin Graham", 2016, April 5) influenced Warren Edward Buffett (1930 - ), an American business magnate and the world’s most successful investor to enroll in that University (Biography.com Editors, n.d.). This analysis includes price which reflects objective measure as well value reflects subjective measure hence,

Equation 1: Price vs. Value calculation

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Thus, price (P) is the representation of value (V) advocated by American Nobel laureate in Economics (2013), Eugene Fama (1939 - ) who is referred to as the father of modern finance ("Vita--Eugene F. Fama", 2015, May). It is the division of expectation or expected value, the weighted average value of a random variable by the average weight.

The report is fragmented into several sections which are also divided in some sub-sections. The remaining section of this study is to present earlier theoretical approach in the field of retail. The main part of the report is based on Walmart business Presentation where history, corporate profile and market dynamics are described. Then the market of Walmart is analyzed based on the competitive forces, SWOT analysis, Strategy, market risk and more. The remaining parts are based on presentation of historical financial data and free cash flow forecast, then valuation is made showing WACC, market value, and fundamental value of Walmart and finally, fundamental analysis, recommendation and conclusion are given. These sections essentially focus on topics of Efficient Market Hypothesis, Basics of Consolidated Accounts, Key Ratios, Valuation & Cost of Capital Basics, Value Drivers, Analysis. The valuation using financial Analysis would reflect as the chart below:

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Figure 2: Organizational Framework of Walmart Financial Analysis

Source: Peterson Drake & Fabozzi (2012)

SECTION-B: THEORETICAL FRAMEWORK

Overview of Retailing

Firstly, assuming the necessity of defining the sector, retail sector is defined. It is the economic sector that consists of the individual and companies involved in selling finished goods to the end consumers (Marcilla, 2014). The retail sector can be divided into two term specialized and non-specialized where non-specialized stores sell a variety of products such an supermarkets, department stores or convenience shops. In 2013, non-specialized retail sector accounted for 20% of retail business in UK, 51% of retail turnover and 47% of employment (Rhodes, 2015, October 2). Data on the retail sector can also be analyzed in terms of the wholesale and retail industries.

Table 1: UK retail sector in 2014

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Source: Rhodes (2015)

The table below shows economic output (Gross Value Added), employment and the number of businesses in the wholesale and retail sector.

Table 2: Wholesale and retail sector in the UK, 2014

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Source: Rhodes (2015, October 2)

The retail industry possesses high competition, wide range of businesses, logistical and execution risks which is affected by macroeconomic factors like unemployment and consumer spending. There are some global retail key industry characteristics that include high standard of execution, high fixed cost, multiple growth models, and markets are to be local or regional in nature, seasonality and fashion risk, influenced by consumer spending, unemployment, and mass traffic (Taylor, Chambers & Smith, 2011, June 30). Retail business models innovations are best viewed as the changes in design components of (i) the way in which the activities are organized, (ii) the type of activities that are executed, and (iii) the level of participation of the actors engaged in performing those activities. There are six major ways to achieve business innovation that enhance value creation and appropriation including (i) Operational efficiency, (ii) Operational effectiveness (iii) Customer lock-in [Value appropriation] (iv) Customer efficiency (v) Customer effectiveness (vi) Customer engagement [Value creation] (Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011). There are six perspectives in retail innovation: (i) reducing effort for customers, (ii) consumers as innovation drivers, (iii) business model innovation, (iv) brand development – own brands as innovation drivers, (v) education, training and skills, and (vi) emerging technology systems (European Commission, 2014). There are significant changes in the field of recent retailing sector that help retailers, service providers, and manufacturers improve their practices and processes in a number of areas, such as setting and optimizing prices, promotion management, launching new products, assortment planning, category management, inventory planning and control, brand management, services marketing, loyalty management, channels and supply chain management, coordinating franchises, and integrating bricks and clicks environments (Grewal & Levy, 2007). Effective retailing in the culturally rich and highly successful retail environment (American Girl Place) contexts is an intensely ideological affair. The centrality of retail place in ideological branding experience acts as a link between cultural concept and strong retail brand ideology (Borghini et al., 2009)

“Tough economic times and emerging technologies are prompting consumers to change their buying behaviour, and smart retailers are responding with innovative in-store offerings” (Cho & Trincia, 2012, p. 47).

Retailing in the World vs. USA

Result of a statistic of top 250 retailers in the world done by Deloitte (2014) in 2012 shows that the aggregate retail revenue of top 250 companies were US $4.29 trillion and average revenue was US $17.15 billion; minimum revenue US $3.80 billion required to be among 250; composite revenue growth 4.9% and from 2007 to 2012 composite CAGR in revenue 4.6%; composite net profit margin 3.1%, return on assets 5.0%, revenue from foreign operations 24.3%, average number of countries where retailers operated 10.0 and 63.2% with foreign operations. Some of the statistics for the world and USA are as follows:

Table 3: Retail Industry volume insider and institutional holdings at % of total share outstanding

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Source: Aswath Damodaran (2016, January 5)

For more information regarding world and USA retailing see Appendix 1.

Table 4: Top 10 retailers worldwide, 2012

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Source: Published company data and Planet Retail (as cited in Deloitte, 2014)

* Sales-weighted, currency-adjusted composites

** Average

Table 5: E-commerce activity among the top 250, 2012

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Source: Published company data and Planet Retail (as cited in Deloitte, 2014)

*Average for all companies in the sector with e-commerce sales

Africa/Middle East region excluded as most retailers did not report e-commerce sales or did not have e-commerce operations

Table 6: Product Sector Profile and Level of globalization by product sector, 2012

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Source: Published company data and Planet Retail (as cited in Deloitte, 2014)

USA retail companies among top 100 in the world are: Wal-Mart Stores, Inc. (1), Apple Inc./apple stores (50), Dollar General Corporation (56), The Gap, Inc. (59), Meijer, Inc. (63), Toys “R” Us, Inc. (68), J.C. Penney Company, Inc. (74), Staples, Inc. (76), Nordstorm, Inc. (86), Whole Foods Market, Inc. (87), BJ’s Wholesale Club, Inc. (88), L Brands, Inc. (Foremarly Limited brands, Inc.) (95) and Liberty Interactive Corporation (99) (Deloitte, 2014). Retail industry faced the experience of a decline in 2008 by 3.7% which was largest drop since 1980. As a result, some retailers like Circuit City, Steve and Barry’s anchor store closed their business in March 2009. At that time some reduced their selling price e.g., Costco reduced average price by 40%, others cut jobs for example Marcy’s laid off employees but Walmart was able to generating huge sales that consequence was a high profit experience (Yang, 2009, May 1). Currently USA retail industry is in crisis because of fast-moving competition and ultra-competitive global retailing environment and at the beginning of 2014, some largest retail chains announced store closing including Walmart, Costco, Home Depot, Best Buy etc.

Table 7: The USA retail industry's direct and total national impact, 2009

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Source: Marcilla (2014)

Walmart Analysis: Critics and Praise from Literature

Walmart’s sale was greater than the world’s next three retailers combined namely Carrefour (France), Home Depot (USA), and Metro (Germany). In the long run, Wal-Mart’s impact on local, national, and global economies will depend on the general-equilibrium responses of other firms, consumers, workers, and governments and on the strategic interactions between these players (Kmart, Target, or Costco) and Wal-Mart (Basker, 2007). The Walmart, ranked number one or two publicly traded companies in the USA and world and the world’s most important privately controlled economic institution has a range of effects resulting from the way of doing business in case of wage rates, prices, and economies on a local, national, and global scale (Fishman, 2006). Last TMT, Walmart generated US $484 billion revenue recognizing that if Walmart is a country assuming revenue equals GDP, it would be the world’s 28th largest countries in the world. In that period, Costco’s sales was US $117 billion, Target’s sales was US $74 billion, Amazon US $101 billion where only Walmart having 165% of Target, Costco and Amazon sale combined with which is not only the difference but also had highest profit margins. These 3 companies have collective capital of US $408 billion (around US $300 billion of Amazon) whereas Walmart has US $206 billion (Sure Dividend, 2016, January 29). Factor weighting regarding retail business are Business and Cash Flow Volatility 10.0%, Market Presence 25.0%, Execution Ability 15.0%, Financial Ratios 50.0%. The weighting 1 indicates Aaa (extremely stable), 3-Aa, 6-A, 9-Baa, 12-Ba, 15-B, 18-Caa, 20-Ca. Moody’s analysis of retail companies focuses on four broad factors of (i) Business and Cash Flow Volatility, (ii) Market Presence, (iii) Execution Ability, (iv) Financial Ratios. According to Moody’s analysis Wal-Mart Stores, Inc. positioned 21 with rating Aa2 (2.5 ≤ x < 3.5) where Costco Wholesale Corporation positioned 4 having rating point A2 (5.5 ≤ x < 6.5), Target Corporation 19 with A2 (5.5 ≤ x < 6.5) and Dollar General Corporation 6 with Ba3 (11.5 ≤ x < 12.5) (Taylor, Chambers & Smith, 2011, June 30). Among top 50 e-retailers in 2012, Walmart’s sales rank is 3rd with e-commerce revenue of US $7,500, a 1.6% of total retail revenue and 20% growth rate where Costco’s position 18th e-commerce revenue of US $2,100, a 2.1% of total retail revenue and 9% growth rate (Deloitte, 2014).

There are a number of researchers and financial analyst who made criticisms against Walmart. Stone (1997) stated that there is strong evidence that rural communities in the United States have been more adversely impacted by the discount mass merchandisers (sometimes referred to as the Walmart phenomenon) than by any other factors in recent times. The biggest challenge to the retail industry coming from the world’s largest retailer: Walmart that the incumbent store lost 17% and small proportion of customers account for the large proportion of losses e.g., 10% households account for 45% of the stores’ lost revenue while 20% of the customer’s account for almost 70% of the lost revenues (Singh, Hansen & Blattberg, 2004). From 1988 to 1994, Walmart’s supplier had less gross margin following pricing concessions (low cost strategy and lower returns as market strategy) and dependency model of market power. Small firms follow dependency model having lower gross margin, operating cost and higher turnover. If considered fixed effect of these firms, small manufacturers only benefit higher turnover doing business with Walmart (Mottner & Smith, 2009). Opening up the Walmart, country-level retail employment reduces by about 150 workers implying each Walmart worker replaces about 1.4 retail workers, a 2.7% reduction in average retail employment as well as leads to decline in country-level retail earnings of about US $1.4 million, a 1.5% resulting in a backdrop of rising retail employment, and lower employment growth (Neumark, Zhang & Ciccarella, 2008). The economic impact played by Walmart are net loss of jobs, loss of small businesses and fewer in number, costs to taxpayers and decline of middle class (Angotti, Paul, Gray & Williams, 2010). Walmart employees earn lower average wages and receive less generous benefits than employees earn from many other large retailers. Walmart’s opening leads to the swap of better paying jobs to less paying jobs and drives down wages for workers in competing industry segments like grocery stores. During 1992 to 2000, due to entry of a single Walmart store in a country lowered average retail wages in that country by 0.5% to 0.9%, in general merchandise sector by 1% for each new Walmart store and for grocery store by 1.5% (Dube, Lester & Eidlin, 2007; Furman, 2005).

Walmart’s performance metrics emphasize 3 priorities of growth, leverage and returns for improving shareholders’ value where growth priority focuses on sales through comparable store or club sales and unit square feet growth, leverage priority encompasses its objective to increase operating income at a faster rate that growth in net sales by improving operating, selling, general and administrative expenses at slower rate that its net sales growth, and the return priority focuses on efficiently employing its assets through ROI and managing working capital and capital expenditure through FCF (United States Securities and Exchange Commission, 2013, January 31). Walmart’s more than half revenue generates from grocery sales. Its financial success is based on low-cost labor, limited health benefits, and leveraging of government subsidies. Walmart’s performance has improved mainly for the adoption of new technologies and low prices obtained from vendors. David Glass’s tenure characterized by business model aimed at increasing volume e.g., building new stores, increasing product variety, everyday low prices (EDLP), & high powered incentives for store managers and Lee Scott lessened EDLD as well as modified Walmart’s human resource practices by stimulating employees opportunities to the social pressure. Finally, the effectiveness of a business mode does not depend on its design but on its implementation (Basker, 2007; Brea-Solís, Casadesus-Masanell & Grifell-Tatjé, 2014; Furman, 2005). Because of Walmart influence post-entry supplier profit increased by 17.77% where incumbents’ profits deceased only marginally for the total market. Supplier shipment increase to 45% markets and profit increases are highest for markets where incumbents offer wide variety of products and carry items that Walmart does not sell (Huang, Nijs, Hansen & Anderson, 2012). Walmart’s productivity is overwhelmed by its sophisticated inventory systems to pricing innovations. It was the largest private employer in the country and 8 of 10 shoppers shopped at Walmart (Furman, 2005). Walmart doesn’t hurt workers in case of employment opportunities and compensation and it is not the prime cause for death of downtown of increase of urban sprawl and USA import rise hence it is neither saint nor a major sinner (Carden, 2007; Vedder & Cox, 2006).

“Every Description of Wal-Mart is built on Superlatives: it is the world’s largest private employer, it generates the most sales, and it occupies the top spot in many U.S retail categories – from food to footwear to toys and television set” (Gereffi & Ong, 2007, p. 47).

According to Wal-Mart Stores, Inc., (2015), Walmart’s belief is that cash flows from continuing operations and its current position and access to capital markets will continue to be enough to meet the operating cash needs including fund to seasonal buildups, capital expenditures, dividend payments and share repurchases. It has strong commercial paper and long-term debt ratings that enable to refinance debt becoming the favorable rates in capital markets. As of January 31, 2015, their outstanding long-term debts were as follows:

Table 8: Walmart debt ratings by different rating agency

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Source: Walmart 2015 annual report

According to Walmart 2015 report, credit rating is subject to revision any time and is not the guarantee to continue consistently over time. Credit ratings are affected by several factors like changes in operating performance, economic environment, condition of retail industry, financial position including total debt and capitalization, and changes in business strategy. Downgrade of credit ratings increases borrowing costs and impair ability to access capital and capital markets. Walmart continually monitors its credit rating and long-term financing capacity using qualitative and quantitative factors. It calculates debt-to-total capitalization as support of making long-term financing decisions where total capitalization defined as debt and shareholders’ equity. Debt-to-total capitalization as of January 31, 2015 was 38.2% and January 31, 2014 was 42.6%.

Generally, in any country Walmart starts its operation it becomes successful in cases like UK, Canada, Mexico, Brazil, Argentina, China but it is a matter of thought that in two countries Germany and South Korea its strategy failed. The reasons found failing in Germany where they started its business in 1997 with the acquisition of 2 German companies Werkauf and Interspar that starting with relatively small number of stores (95) causing hamper in economies of scale though was large enough building reputation at beginning, again lack of consumer research, inadequate understanding of people, laws etc. act. By being aware of the German Location preferences to shop, pricing regulations, the competitors they face and the new differentiation strategy would relief from such failure (Marcilla, 2014). Recently Walmart announced to shut down 154 locations in USA including 102 express locations, 23 neighborhood markets, 12 supercenters, 4 Sam’s Clubs and others. Again, internationally it plans to close 115 stores in Latin America though it expects to open new 50-60 supercenters and 85-95 neighborhood markets in USA in the fiscal year 2017 between 200 and 400 locations internationally. For this purpose around 16,000 associates will be involved (Downing, 2016, January 29).

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