This paper aims to review Wal-Mart Stores Inc. corporate strategy as well as the evaluation of whether is prudent to invest in the company. Basically, the company’s fact sheets and annual reports are employed in its corporate strategy analysis. The annual reports previewed of Wal-Mart Stores Inc. show that it has a high volume, low cost corporate strategy. Besides, retail market dominance wherever it has presence, growth through expansion generally in US and globally as well as creation of widespread brand and name recognition and full satisfaction of the customer with any brand of Wal-Mart. The company also strategizes to branch out into innovative retailing sector. It strives to offer the best to the customer at the best and lowest prices. Wal-Mart Stores Inc. has been successful in achieving these strategies.
Based on the information contained in the annual report, I would invest in Wal-Mart Stores Inc. The company’s return on investment is stable at 19.2% for financial years 2011. It was stable at 19.3% for fiscal years 2009 and 2010. This shows that company is effectively employing its asset which is good for investment. It also has a positive growth as typified by a significant positive increase in net sales by 3.4% in 2011. Operating income is in the increase. It increased by 6.4% when compared to 2010 and by 5.4% in fiscal 2010 when compared to fiscal 2009. This signifies growth potentiality. Leverage operating expenses at 19.3% is not promising. However, the growing of the expenses at slower rate when compared net sales and growing operating income faster than net sales is worth promises making an investment in the company. Fiscal 2010 operating expenses increased 2.7% when compared to fiscal 2009, while net sales increased 1.0% over the same period. Its gross profit margin of 24.7% in 2011 is as well promising. The dividends declared per common share over the years have been in the increase and stands at 1.21 for 2011 which is good for investor.
In conclusion, the senior management should increase their free cash flows even though massive investment is made in the company’s inventory. They should also keep net sales in the increase as that of fiscal year 2011 was comparatively flat. The customer traffic should be checked into as this is what led to a decline in store sales by 1.5%. Lastly, the management should look into a way of how it effectively lowers its operating expenses so that operating expense leverage is lowered this upcoming fiscal 2012.
Reference
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Wal-Mart Stores Inc., 2011, Annual Report and Accounts for the year 2011. Retrieved at http://walmartstores.com/sites/annualreport/2011/financials.aspx
