Financial Accounting Assignment Team Members 1. Shoeb Ansari 2. Raja 3. Rakesh Pillai 4. Jayeetha
Company Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc
Objective • To find ROE for the companies • De Deco com mpo pose se ROE ROE (DuP (DuPon ontt Ana naly lysi sis s) • Co Comm mmen entt on on th the e per perfo form rman ance ce of th the e com compa pani nies es (Rat (Ratio io Analysis) • Co Conv nver ertt th the e give given n BS into into con onde dens nsed ed BS • Do we we reco recomm mmen end d inve invest stin ing g into into the these se sha share re aft after er analysis for the following year of the given balance sheet • Cu Curr rren entt pos posit itio ion no on n tthe he tw two o com compa pani nies es
Company Profile •
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Sears, Roebuck and Co. (sometimes known only as Sears, Sears, or Sears and Roebuck among older Americans and Southerners) Southerners) is an American midrange chain of international international department stores founded by founded by Richard Richard Sears Sears and Alvah Alvah Roe Roebuck buck in the late 19th century. Started as as a catalogue bu business in in 11886 and grew into one of the largest retail and departmental stores until 1997. Sears merged w wiith Km Kmart in early 2005, creating the Sears Holdings Corporation. It con onttinue inues s to op ope erat rate stor store es und nde er both the Sears and Kmart brands.
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Founded by Sam Walton in 1962 Wal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500 Wal-M al-Mar artt, Inc Inc. c com ompa pany ny pu purp rpos ose e is savi saving ng people money so they can live better
Condensed Balance Sheet Sear Sears, s, Roeb Roebu uck Fiscal years ended January 31,
WalWal-M Mart art Stor Stores es
1 99 7
1996
1998
1997
Current Assets
30682
28447
19352
17993
Fixed Assets Property, plant & equipment Depreciation & Amortization Capital Lease Other assets & def erred charges Total Fixed assets
10826 (4910) 498 16 04 8018
9804 (4359) 43 3 1842 7720
27376 (6810) 3040 24 26 26032
23182 (5640) 2782 1 287 21611
Total Assets
38700
36167
45384
39604
Current Liabilities
15790
14950
14460
10957
LTL Income tax es and interest Total shareholders equity Total Liabilities and share holders Equity
13071 3977 5862 38700
12170 4102 4945 36167
9674 274 7 18503 45384
10016 1 488 17143 39604
Condensed Income Statement Fis c al y ears ended January 31,
Sears Sear s, Roebu ebuck and and Co., 1997 1996 1995
WalWal-Mart art Stores 1998 1997 1996
S a le s
41296
38064
34835
119299 106178
94773
Costs and Expenses COGS Selling & Admin Ex pens es Provis ion for unc ollec tible ac c ounts Depreciat ion & Amortiz ation Int eres t Reaffirmat ion c harge Capit al Leas es Total costs and expenses
26769 8331 1532 786 1409 475 -39302
24889 8059 971 697 1365 --35981
23160 7428 589 580 1373 --33130
93438 83510 19358 16946 --555 629 78 27 --229 216 113658 101328
74505 15021 -692 13 -196 90427
Operating Inc ome Ot her inc ome Income before income taxes (PBT) Inc ome tax es Income from continuing operations Dis c ontinued operations Ne t Incom e (PAT)
1994 106 2100 912 1188 -1188
2083 22 2105 834 1271 -1271
1705 23 1728 703 1025 776 1801
5641 -5641 2115 3526 -3526
4850 -4850 1794 3056 -3056
4346 -4346 1606 2740 -2740
Condensed Cash Flow Statement Fiscal years ended January 31, Net Cash provided by Operating Activities Net Cash used by Investing Activities Net Cash provided by Financing Activities Effect of exchange rate Net incre a se in ca sh & ca sh equivale nt
Sear Sears, Roebu ebuck and and Co., 1997 1996 1995 (556) (1072) 1330 (4) (302)
1189 (1443) 309 (1) 54
415 (712) 361 (6) 58
Wal-M Wal-Mart art Stores 1998 1997 1996 7123 (4421) (2138) -564
5930 (2068) (3062) -800
2383 (3332) 987 -38
Ratio’s Comparisons Ratios : Current Ratio ROTA ROE PBIT/SALES SALES/TA TA/CE ROCE ROCE
Sears,Roebuck and Co., 19 97 1 99 6 1. 9 1.9 3.1% 3.5% 20.3% 25.7% 0.09 0.09 1 . 07 1.05 1.69 1.70 0.17 0.16 0.17 0.16
Wal-Mart Stores, Inc 1 99 8 1 99 7 1.3 1.6 7.8% 7.7% 19.1% 17.8% 0.06 0.05 2.60 2.65 1.61 1.46 0.23 0.21 0.23 0.21
DuPo Du Pont nt An Anal alys ysis is – RO RONW NW – WA WALM LMAR ART T RONW=PAT/NW 1997 1998 0.19 0.18
PAT/SALES 1997 1998 0.03 0.03
COGS/SALES 1997 1998 0.79 0.78
SALES/TA 1997 1998 2.68 2.63
SALES/FA 1997 1998 4. 91 4. 58
TA/NW 1997 1998 2.31 2.45
SALES/CA 1997 1998 5.92 6.16
INTEREST/SALES 1997 1998 0.01 0.01
SALES/INVENTORY 1997 1998 6. 68 7. 23
TAX/SALES 1997 1998 0.02 0.02
SALES/DEBTORS 1997 1998 125.6 .65 5 122.2 .23 3
SALES/CASH 1997 1998 120.25 82. 45 45
FA/NW 1997 1998 1.26 1.41 CA/NW 1997 1998 1.05 1.05
SALES/OTHER CA 1997 1998 288.5% 8.5% 276.2% 6.2%
SALES/LOANS&ADV 1997 1998 NI L NI L
DuPo Du Pont nt An Anal alys ysis is – RO RONW NW – SE SEAR ARS S RONW=PAT/NW 1996 1997 0.26 0.20
PAT/SALES 1996 1997 0.03 0.03
COGS/SALES 1996 1997 0.65 0.65
SALES/TA 1996 1997 1.05 1.07
SALES/FA 1996 1997 4. 93 5. 15
TA/NW 1996 1997 7.31 6.60
SALES/CA 1996 1997 1.34 1.35
INTEREST/SALES 1996 1997 0.04 0.03
SALES/INVENTORY 1996 1997 8. 19 8. 19
TAX/SALES 1996 1997 0.02 0.02
SALES/DEBTORS 1996 1997 1.94 2.05
SALES/CASH 1996 1997 57.67 .67 115.35 .35
FA/NW 1996 1997 1.56 1.37 CA/NW 1996 1997 5.75 5.23
SALES/OTHER CA 1996 1997 109.38 43.20
SALES/LOANS&ADV 1996 1997 10. 77 7.93
DuPo Du Pont nt An Anal alys ysis is – RO RONW NW
Profitability ROCE PBIT/SALES COGS/SALES OPEX/SALES Efficiency SALES /TA SALES/FA SALES/CA SALES/DEBTORS SALES SA LES/OT /OTHER HER A DD ID Solvency TA/CE TA/LTL TA/EQUITY TA/CAPITAL TOTAL SALES SALES PER DAY
DU PONT ANALYSIS DUPONT ANALYSIS : earrs,Roe ea s,Roebu buck ck and and Co. Walal-Mart art Stor Stores es,, Inc 19 9 7 1 9 96 1 99 8 1 99 7 0.17 0.16 0.23 0.21 0.09 0.09 0.06 0.05 0.65 0.65 0.79 0.80 0.24 0.24 0.16 0.16 1.07 6.44 1.35 1.97 6.44 185.22 44.58
1.05 6.48 1.34 1.68 6.48 192.78 44.55
2.60 5.00 6.10 120.86 48.62 3.02 51.05
2.65 5.16 5.83 124.09 81.48 2.94 55.34
1.69 2.27 6.60 1.69 41,296
1.70 2.22 7.31 1.70 38,064
1.61 4.69 2.45 1.61 117,958.00
1.46 3.95 2.31 1.46 104,859.00
Sears TA Break-up Total Assets 1997 4% 17% 17 %
1%
9%
5%
13% 13 %
51% 51 %
Cash & Cash Equivalents
retained interest in Credit card receivables
Total receivables
Inventories
Other current assets
Fixed A ssets
Other long term assets
Sears Funding Sources-1997 Break-up
15% 15 %
20% 20 %
10% 10 %
17% 17 % 4%
34% 34 %
Short term loans
Payables
Une nearn arned ed revenu revenues es & un unpa paiid taxe taxes s
Long Lo ng term term Lo Loan ans s
retirement benefit fits & others
Share holders eq equity
Wal-Mart share price as on 16/05/08
Sears share price as on 16/05/08 Sears shares are de-listed and they are not in the business of retailing like Wal-Mart. Sears' stores sell apparel, tools, and appliances, and provide home services (remodeling, appliance repairs) under the Sears Parts & Repair Services and A&E Factory brands. Its Web site also sells appliances and tools. Sears was acquired by Kmart Holding Corp. in 2005. The deal formed a new parent company, Sears Holdings, which owns both chains. was acquired by Kmart Holding Corp. in 2005. The deal formed a new parent company, Sears Holdings, which owns both chains.
Analysis 1. 2. 3.
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Walal-Ma Mart rt used used CA 5 tim times es more ore ef effici ficien entl tly y to to gen gener erat ate e Sal Sales es tha han n Sears. Wal-Mart had le less debtors compare to to Sears. The The hig highe herr Sal Sales es//Ass Asset ets s rat ratio io fo forr Wal Wal-M -Mar artt ind indic icat ates es th that at the operational efficiency is better and returns from fixed assets in higher when compared to Sears. The The an anal alys ysis is als also show shows s tha hatt the curr curren entt asse assets ts ha have ve no nott generated enough sales/revenue for Sears when compared to that of Wal-Mart The sales ales//cash cash fo forr Sea Sears rs show shows s tha thatt the there re ha has s bee been n inc incre reas ase e in in sales but a decrease in the cash collections for the year 1997, and this is in sharp contrast to the previous year, which in turn can lead to a liquidity crisis. At the same time, Wal-Mart continued to maintain almost high ratio for the consecutive years.
