Sears Roebuck & Co. vs. Walmart Stores

Case Analysis(Group 4: MBA-PR)

Background to the Case

Sears Roebuck & Co

• Founded in 1891• Made great strides in 1990s

to revive the fortunes • ROE of 22%• Offered flexible payment

facility : exclusive Sears Credit Card

Wal Mart Stores

• Founded in 1962• Acknowledged powerhouse

of US retail industry• ROE of 20%• DID Offered the facility of

Credit card with their Logo, but did not have a propriety Credit Card

The Financial Data are taken from the Balance Sheet of the respective companies to Compare and Identify which company is performing better

Financial Comparision

CURRENT RATIO=Current Assets/Current LiabilitiesIndicates ability to pay company’s obligations

Sears

1.943128562 (1997)1.902809365 (1996)

Wal-Mart

1.338312586 (1998)1.642146573 (1997)

As, Walmart’s current ratio is near to 1.5 (general acceptable value), the company has a good capacity to pay off its obligations.Also, not a very high value, it clearly indicates that the Company is using its liquidity to grow.

Financial Comparision

DEBT TO EQUITY RATIO =Total Liability/Shareholder EquityIndicates what portion of Equity & debt a company is using to

finance its assets.

Sears

5.601842375 (1997)6.313852376 (1996)

Wal-Mart

0.781494893 (1998)0.639153007 (1997)

As, Walmart’s Debt to Equity Ratio is Less than 1, which indicates that their assets are financed with equity and not Debt.

Financial Comparision

LEVERAGE RATIO=Long Term Debt/Shareholder EquityIndicates how much debt a company has.

Sears

2.229785056 (1997)2.46107179 (1996)

Wal-Mart

0.38863968 (1998)0.449687919 (1997)

As, Walmart’s Leverage Ratio is less than Sears & Co., which indicates that Walmart is comparatively lower in debt than Sears & Co.

Financial Comparision

RETURN ON INVESTMENT= Net Income/Shareholder EquityIndicates how much money the company is making for the

Investors

Sears

0.202661208 (1997)0.2570273 (1996)

Wal-Mart

1.905945946 (1998)0.178265181 (1997)

Though Walmart has lower ROI as compared to Sears in 1997, yet we can observe that Sears & Co. have their ROI decrement from 1996 to 1997, whereas Walmart has a considerable increment in ROI from 1997 to 1998 clearly indicating a better accelerating performance .

Financial Comparision

NET INCOME AS A % OF TOTAL REVENUE= (Net Income/Total Revenue) * 100

Sears

2.876791941 (1997)3.339113073(1996)

Wal-Mart

2.955598957 (1998)2.878185688 (1997)

As it is evident, Sears has a considerable decrement from 1996 to 1997, Walmart shows a consistent performance .

Financial Comparision

COMPARATIVE STUDY OF NET INCREASE OR DECREASE IN CASH & CASH EQUIVALENTS

Sears

-302(1997)54(1996)58 (1995)

Wal-Mart

564 (1998)800 (1997)38 (1996)

As it is evident, Sears has a considerable DECREASE in Cash & Cash Flow as compared to Walmart .

Financial Conclusion

As is evident, the above Financial Ratios clearly indicate that WALMART is financially performing Better than SEAR’S ROEBUCK & CO.

Group Members:

Aastha SinghJuanita Jocelyn

Mansi BaggaPooja Singh

Ruchi KothariSreeparna Maitra

Thank You