Retailing 8th Edition by Patrick Dunne,Robert Lusch, James Carver

Exercise 18

The Current Business of Walmart
Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money so they can live better. We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices (EDLP), while fostering a culture that rewards and embraces mutual respect, integrity, and diversity. EDLP is our pricing philosophy under which we price items at a low price everyday so our customers trust that our prices will not change under frequent promotional activity.
Currently, our operations comprise three reportable business segments: the Walmart U.S. segment, the Walmart International segment, and the Sam's Club segment.
Walmart U.S.
The Walmart U.S. segment had net sales of $264.2 billion, $260.3 billion, and $259.9 billion for fiscal years 2012, 2011, and 2010, respectively. During the most recent fiscal year, no single supercenter, discount store, neighborhood market, or other small store format location accounted for as much as 1 percent of total company net sales. As a mass merchandiser of consumer products, the Walmart U.S. segment operates retail stores in all 50 states and Puerto Rico, with supercenters in 48 states and Puerto Rico, discount stores in 45 states and Puerto Rico, and neighborhood markets and other small store formats in 18 states and Puerto Rico. Supercenters range in size from 78,000 square feet to 260,000 square feet, with an average size of approximately 182,000 square feet. Our discount stores range in size from 30,000 square feet to 219,000 square feet, with an average size of approximately 106,000 square feet. Neighborhood Markets and other small formats range in size from 3,000 square feet to 64,000 square feet, with an average size of approximately 38,000 square feet. From time to time, Walmart U.S. tests different store formats to meet market demands and needs. Customers can also purchase a broad assortment of merchandise and services online at www.walmart.com. Walmart U.S. does business in the six broad merchandise categories of grocery, entertainment, hardlines, health and wellness, apparel, and home.
Walmart International
The Walmart International segment's net sales for fiscal years 2012, 2011, and 2010 were $125.9 billion, $109.2 billion, and $97.4 billion, respectively. During the most recent fiscal year, no single unit accounted for as much as 1 percent of total company net sales. Our Walmart International segment is composed of our wholly owned subsidiaries operating in Argentina, Brazil, Canada, China, Japan, and the United Kingdom; our majority-owned subsidiaries operating in Chile, Mexico, 12 countries in Africa and 5 countries in Central America; our joint ventures in China and India and our other controlled subsidiaries in China. Walmart International operates units under approximately 70 banners in numerous formats, including discount stores, supermarkets, supercenters, hypermarkets, websites, warehouse clubs, restaurants, and apparel stores. Also, on a limited basis, our Walmart International segment operates banks that provide consumer lending. The merchandising strategy for the Walmart International segment is similar to that of our operations in the United States in terms of the breadth and scope of merchandise offered for sale. While brand name merchandise accounts for a majority of sales, numerous store brands not offered for sale in the U.S. stores and clubs have been developed to serve customers in the different markets in which the Walmart International segment operates. In addition, steps have been taken to develop relationships with local suppliers in each country to ensure reliable sources of quality merchandise.
Sams Club
The Sam's Club segment had net sales of $53.8 billion, $49.5 billion and $47.8 billion for fiscal years 2012, 2011, and 2010, respectively. During the most recent fiscal year, no single club location accounted for as much as 1 percent of total company net sales. As a membership club warehouse, facility sizes for Sam's Clubs generally range between 71,000 and 190,000 square feet, with an average size of approximately 134,000 square feet. Sam's Club also provides its members with a broad assortment of merchandise and services online atwww.samsclub.com. Sam's Club offers brand name merchandise, including hardgoods, some softgoods, and selected private-label items such as "Member's Mark" and three new proprietary brands, "Artisan Fresh," "Daily Chef," and "Simply Right," in five merchandise categories, listed below, within the warehouse club format. The broad merchandise categories for Sam's Club are grocery and consumables, fuel and other, technology office and entertainment, home and apparel, and health and wellness.
Source: Adapted from Item 1 of Walmart 2011 Annual Report.
The Current Business of Target
Target Corporation (the Corporation or Target) was incorporated in Minnesota in 1902. We operate as three reportable segments: U.S. Retail, U.S. Credit Card, and Canadian. Our U.S. Retail Segment includes all of our merchandising operations, including our fully integrated online business. We offer both everyday essentials and fashionable, differentiated merchandise at discounted prices. Our ability to deliver a shopping experience that is preferred by our customers, referred to as "guests," is supported by our strong supply chain and technology infrastructure, a devotion to innovation that is ingrained in our organization and culture and our disciplined approach to managing our current business and investing in future growth. As a component of the U.S. Retail Segment, our online presence is designed to enable guests to purchase products seamlessly either online or by locating them in one of our stores with the aid of online research and location tools. Our online shopping site offers similar merchandise categories to those found in our stores, excluding food items and household essentials. Our U.S. Credit Card Segment offers credit to qualified guests through our branded proprietary credit cards, the Target Visa and the Target Card. Additionally, we offer a branded proprietary Target Debit Card. Collectively, these REDcards ® help strengthen the bond with our guests, drive incremental sales, and contribute to our results of operations. Our Canadian Segment was initially reported in the first quarter of 2011 as a result of our purchase of leasehold interests in Canada from Zellers, Inc. (Zellers). This segment includes costs incurred in the United States and Canada related to our planned 2013 Canadian retail market entry.
We operate Target general merchandise stores, the majority of which offer a wide assortment of general merchandise and a more limited food assortment than traditional supermarkets. During the past three years, we completed store remodels that enabled us to offer an expanded food assortment in many of our general merchandise stores. The expanded food assortment includes some perishables and some additional dry, dairy and frozen items. In addition, we operate SuperTarget ® stores with general merchandise items and a full line of food items comparable to that of traditional supermarkets. Target.com offers a wide assortment of general merchandise including many items found in our stores and a complementary assortment, such as extended sizes and colors, sold only online. A significant portion of our sales is from national brand merchandise. We also sell many products under our owned and exclusive brands. Owned brands include merchandise sold under private-label brands.
Merchandise is broadly categorized into five groups: household essentials, which includes pharmacy, beauty, personal care, baby care, and cleaning and paper products; hardlines, which includes electronics (including video game hardware and software), music, movies, books, computer software, sporting goods, and toys; apparel and accessories including apparel for women, men, boys, girls, toddlers, infants, and newborns, and also includes intimate apparel, jewelry, accessories, and shoes; food and pet supplies which includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and home furnishings and decor which includes furniture, lighting, kitchenware, small appliances, home decor, bed and bath, home improvement, automotive, and seasonal merchandise such as patio furniture and holiday decor.
Source:Adapted from Item 1 of Target 2011 Annual Report.
Walmart versus Target: A Decade of Comparative Performance
The decade from year end January 2003 through year end January 2012 witnessed Walmart growth in sales, pre-tax net operating profit, and stores far outstrip Target. These trends are displayed in Exhibits 1-3. During this time frame, Walmart saw its stock price move from $47.80 to $61.36, and Target during this same time frame witnessed its stock move from $28.21 to $50.81 (see Exhibit 4). For the year end January 2012, we can see many other operating performance statistics for these two retailers as displayed in Exhibit 5.
Exhibit 1
Sales Growth at Walmart versus Target
Walmart vs. Target: Sales

Exhibit 2
Pre-Tax Operating Profit Growth at Walmart and Target
Walmart vs. Target: Operating Income (Pre-Tax)

Exhibit 3
Growth in Store Locations: Walmart versus Target
Walmart vs. Target: Locations

Exhibit 4
Walmart versus Target: Stock Price
Walmart vs. Target: Stock Price

Exhibit 5
Walmart versus Target Stores: Fiscal Year 2012 Operating Statistics (all data in millions)

1.With the financial data presented in this case, compute the ratios of the strategic profit model for Walmart and Target Stores. Interpret these ratios with special attention to comparing these two major discount retailers.
2.Discuss why Walmart has been growing more rapidly than Target over the last decade. Do you see this trend continuing Explain your rationale. Note this may require you to do some additional research on these two retailers.
3.Develop a summary of the mission and corporate culture of these two retailers. Note a corporate culture reflects the core values, norms, and behaviors that reflect how it behaves toward employees, customers, and suppliers.