Financial Analysis

BERIN MaximeGALLEGO CoralieGIRARD Antoine

MEASSON KévinPERINO AloïsPIERI Maxime 31st March, 2012

Wal-Mart Stores, Inc. founded in 1962

Sector: Services

Industry: Discount, Variety Stores

Full-time Employees: 2,1M

Number of Locations: 8,970

Target: Households, companies (wholesale)

Sears Roebuck and Co. founded in 1886

Sector: Services

Industry: Department Stores

Full-time Employees: 312K

Number of Locations: 2,248

Target: Households

Industry Overview

Industry Overview (cont’d)

+89%

Bought 51% of the stocks volume of Massmart. (June)

15 billion share repurchasing program (June).

Investment in Yihaodian, fast growing e-commerce business in China. (May)

 Acquisition of Social Media Company Kosmix (April)

Increases in annual dividend by 21% ($1.21$1.46) (March)

Holding awards $20 000 in small business grants (June).

Shares three TV friends in 2011 and launch movie download service (December)

Past Year’s Major Event

Current Economic Situation

+5.5%

+16.4%

+7.2%

-16.6%

Walmart vs. S&P500

Sears vs. S&P500

Walmart following S&P500

Feb to May:- Sears above

S&P500From June:

- S&P500 above Sears

40%

<10%

10%

10%

31 Jan, 2010 11:58 UTC – 1 Feb, 2011 07:59 UTC

Open:6.8268

USD/CNY Monthly Fiscal Year 2011

Close:6.6017

-3%

USD/MXN Monthly Fiscal Year 2011

Open:12.942

Close:12.1541

-6%

Highest:13.26

89%

12%

United States International

95%

5%

Sears Domestic Sears Canada

Revenue by Area

Focus on US

market

Total Revenue: $419B

Total Revenue: $43B

9 times Highe

r

Revenue by Segment

62%

26%

12%

Walmart US InternationalSam's Club

53%

36%

11%

Sears Domestic K martSears Canada

Total Revenue: $419B

Total Revenue: $43B

Walmart is better:

InternationalStrong

membership loyalty

200220032004200520062007200820092010 $-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$M

2004 2005 2006 2007 2008 2009 2010 $-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$M

10-Year Revenue

+86 %

+188 % -17 %

20022003200420052006200720082009201020112012-5%

0%

5%

10%

15%

20%

25%

30%

Gross Margin

Sears :

2005+20062008

20022003200420052006200720082009201020112012-5%

0%

5%

10%

15%

20%

25%

30%

35%Net margin ROE ROA

10-Year Profitability

2004 2005 2006 2007 2008 2009 2010 2011 20120%

5%

10%

15%

20%

25%

30%

Gross Margin

2004 2005 2006 2007 2008 2009 2010 2011 2012-5%

0%

5%

10%

15%

20%

25%

30%

35%Net margin ROE ROA

Walmart:

Constant growthWhy?

Worldwide economic conditions

Price + margin

Walmart:

Stable

Sears : Net Margin+

ROE+ROA follow the same trend 2008

Why 2005? Decrease since 2007

Walmart is more profitable +

More efficient management at using its assets to generate

earnings.+

Generates more money with the money shareholders have

invested.

10-Year Financial Health

00.5

11.5

22.5

3Financial leverage Debt/Equity

00.20.40.60.8

11.2

Current ratio Quick ratio

00.5

11.5

22.5

3Financial leverage Debt/equity

00.5

11.5

22.5

33.5

4Current ratio Quickratio

- 30%

- 72%

+74%

+19%

- 23%

- 58%

9%

FLAT

2008 2009 2010

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

7%

1%

3%

-8%

-6%

-2%

8%

7% 7%

2%

0%

3%

Correlation Sales/Stores

Walmart Net salesSears Net salesWalmart StoresSears Stores

Years

Sale

s/St

ores

+23.5%stores+21.5% sales

-18%sales

2008 2009 2010

-200%

-100%

0%

100%

200%

300%

400%

5% 7% 14%

-94%

343%

-43%

Net IncomeWalmart Net Income Sears Net income

Years

Net

Inco

me

Walmart:Constant

evolution = +28.7%

Sears: 2009: 53M to 235M +

Operating income increased

Operating income shrunk by 239M

Growth Rate

-84%

+ 28.7%

Walmart:

Broad merchandise

More selling spaces

Sears:

Keep decreasing Margin ratePrice of raw materials

2007 2008 2009 2010

-15%

-10%

-5%

0%

5%

10%

15%

Correlation inventories/sales

Walmart Inven-toriesSears InventoriesWalmart Net salesSears Net sales

Years

Inve

ntor

ies/

asse

ts

+7.81 Invento-ries+21.5% Net sales

2007 2008 2009 2010

-100%

0%

100%

200%

300%

400%

500%

-7%

6%

-3%-16%

-37%

39%

457%

-55%

P/E ratio evolution

Walmart P/E Ratio Sears P/E Ratio

-19%

+120%

Growth Rate (cont’d)

-7.9%Inventories-18% net sales

Walmart:

Positive gowth inventory, they can answer unexpected demand

But higher cost

Sears:Negative growth in

inventory, no security margin

Decrease in salesPoor management of

the stock

Sears:

+120%= high expected return in the future

Market price 2007+2008

Walmart:

No major changement price does not fluctuate

much.

Growth Rate (cont’d)

2007 2008 2009 2010

-10%

-5%

0%

5%

10%

15%

10%

-1%

7%5%

-3%

-9%-5% -4%

Total assets evolution

Walmart Sears

+22%

-19%

Walmart:

Property & equipment

2008 : decrease in

property under capital

lease

Sears:Keep decreasing in total

property equipment + shut down shops.

Stores Sales ($100M)

02000400060008000

10000

Stores Sales ($100M)

02000400060008000

10000

Stores, Sales

+543 Stores

+88 Stores

onlyNo

significant

change No signific

ant change

Sales per Store & Sales per Square Foot

2009 20100

100

200

300

400

500

600

Sales per store

2009 20100500

10001500200025003000350040004500

Sales per square foot-28

sales per

Stores

-81.6 sales per

Stores

Increase by 50 due

to the modern

strategies of

supermarketIncrease

by 0.41 due to the

modern strategies

of supermark

et

Carrefour S.A.:$12B

J. C. PenneyCompany, Inc.:

$9B

Costco Wholesale Corp: $37B

WalmartStores, Inc.:

$203B

Top Competitors by Market Capitalization

Market Capitalization: $203B Market Capitalization: $7B

Target Corp:$38B

Target Corp:$38B

Carrefour S.A.:$12B

J. C. PenneyCompany, Inc.:

$9B

Costco Wholesale Corp: $37B

WalmartStores, Inc.:

$203B

Top Competitors by Market Capitalization

Market Capitalization: $203B Market Capitalization: $7B

Target Corp:$38B

Target Corp:$38B

Direct Competitors by Market Share

13%

2%2%

82%

Discount, Variety Stores Industry:

Percentage Market Share

Walmart StoresCostco WholesaleTarget CorpOther

1% 2%12%

85%

Department Stores In-dustry:

Percentage Market Share

Sears HoldingsTarget CorpWalmart StoresOther

Competitors by Segment

• Home Depot: $920B

• Kingfisher: $660B• Lowe’s Companies: $34B

• CVs Caremark: $58B• Walgreen: $29B• GNC Holdings: $3B

• Tesco: $2 543B• Morisson

Supermarket: $752B

• Sainsbury’s: $550B

• Best Buy: $8B• Gamestop: 3B• Radioshack: $678M

ElectronicsStores

Industry GroceryStores

IndustryHome

Improvement

StoresIndustry

Drug Stores

Industry

Discount, Variety Stores Industry:

Discount grocery stores

Other discount retailerse.g.: Target (TGT)

Sell small cheaply priced goods to households (scissors, tape, pencils, etc.)

Department Stores Industry:

Durable goods and products to the consumer's personal and residential needs; multiple merchandise lines

Sell apparel, furniture, home appliances, toys, cosmetics, gardening, toiletries, etc.

Part of a retail chain of many stores.

Industry Differentiation

Office Pets

Auto, Home Improvement

Photo

Common:

Electronics & Office

Movies, Music & Books

Food & Grocery

Pharmacy

Apparel & Jewelry

Sports & Fitness

Beauty, Baby

Home, Furniture & Outdoor

Toys & Games

Lawn & Garden

Outdoor Living

Tools

Product Differentiation

Low prices:

“Saturation” strategy

Stores at 1 day drive to warehouse

Branded products at low prices

Large discount stores in small rural towns

High quality:

Build in large towns

Sell attractive, innovative, high-quality products

Fleeting star clothes collection

Marketing Strategy

Q1 Q2 Q3 Q40%

5%

10%

15%

20%

25%

30%

23%25% 24%

27%

23%25% 24%

28%

Walmart: Quarterly sales as percent of year sales

2009 2010

Q1 Q2 Q3 Q4-5%

0%

5%

10%

15%

20%

25%

30%

23% 24% 23%

30%

23% 24%22%

30%

Sears: Quarterly sales as percent of year sales

20092010

Quarterly Loading of SalesGood

repartition of sales

during the year

Good repartition of sales

during the year

with a signific

ant rising in the end of the year

Q1 Q2 Q3 Q4

-300

-200

-100

0

100

200

300

400

500

26

-94 -127

430

16

-39

-218

374Sears: Quartely net income in million of dollar

20092010

Q1 Q2 Q3 Q40%5%

10%15%20%25%30%35%

23%26%

23%28%

21%24% 23%

32%

Walmart: Quarterly net income as percent of year net income

20092010

Quarterly Loading of Net Income Good

repartition of net

income during

the year

Massive loss of net income in

Q2-Q3

Terrible repartition of net income during the

year

Massive won in

Q4

Beta Analysis

S&P500:1.22

Services Sector:

0.97

SHLD:2.51

Department Stores: 1.11

WMT:0.46

Discount, Variety Stores:0.58

Walmart vs Sears

Sears much more riskier (2.51 vs. 0.46)

Shares of Sears plunged more than 27% in 3 years

Closed 120 US storesWalmart

Defensive stock as the beta is <1

Positive quarterly sales growth

Constant growth in the stock price

Reaction of the stock is less than the market Index

Less risky to the market

Assets has less systematic risk than the overall market

Sears Aggressive stock as the beta is >1

Most of the quarterly sales growth are negative since 2007

High volatility of the stock more risks more expected return

Stock will react more than the market index

More risky than the market

Sears 5.5 times higher

Beta Analysis

Volatility

Stability

Horizontal Analysis

Comparative Income Statement – 2 Years

 In millions of USD WALMART SEARSPeriod ending January 31, 2011 2010 2011 vs 2010 2011 2010 2011 vs 2010

  Amount Amount Amount V% Amount Amount Amount V% 

Total Revenue 421 849408 085 13 764 3% 43 326 44 043 -717 -2% 

Cost and expenses  Cost of sales 315 287 304 444 10 843 4% 31 448 31 824 -376 -1%Gross Margin 106 562 103 641 2 921 3% 11 878 12 219 -341 -3%Operating , selling, general and administrative expenses 81 020 79 639 1 381 2% 11 404 11 506 -102 -1%

 Total operating expenses 396 307384 083 12 224 3% 42 852 43 330 -478 -1%

 Operating Income or loss 25 542 24 002 1 540 6% 474 713 -239 -34%

 Interest expenses 2 205 2 065 140 7% 324 326 -2 -1%Interest income -201 -181 -20 11% -36 -33 -3 9%Income from continuing operations before income taxes 23 538 22 118 1420 6% 186 420 -234 -56%

 Provision for income taxes 7 579 7 156 423 6% -36 -123 -87 -71%

 Income from continuing operations 15 959 14 962 997 7% 150 297 -147 -49%Income from discountinued operations, net of tax 1034 -79 1 113 1 409% X X   

 Consolidated net income 16 993 14 883 2 110 14% 150 297 -147 -49%Minority interests -604 -513 -91 18% -17 -62 45 -73%

 Total consolidated net income 16 389 14 370 2 019 14% 133 235 -102 -43%

3%

6%

6%

1 409%

14%

2%

-34%

-56%

-43%

Comparative Income Statement – 2 YearsVertical Analysis

 In millions of USD WALMART SEARSPeriod ending January 31, 2011 2010 2011 2010

  Amount %Rev Amount %Rev Amount %Rev Amount %Rev 

Total Revenue 421 849 100% 408

085 100% 43 326 100% 44 043 100% 

Cost and expenses  Cost of sales 315 287 75% 304 444 75% 31 448 73% 31 824 72%Gross Margin 106

562 25%103 641 25% 11 878 27% 12 219 28%

Operating , selling, general and administrative expenses 81 020 19% 79 639 20% 11 404 26% 11 506 26%

 Total operating expenses 396

307 94% 384 083 94% 42 852 99% 43 330 98%

 Operating Income or loss 25 542 6% 24 002 6% 474 1% 713 2%

 Interest expenses 2 205 1% 2 065 1% 324 1% 326 1%Interest income -201 0% -181 0% -36 0% -33 0%Income from continuing operations before income taxes 23 538 6% 22 118 5% 186 0% 420 1%

 Provision for income taxes 7 579 2% 7 156 2% -36 0% -123 0%

 Income from continuing operations 15 959 4% 14 962 4% 150 0% 297 1%Income from discountinued operations, net of tax 1 034 0% -79 0% X   X  

 Consolidated net income 16 993 4% 14 883 4% 150 0% 297 1%Minority interests -604 0% -513 0% -17 0% -62 0%

 Total consolidated net income 16 389 4% 14 370 4% 133 0% 235 1%

19%

20%

94%6% 6%

6% 5%

4%

26%99%

0% 1%

0%

One-Day Comparative Income Statement In millions of USD WALMART SEARS

Period ending January 31, 2011 2011  Amount % revenue Amount % revenue

 Total Revenue 1 171,8 100% 120,4 100%

 Cost and expenses        Cost of sales 875,8 75% 87,4 73%Operating , selling, general and administrative expenses 225,1 19% 31,7 26%

 Total operating expenses 1 100,9 94% 119,0 99%

 Operating Income or loss 71,0 6% 1,3 1%

 Interest expenses 6,1 1% 0,9 1%Interest income -0,6 0% -0,1 0%Income from continuing operations before income taxes 65,4 6% 0,5 0%

 Provision for income taxes 21,1 2% -0,1 0%

 Income from continuing operations 44,3 4% 0,4 0%Income from discountinued operations, net of tax 2,9 0% X X

 Consolidated net income 47,2 4% 0,4 0%Minority interests -1,7 0% -0.0 0%

 Total consolidated net income 45,5 4% 0,4 0%

X 13

X 6

6.1%

1.1%

3.9%

0.3%

Comparative Balance Sheet: Assets In millions of USD WALMART SEARS

Period ending January 31, 2011 2010 2011 vs

2010 2011 2010 2011 vs 2010

ASSETS Amount % Amount % V V% Amount % Amount % V V%

Current assets 

Cash and equivalent $7 395 4% $7 907 4% $-512 -6% $1 390 6% $1 700 7% $-310 -18%

Receivables, net 5 089 3% 4 144 2% 945 23% 683 3% 652 3% 31 5%

Inventories 36 318 20% 32 713 16% 3 605 11% 9 123 38% 8 705 35% 418 5%

Prepaid expenses 2 960 2% 3 128 1% -168 -5% 312 1% 351 1% -39 -11%

Current assets of discontinued operations 131 0% 140 0% -9 -6% 27 0% 30 0% -3 -10%

Total Current assets $51 893 29% $48

032 23% $3 861 8% $11

535 48% $11 438 46% $97 1%

Property and equipment net

$105 098 58% $99 544 66% $5 554 6% $6 966 29% $7 335 30% $-369 -5%

Property under capital lease net 2 780 2% 2 763 1% 17 1% 399 2% 374 2% 25 7%

Goodwill 16 763 9% 16 126 8% 637 4% 1 392 6% 1 392 6% 0 0%Other asset and defered charges 4 129 2% 3 942 2% 187 5% 3 976 16% 4 269 17% -293 -7%

Total assets $180 663 100% $170

407 100% $10 256 6% $24

268 100% $24 808 100% $-540 -2%

-18%

-6%

23%11%

-5%6%

4%

6%

Decreased income Higher pension & post-

retirement Higher working capital

balances

-2%

Due from banks:

$1.2B in FY2011

$2.6B in FY2010

Pharmacies Insurance Banks for credit card,

debit card Suppliers for marketing

13 divisions to 49 departments:

Better turnover Precise COGS, ending

inventory value at the lower of cost or market

Expansion:Asia, Brazil,

Mexico

US: $32M in goodwill

Int.: $605M in currency

translation

$10B

5%

Sears Canada: $150M increase

Change in exchange rates Retail environment changing

Low salesBUT Good Mgmt: -$42M

Improvements Extention of existing facilities and equipment

$-540M

 In millions of USD WALMART SEARSPeriod ending January

31, 2011 2010 2011 vs 2010 2011 2010 2011 vs 2010

LIABILITIES Amount % Amount % V V% Amount % Amount % V V%Current liabilitiesST Debt $1 031 1% $523 0% $508 97% $360 1% $325 1% $35 11%Account payable 33 557 19% 30 451 18% 3 106 10% 3 101 13% 3 335 13% -234 -7%Accrued liabilities 18 701 10% 18 734 11% -33 0% 3 115 13% 3 098 12% 17 1%Income tax payable 157 0% 1 347 1% -1 190 -88% 557 2% 534 2% 23 4%Current portion of LT debt and capitalized lease 4 991 3% 4 396 3% 595 14% 509 2% 482 2% 27 6%

Other liabilities 47 0% 92 0% -45 -49% 976 4% 1012 4% -36 -4%Total current liabilities $58 484 32%$55 543 33% $2 941 5% $8 618 36% $8 786 35% $-168 -2%

 LT debt 40 692 23% 33 231 20% 7 461 22% 2 663 11% 1 698 7% 965 57%Other non current liabilities 10 240 6% 8 985 5% 1 255 14% 4 373 18% 4 889 20% -516 -11%

Total Liabilities $109 416 61%$97 759 57% $11

657 12% $15 654 65% $15

373 62% $281 2%

EQUITYCommon stock $352 0% $378 0% $-26 -7% $1 0% $1 0% 0 0%Treasury stock -14 342 -8% -7 340 -4% -7 002 95% -5 826 -24% -5 446 -22% -380 7%Paid-in-capital 3 577 2% 3 803 2% -226 -6% 10 185 42% 10 465 42% -280 -3%Retained earnings 78 309 43% 73 697 43% 4 612 6% 4 930 20% 4 797 19% 133 3%Accumulated other comprehensive loss 646 0% -70 0% 716 1 023% -779 -3% -721 -3% -58 8%Noncontrolling interest 2 705 1% 2 180 1% 525 24% 103 0% 339 1% -236 -70%Total equity $71 247 39%$72 648 43% $-1

401 -2% $8 614 35% $9 435 38% $-821 -9%Total liabilities and shareholder's equity

$180 663

100%

$170 407

100%

$10 256 6% $24

268100

%$24 808

100% $-540 -2%

Comparative Balance Sheet: Liabilities & Owner’s Equity

-88%

97%10%

22%

6%1

023%24%

-7%

57%

7%-3%3%

-70%

Finance seasonal

buildups in inventory

Need liquidity

Lower sales at Sears Domestic So, reduced

inventory receipts at the end of 2010

Increased investment in

inventory$1.0B tax benefit in discontinued operations

Pay down or refinance existing

debt

$1.2B issuance of Senior Secured Notes (due 2018 at 6.625%) $1B of currency

translation loss Investment in UK

& Japan$162M of restricted stock and

performance share awards

$394M shares repurchasePurchased 5.4 million

common shares of Sears Canada $269M

Shareholders: $133M($1.19 per diluted

share)

$14B Stock Repurchase

95%

$4B Cash dividends ($1.21 per share)

BUT $17B from income taxes to invest abroad

In millions of USD 

WALMART SEARS

2010 2009 2008 2007 2006 2010 2009 2008 2007 2006

Cash $7 395 $7 907 $7 275 $5 569 $7 767 $1 390 $1 700 $1173 $1 622 $3 839

Equity $71 247 $72 648 $67 079 $64 608 $61 573 $8 614 $9 435 $9 699 $10 670 $12 710

LT debt $40 692 $33 231 $31 349 $29 799 $27 222 $2 663 $1 698 $2 132 $2 606 $2 843

Beta 0.34 1.96

LT Debt to Equity Ratio

Total Debt to Equity

Debt

57%

46%

47%

46%

44%

31%

18%

22%

24%

22%

154%

182%135% 150% 153% 146% 163% 170% 157% 135%

 In millions of USD WALMART SEARSFiscal year ending January 31, 2011Cash flows from operating activities Income from continuing operations 16389 133Depreciation and amortization 7641 900Income tax payable -1190 23Accrued liabilities -33 17A/R -945 -31Inventories -3605 -418A/P 3106 -234Prepaid expenses 168 39Property under capital lease -17 -25Current asset from discontinued operations 9 3Other non current liabilities 1275 0Post retirement benefits 0 -120Current liabilities from discontinued operations -45 -36Net cash provided by operating activites 22753 251Cash flows from investing activities Payments for property and equipment -13195 -531Goodwill -637 0Investment and business acquisitions -187 293Net cash used in investing activities -14019 -238Cash flows from financing activities ST borrowings 508 35Proceeds from issuance of LT debt 7461 -396Long-term obligations under capitalized lease -20 965Obligation under capitalized lease -10 Current portion of LT debt 605 27Additional paid-in-capital -226 -280Dividend -11777 0Common stock -26 0Purchase of treasury stock -7002 -380Other comprehensive gain/(loss) 716 -58Non controlling interests 525 -236Net cash used in financing activities -9246 -323Change in cash position -512 -310Difference 0 0Net change in cash -512 -310Cash at begining 7907 1700Cash at end 7395 1390

Comparative Cash Flow

Free cash flow:

$9 371

Free cash flow:-$280

-3 605 -418

-13 195 -531

7 461

-7 002

-396

-380

Inventories

Property and equipment

LT Debt

Treasury Stock

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-$500

$4,500

$9,500

$14,500

$19,500

$24,500

$29,500

$10,260$12,532

$15,996 $15,044$17,633

$20,164 $20,354$23,147

$26,249$23,643

$1,877 $3,177

$5,688

$2,151 $3,070 $4,498 $5,417

$11,648 $14,065

$10,944 Operating cash flow

Free cash flow

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-500

4500

9500

14500

19500

24500

29500

736 10682298

1444 1547 992 1507130628 838 1752 931 977 495 1146

-311

Operating cash flow

Free cash flow

Comparative 10-Year Cash Flow

2010 2009 Better / WorseLiquidityCurrent 0,89 0,86 BQuick 0,27 0,28 WProfitabilityROA 0,091 0,069 B ROE 0,24 0,2 B ROS 0,04 0,04 EqualTurnoverReceivables Turnover 82,89 98,48 W Asset Turnover 2,34 1,96 BInventory Turnover 8,68 9,31 WLeverageD/A 0,32 0,27 WD/E 1.54 1.35 WCash ManagementDSO 4,34 3,66 WICD 41,47 38,7 W APD 38,32 36,01 B CCC 7,5 6,33 W DividendsEPS 4,24 3,65 B DPS - - -Payout Ratio 0,26 0,26 EqualProductivitySales/Employee $210 925 $194 326 B Ni/Employee $8 195 $6 843 B

Individual Ratios 2 Years - Walmart

8 Better8 Worse

Based on 2009

32%

- 16%19%- 7%

+ 0.68 days

+ 1.17 days

16%

EQUAL

0.091 0.069

9.31

98.4882.89

8.68

1.962.34

3.65

3.664.34

4.24

6.337.5

EQUAL

Current & QuickRatios are Constant

Profitability:ROA & ROE

Turnover:Generates profits

But A/R & Inventory

Lowly leverage

# of days APD= 2.31 days UP

Earnings

Individual Ratios 2 Years - Sears 2010 2009 Better / Worse

LiquidityCurrent 1,34 1,30 BQuick 0,28 0,31 WProfitabilityROA 0,01 0,01 EqualROE 0,02 0,03 WROS 0 0,01 WTurnoverReceivables Turnover 63,43 67,55 WAsset Turnover 1,79 1,78 BInventory Turnover 3,45 3,66 WLeverageTIE - - -D/A 0,65 0,62 WD/E 1,82 1,63 WCash ManagementDSO 5,68 5,33 W ICD 104,44 98,47 W APD 35,50 37,73 W CCC 74,61 66,08 W DividendsMarket Cap. - - -EPS 1,19 1,99 WDPS - - -Payout Ratio - - -ProductivitySales/Employee $138 865 $192 559 WNi/Employee $426 $6 381 W

2 Better14 Worse

Based on 2009

$426

EQUAL

- 6%

- 6%

-12%

+ 8.6 days

- 40% 1.99

1.63

67.5563.43

1.82

3.663.45

1.19

66.0874.61

D/ALess Debt Financing

Profitability decreases

slowly

Cash Management# of days

No DividendEarnings

Liquidity WALMART SEARS Better / Worse

Current Ratio 0,89 1,34 WQuick Ratio 0,27 0,28 WProfitability  ROS 4% 0% BROA 9% 1% BROE 4% 2% BTurnover  Receivable 82.89 63.43 BAsset Turnover 2.31 1.79 BInventory 8.68 3.45 BCash Management Days  DSO 4.34 days 5.68 days B

ICP 41.47 days104.44 days B

APD 38.32 days 35.50 days WCCC 7.50 days 74.61 days BLeverage  Debt to Asset 32.4% 64,5% BDebt to Equity 153.7% 181,7% BMarket Value  EPS $4.24 $1.19 WDividend Payout 26% 311% WProductivity  Sales/Employee $210 925 $138 865 BNI/Employee $8 195 $426 B

Comparative Ratios - 2010

Based on Walmart

Wal-Mart: 14 Better

Better Profitability, Turnover,

Leverage and Productivity

Walmart:78% Better22% Worse

Sears:22% Better78% Worse

1900%

170%

50%

900%

252%

1000%

200%130

%

8%

96%

152%

+1.34 d+63 d -2.82

d+67d

356%

130%

  WALMART % DIFFERENCE INDUSTRY % DIFFERENCE SEARS

VALUATION RATIOSP/E Ratio (TTM) 12.94 45% 28.76  - -P/E High – Last 5 Yrs 16.06 35% 45.28 215% 97.45P/E Low – Last 5 Yrs 13.04 78% 16.66 113% 18.87

Beta 0.34 59% 0.58 336% 1.95Price to Sales (TTM) 0.45 60% 0.75 23% 0.17Prices to Book (MRQ) 2.82 77% 3.66 46% 1.67Price to Tangible Book (MRQ) 3.97 87% 4.58 282% 12.90Price to Cash Flow (TTM) 8.19 61% 13.44  -  -Price to Free Cash Flow (TTM) 35.34 140% 25.20  -  -DIVIDENDSDividend Yield 2.48 175% 1.42  - -Divisdend Yield – 5 Yrs Avg 2.08 166% 1.25  -  -Dividend 5 year Growth Rate 16.86 157% 10.77  -  -

Payout Ratio (TTM) 31.95 161% 19.83  -  -GROWTH RATESSales (MRQ) vs Qtr 1 Yr. Ago 5.85 41% 14.35 -28% -3.98Sales (TTM) vs TTM 1 Yr. Ago 5.95 31% 19.02 -14% -2.57Sales – 5 Yr. Growth Rate 5.11 43% 11.77 -40% -4.75

EPS (MRQ) vs Qtr. 1 Yr. Ago 7.06 208% 3.39 -22 283% -755.39EPS – 5 Yr. Growth Rate 9.19 109% 8.42 - -Capital Spending – 5 Yr. Growth Rate -2.92  - 18.58 - -FINANCIAL STRENGHTQuick Ratio (MRQ) 0.23 50% 0.46 43% 0.20Current Ratio (MRQ) 0.88 78% 1.13 98% 1.11LT Debt to Equity (MRQ) 66.02 126% 52.24 92% 48.10Total Debt to Equity (MRQ) 74.92 104% 72.23 111% 80.47Interest Coverage (TTM) 12.75 114% 11.22 15% 1.70

Reuter’s Ratios

336%59%

175%

41% -28%

-22 283%208%

98%43%

111%15%114%

104%

78%50%

45%

WALMART % DIFFERENCE INDUSTRY % DIFFERENCE SEARSPROFITABILITY RATIOSGross Margin (TTM) 25.02 % 95% 26.30% 97% 25.50%Gross Margin – 5 Yr. Avg. 25.05% 102% 24.62% 110% 27.11%

Operating Margin (TTM) 5.94% 127% 4.69 -77% <3.61%>Operating Margin – 5 Yr Avg. 5.87% 133% 4.42 15% 0.68%

Pre-Tax Margin (TTM) 5.46% 124% 4.39 -96% <4.21%>Pre-Tax Margin – 5 Yr. Avg. 5.40% 125% 4.32 5% 0.21%

Net Profit Margin (TTM) 3.68% 133% 2.77 -271% <7.51%>Net Profit Margin – 5 Yr. Avg. 3.61% 129% 2.79 -27% <0.75%>

Effective Tax Rate (TTM) 32.56 97% 33.44 -  -Effective Tax Rate – 5 Yr. Avg. 33.04 95% 34.94 1309% 457.32MANAGEMENT EFECTIVENESSReturn on Assets (TTM) 8.79% 153% 5.74 -238% <13.64%>Return on Assets – 5 Yr. Avg. 8.74% 147% 5.95 -22% <1.32%>

Return on Investment (TTM) 13.41% 155% 8.64 -259% <22.38%>Return on Investment – 5 Yr. Avg. 13.47% 140% 9.62 -22% <2.10%>

Return on Equity (TTM) 22.55% 155% 14.52 -331% <48.06%>Return on Equity – 5 Yr. Avg. 21.37% 140% 15.30 -27% <4.06%>EFFICIENCY

Receivable Turnover (TTM) 81.07 125% 65.09 92% 60.07Inventory Turnover (TTM) 8.69 127% 6.86 52% 3.57Asset Turnover (TTM) 2.39 118% 2.03 90% 1.82

Reuter’s Ratios (cont’d)

Walmart vs. Industry: 64% Better vs. 36%

Better

SEARS vs. Industry: 19% Better vs. 81%

Better

95%

118% 90%

127%

153%

155%

155%

-77%

97%

-238%

-259%

-331%

52%92%125%

127%

Dupont Equation In millions of USD WALMART SEARS

Period 2010 2009 % Change 2010 2009 % Change

Net income 16 389 14 370 14% 133 235 -43%

Sales 421 849 408 085 3% 43 326 44 043 -2%

Total assets 180 663 170 407 6% 24 268 24 808 -2%

Owner's equity 71 247 72 648 -2% 8 614 9 435 -9%

 

EM= TA/ OE 2.54 2.35 8% 2.82 2.63 7%

TAT = sales/TA 2.34 2.39 -2% 1.79 1.78 1%

ROS =NI/sales 3.9% 3.5% 10% 0.3% 0.5% -42%

ROE= ROSxTATxEM 23.0% 19.8% 16% 1.5% 2.5% -38%

8%

10%

16%

7%

-43%

-42%

-38%

Altman Z Score

 In millions of USD Walmart Sears

Period 01/01/2010(fiscal-year 2009)

01/01/2011(fiscal year 2010) 01/01/2009 01/01/2010

Working Capital -7 230 -6 591 2 652 2 917

Total assets 170 706 180 663 24 808 24 268

Retained earnings 66 638 63 967 4 562 4 797

EBIT 23 950 25 542 713 407

Market cap 195 086 203 840 8 290 10 780

Total liabilities 99 957 112 121 15 712 15 757

Sales 401 080 405 040 43 326 44 043

2010 2009

4.3 4.48

2.7 2.46+1.5 +2.0

2

-4%

+10%

+2253%+1790

%

2.35 2.24

Difference decreased, why? - Market cap for

Sears- Ratio: Sales/TA and

Market Cap/TL

Walmart >3 Healthy few risks of bankruptcy

Sears<3 lies in the grey area

higher chances of bankruptcy.

DOL / DFL / DTL

DOL1.90

DFL2.52

DTL4.79

DOL34.22

DFL0.72

DTL24.69

Operating Lease

Lease Financing

010002000300040005000600070008000

Operating Leases ($ M)Capital Leases ($M)

112%- 13%

2012

2013

2014

2015

There

after

010002000300040005000600070008000

Operating Leases ($ M)Capital Leases ($M)

- 42%

Present value ofMinimum lease

payments = $533

Yr = 14.76%NPV = $3,220

Present value ofMinimum lease

payments = $3,486

Yr = 12.89%NPV = $9,360

Bankruptcy In millions

of USD Coefficie

ntB/S Value

2010B/S Value

2009Bankruptc

y 2010Bankruptc

y 2009Cash and Equivalents 1 7 395 7 907 7 395 7 907Receivables 0.8 5 089 4 144 4 071.2 3 315.2Inventories 0.8 36 318 32 713 29 054.4 26 170.4Prepaid Expenses 0.8 2 960 3 128 2 368 2 502.4Other Current Assets 0.8 131 140 104.8 112Total Current Assets   51 893 48 032 0 0Property and Equipment 0.5 105 098 99 544 52 549 49 772Property under capital lease, net

0.5 2 780 2 763 1 390 1 381.5

Goodwill 0.5 16 763 16 126 8 381.5 8 063Other Assets and Deferred Tax Assets

0.5 4 129 3 942 2 064.5 1 971

Total Fire Sale Assets   180 663 170 407 107 378.4 101 194.5Total Current Liabilities 1 58 484 55 561 58 484 55 561Net Cash       48 894,4 45 633.5Total Long-Term Liabilities

1 40 692 33 231 40 692 33 231

Sub Total   109 416 97 777 8 202.4 12 402.5Preferred Stock   x   0 0Liquidation Value   x x 8 202.4 12 402.5Common Share Outstanding

  x x 3 516 3 786

Net Liquidation Share

  x x

 In millions of USD

Coefficient

B/S Value 2010

B/S Value 2009

Bankruptcy 2010

Bankruptcy 2009

Cash and Equivalents 1 1 390 1 700 1 390 1 700Receivables 0.8 683 652 546.4 521.6Inventories 0.8 9 123 8 705 7 298.4 6 964Prepaid Expenses 0.8 312 351 249.6 280.8Other Current Assets 0.8 27 30 21.6 24Total Current Assets   11 535 11 438 0 0Property and Equipment 0.5 6 966 7 335 3 483 3 667.5Property under capital lease, net

0.5 399 374 199.5 187

Goodwill 0.5 1 392 1 392 696 696Other Assets and Deferred Tax Assets

0.5 3 976 4 269 1 988 2 134.5

Total Fire Sale Assets   24 268 24 808 15 872.5 16 175.4Total Current Liabilities 1 8 618 8 786 8 618 8 786Net Cash       7 254.5 7 389.4Total Long-Term Liabilities

1 2 663 2 663 2 663 1 698

Sub Total   15 654 15 373 4 591.5 5 691.4Preferred Stock   x x 0 0Liquidation Value   x   4 591.50 5 691.40Common Share Outstanding

  x x 109 115

Net Liquidation Share

  x x

Bankruptcy:

End of a business

Fresh Start

Total Liquidation

The coefficients:How quickly

the asset can be

liquidated

Net Liquidation

Share:Liquidation/Common

Share Outstandin

g

2.33

3.28 42.12

49.49

2010:4.3% of

Wal-Mart’s stock

prices

2009:6.5% of

Wal-Mart’s stock

prices

2010:56% of SEARS’ stock

prices

2010:55% of SEARS’ stock

prices

Stock Market Investigation

Comparative Stock Prices Over 1 Year

High volatility

Resistance

-18%

Positive

trend

Negative

trendRecover

y

Coefficient correlation

Coefficient Correlation

Capital Expenditure In millions of

USD WALMART

Assets % Change Net sales % Change Operating Income % Change

Period 2010 2009 2010 vs 2009 2010 2009 2010 vs

2009 2010 2009 2010 vs 2009

Walmart US 112 231 109 327 2,7% 260 261 259 919 0,1% 19 914 19 313 3,1%Walmart international 47 103 40 971 15,0% 109 232 97 407 12,1% 5 606 4 901 14,4%

Sam's club 21 328 20 108 6,1% 49 459 47 806 3,5% 1 711 1 515 12,9%

Total 180663 170407 6,0% 418 952 405 132 3,4% 27 231 25 729 5,8%

 In millions of USD

SEARS

Assets % Change Net sales % Change Operating Income % Change

Period 2010 2009 2010 vs 2009 2010 2009 2010 vs

2009 2010 2009 2010 vs 2009

Kmart 6 085 5 729 6% 15 593 15 743 -1,0% 353 190 86%

Sears Domestic 15 207 15 489 -2% 22 937 23 672 -3,1% -112 133 -184%

Sears Canada 2 976 3 590 -17% 4 796 4 628 3,6% 233 390 -40%

Sears Holding 24 268 24 808 -2% 43 326 44 043 -1,6% 474 713 -34%

Total 48 536 49 616 -2% 86 652 88 086 -1,6% 948 1426 -34%

6.1%15%

6%

2.7%

3.5%

12.1%

0.1%

3.4%

12.9%

3.1%

5.8%

14.4%

6%-2%-17%-2%

-1%-

3.1%3.6%

-1.6%

86%-184%-40%

-34%-2% 1.6% -34%

+8% +5% +39.8%

ERR / RRR

0 0.5 1 1.5 2 2.50

2

4

6

8

10

12

14

16

18

20

Security Market Line

Return Linear (Return)Risk taken (Beta)

Expe

cted

Ret

urn

BUY

SELL

%

ERR2 10.6ERR4 10.4

ERR3 9.1ERR1 8.7

ERR1ERR3

ERR2ERR4

RRR 13.00

Km 8.70

B 0.46

B 2.51

Growth 8.20% to 8.80%D0 = 0.32P0 = 61.19

Growth 3.20% to 2.20%D0 = 0P0 = 70

Analyst Estimates (Yahoo)

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy 1 1 0 0Buy 0 0 1 1Hold 1 2 1 1Underperform 5 4 4 4

Sell 0 0 0 1

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy 7 9 9 9Buy 4 4 4 4Hold 17 15 14 14Underperform 1 1 1 1Sell 0 0 0 0

2 analysts

28 analysts

7

174

01

1

Analyst Estimates Valuation Yield

30-Year T-Bond Yield

S&P 500 Dividend Yield

S&P 500 Earning Yield

Cash Return

Dividend Yield

Earning Yield

0 2 4 6 8

3.5

2.4

6.7

4.4

2.5

7.3

30-Year T-Bond Yield

S&P 500 Dividend Yield

S&P 500 Earning Yield

Cash Return

Dividend Yield

-80 -70 -60 -50 -40 -30 -20 -10 0 10 20

3.5

2.4

6.7

NA

0

-69,7 Earning Yield

7.3%

-69.7%

2.5%

Has approved an annual dividend of $1.21 per share, an 11 percent increase from the $1.09 per share paid during fiscal year 2010.

The annual dividend of $1.21 per share will be paid in four quarterly installment of $0.3025 per share.

Has increased its dividend every year since its first declared dividend of $0.05 per share in March 1974.

Does not provide any dividend since they

merged with K-Mart in 2004

Dividend History

5-year DPS Evolution

+21%

+48%

+31% +8

%

Hard economi

c conditio

ns

-32%

+72%

+10%

Walmart

Target

Costco

Sears

0 0.2 0.4 0.6 0.8 1 1.2 1.4

1.21

0.840000000000001

0.795

0

Dividend vs. Competitors 2010

Walmart Dividend Evolution

+700%

Mike Duke

"We're very pleased that our financial position continues

to allow us to pay shareholders an increased dividend again this year.”

94.0%

6.0%

95.0%

5.0%

outstanding sharestreasury stock

2009

2010

Treasury Stocks

 In millions of USD

2009 2010

Numbers % Numbers %Outstanding Share 3 929 96% 3786 93%

Treasury Stock 145 4% 280 7% 

Total 4074 100% 4066 100%

The amount of Treasury stock rise form 4% to

7% which represent a 43%

raise

94.0%

6.0%

95.0%

5.0%

outstanding sharestreasury stock

2010

2009

Treasury Stocks (cont’d)

 In millions of USD

2009 2010

Numbers % Numbers %Outstanding Share 115 94% 109 95%

Treasury Stock 7 6% 6 5% 

Total 122 100% 115 100%

The amount of Treasury stock fall form 6% to

5% which represent a 20%

fall

WACC – Walmart Walmart Weighted average

cost of capital is 6.27%

86%

13.9% 66.3

%

33.7%

6.7%

6.3%

5.8%

Sears Weight average cost of capital is 9.11

WACC - Sears

64.6%

34.8%

65.2%

35.4%

9.1%

7.5%10.7%

Bank of Walmart Walmart money car in association

with GE money bank

Walmart also have partnership with SunTrust and Green dot

Walmart Canada provide a debit card with no intermediary

More Investigations

Governments Factors: Higher taxes Net import Increase of exportation taxes from China’s Gov.

Political Factors: Cold War between the U.S and China

Economic Factors: Currency:

• Decrease of the dollar against the renminbi • Increase of the renminbi against the dollar

Price competition Inflation: Leading to a decrease in customers’ purchasing

power Debt: Interest Rate

Environmental / Internal Factors: Inventory: Strikes or environmental foribidding importing

from China

Risks

Risks (cont’d)

Governments Factors: Higher taxes on

Net Import

Economic Factors: Price competition

Inflation (leading to a decrease in customers’ purchasing power)

Increase of Interest Rate for short term borrowing and long term

debt

Environmental/Inside Factors: Strikes

Lost of suppliers Dependence of brands

401k Retirement Plan

Profit Sharing Additional contributions Employees can contribute Foreigners’ employees

benefits

Employees Savings Plan

Next year, the company will offer a safe harbor 401k Plan

For all eligible U.S and Puerto Rico associates

Employees can contribute up to 50% of their pretax earnings (limit to the statutory)

> 50 years old may have defer additional earnings in catch up to the maximum statutory limit

401k Retirement Plan Pensionable service Domestic Benefit Plans

– The Sears Holding Pension Plan

– Based on:• Length of service• Compensation• Social security • Medical and

insurance benefits

Employees Savings Plan (cont’d)

New Master Plan including:

Post-retirements programs

Kmart pre-65 retiree medical plan

Sears pre-65 Sears post-65 retiree

and medical plan merged

Insider – Institutional Trading

Insider – Institutional Trading (cont’d)

Legal Proceedings

Dukes v. Wal-Mart Stores, Inc.

Sexual discrimination lawsuit Largest civil rights class action suit in United

States history

Betty Dukes

Environmental Issues

Transition to renewable energy

Improving the efficiency of our buildings and fleet

Reduce energy use and emissions.

Send waste to recycling facilities Instead of the landfill, recycled packaging and products

Provide customers products that can reduce impact on the environment Saving energy, water and money

Impact on the Environment

Energy management. Discover new ways to reduce energy consumption

Waste reduction & recycling (tires, papers, cardboard)

Reduce emissions, transportation through supply chain management

Impact on the Environment (cont’d)

HOT NEWS

Wal-Mart reported selling 450,000 American flags

between September 11th and 13th.

Walmart Joined Digital Video Locker

Brian Cornell is expected to join the company as CEO (Currently executive vice president)

Starts betting on China. Increased their stake in a Chinese e-commerce firm Yihaodian to 51%

Walmart wants to acquire Game

HOT NEWS

Sears shocked the world by telling that they will close 120 Sears and Kmart storesThe main reason they did not perform in their holiday sales season

Sears Canada cut down prices competition heats up

Sears Financial has launched an online points redemption system for its five million card members

HOT NEWS

Thank You for Your Attention!