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Sears Roebuck And Co Vs Wal Mart Stores Inc Case Study

Case:Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc.
Financial Statement
Case analysis

1. How do the retailing strategies of Sears and Wal-Mart differ? How does each firm operate their business/attempt to create value?
The two companies differs in retailing strategy in two ways.

1. Credit sales boost sales greatly in Sears, not in Wal-mart
Since 1992 when Arthur C. Martinez was brought on board to head Sears’s retailing operations, credit sales, especially through the use of the company’s own proprietary credit card, boost the sales of the company greatly from 1993 to 1997. The new card accounts between 1993 and 1996 were increasing by roughly a 50% rate every year. Besides the company’s own credit cards, the third…show more content…

(1) The higher asset turnover of Walmart at 2.8074 over 1.1032 of Sears represents that the efficiency of Walmart to utilize same amount of assets to generate revenue is obviously higher than Sears. The gap can mainly be attributed to gross revenue, since the two marts shares nearly the identical total assets.

(2) There exists huge difference of leverage ratio, which indicates the financial structure of a firm, between Sears and Walmart. Greater use of debt financing increases financial leverage and, typically, risk to equity holders and bondholders alike. While leverage magnifies profits when the returns from the asset more than offset the costs of borrowing, losses are magnified when the opposite is true. A corporation that borrows too much money might face bankruptcy or default during a business downturn, while a less-levered corporation might survive.

When taking the common size analysis into account, we can notice the total current liabilities and long-term debt and

Sears vs. Wal-Mart 1. Wal-Mart markets itself as a large discount retailer that targets lower-income markets. Sears, on the other hand, has tried to reinvent itself as a middle-class retailer with a focus on women. In addition, Sears offers its own credit line, where shoppers can sign up for a Sears credit card that offers more flexibility in paying for merchandise. On the other hand, Wal-Mart has a partnership with Chase that offers a credit card with Wal-Mart’s logo on the card, but no actual affiliation to the company. This indicates a difference in retail strategy between the two firms. While Sears wants to appeal to middle and upper-class markets and retain customers (by offering its own credit card), Wal-Mart markets itself as a low-cost, discount retailer with “always low prices.” 2. Note – all financial numbers pulled from data are in millions Wal-Mart 1998 Ratios: Sears 1997 Ratios: 3. Wal-Mart 1998 –

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