Sears Walmart Essay

1869 Words8 Pages
The following report will compare, contrast, and analyze the financial performance of Sears and Wal-mart between 1995 and 1997 to be used as input into stock buying and selling recommendations given to clients. Specifically, the report will discuss: • Economic and historical factors that lead us to believe that Wal-mart, and not Sears, should have a higher ROE • Each company’s financial performance • Each companies’ past and likely future profitability Big picture: Factors why Wal-mart should have a higher ROE. Even though Sears’ ROE of 22% exceeds Wal-mart’s ROE of 20%, historical and economic factors have led us to question the validity of these values as to who is the real retail powerhouse. In the past three decades, Sears has faced increased competition in the marketplace, resulting in a loss of market share as well as sales. To cut costs and improve profitability, in 1992 Sears repositioned itself within the market to target middle-class female shoppers. This niche market means that Sears can focus its mission and better appeal to its customers through specific product offerings, but also means that the potential market pool of customers is reduced significantly. However, during this same time period, Wal-mart has had tremendous growth, becoming the world’s largest retailer in 1991 and breaking $100 billion in annual sales by 1996. Wal-mart’s “Always low prices” strategy offers mass appeal to price sensitive customers, offering the company a much larger customer pool than that of Sears. Plus, it’s three types of stores--Wal-mart Discount Stores, Wal-mart Supercenters, and Sam’s Clubs--all target different types of price sensitive customers, such as those solely focused on cheap purchases and those focused on realizing savings by buying in bulk. The trajectories of these two companies over the past three decades have been completely
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