Walmart Essay

411 WordsMay 21, 20152 Pages
Between 2000 and 2005, Walmart experienced tremendous growth (see Exhibit 1 for comparative financial statements). With almost $288 billion in sales, Walmart was the largest company in the world in 2005, a title that it had held for four years.6 Profits and sales increased each year and the company consistently met analyst expectations. By 2005, the company’s profits had topped $10 billion for the first time in its history.7 Walmart’s Supercenter strategy proved quite successful. Since 2000, Walmart had opened an average of 16 Supercenter stores every month and planned to open another 4,000 in the U.S. over the next 10 to 15 years (see Exhibit 2 for store counts).8 By 2005, Walmart was the nation’s largest grocer, controlling about 16% of the grocery market. Of the 31 grocery chains that filed for bankruptcy between 1998 and 2006, 27 cited their inability to compete with Walmart’s prices, which tended to be 15% lower than other grocers’.9 Despite these successes, the company’s flagging stock price performance in comparison to the S&P 500 (see Exhibit 3) beginning in 2003 provided an indication of the significant strategic challenges it faced. Specifically, although international sales had increased each year from 2000 through 2005, they accounted for only 20% of Walmart’s 2005 sales. This was far short of the company’s original 30% target and a reflection of the difficulty in transporting Walmart’s business model internationally. In addition, although Walmart had experienced great success with its Superstores, analysts were skeptical of its strategy of deliberately cannibalizing sales of existing Superstores by adding Superstores in areas where existing stores’ profits had reached $100 million. Walmart also faced the challenge of managing costs. In 2004, the company faced higher health insurance, labor, and utility costs.10 Walmart dealt with these pressures by

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