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vs Wal-Mart Stores
Case Background
Sears, Roebuck and Co. Wal-Mart Stores
Started as a company dealing in catalogue sales Diversification into 3 types of business Retail, Service and Credit Retail store types Full line stores, Auto stores, Home and lifestyle stores
Started as a franchisee type variety store Primarily Retail business Discount stores, Supercenters, Sams club warehouses
Walmart Stores
Increase of 5% from 2558 in 1995 to 2740 in 1997
Comments
No. of stores
Retail selling space has increased more for Walmart as compared to Sears Retail space Increase of 13% from 81 to 93 mn sq ft Increase of 12.5% from 278 to 313 mn sq ft
Increase of 23% from 357 to 439 Increase of 12% from 531 to 596 mn mn
Increase of 15% from 433 to 498 Increase of 9% from 2782 to 3040 mn mn
Credit card
Accounting Policies
Depreciation Straight Line Method
SEARS 5-10 years on furniture and 40-50 years on buildings WALMART 5-12 years on furniture and 5-33 on buildings
1. Retailing Segment Companys namesake stores Speciality chains o Home Furnishings o Hardware o Tires & Batteries o Auto Parts
2. Service Segment Home Remodeling Appliance Repair 3. Credit Businesses Activities related to Sears Credit Card
4. Corporate Segment
Business Segment
1997
1996
1995
$ 2082 mn
-1%
$ 2094 mn
21%
1728
While the services segment grew at a very good rate for consecutive years, Operations from Credit Segment fell alarmingly. Since any default of credit defaulters was to be borne by Sears, Roebuck & Co., this further fall was bound to hit them severely
20956
1532 1113 7%
4.24%
57.78% 38.95% 29.63%
20104
971 801
4.75%
64.86% -3.03%
19193
589 826 4.16%
5.40% 29.81%
Sears started accepting other credit cards like VISA, MasterCard, etc since 1993
This did not cause a significant change in the percent of sales through the years, but
The allowance & provision for uncollectable accounts very recorded to be very high
signifying more bad debts in the respective calendar year.
An account is generally considered delinquent when the past due balance is three ti the scheduled minimum monthly payment, which is also on a rise.
Conclusion
Wal-Mart used their current assets more efficiently to generate sales than sears. Wal-Mart had less debtors compare to sears, majority of sears CA comprised of debtors In comparison with Sears Walmart has higher Sales/Assets ratio which indicates that the operational efficiency is better and returns from fixed assets in higher Also the current assets have not generated enough Revenue for Sears when compared to that of Wal-Mart
The Sales/ Cash for Sears shows that there has been increase in Sales but a decrease in the cash collections for the year 1997, and this is in sharp contrast to the previous year, which in turn can lead to a liquidity crisis. At the same time, Wal-Mart continued to maintain almost high ratio for the consecutive years.