Financial Essay

1. Introduction

The following report presents a detailed research and analysis of Wal-Mart Stores Inc., a retail store based in the United States with stores in other major countries around the world. The purpose of this analysis is to advise the board of directors about a potential major investment in the company and whether the investment would be feasible.

The report includes Wal-Mart's company profile; an overview of the challenges and opportunities facing the retail industry, along with an analysis of its past, present and future expected performance, benchmarked against that of the entire retail industry. In addition we will be examining the following questions:-

 What is the company's sustainable growth rate?

 What is the correlation between the stock price and the company's performance? Indicate how you would expect the stock price to change in future years given the past trend and the existing and expected economic environment, assuming that the company does not embark on this project.

 Based on your analysis of the company's strengths and weaknesses, suggest what method of financing may be most viable for your company, and provide supporting arguments for your suggestion.

2. Company Background Information

Ranked first among retailers in Fortune Magazine's 2009 Most Admired Company, Wal-Mart is a leader in sustainability, corporate philanthropy and employment opportunity. Wal-Mart was founded by Sam Walton in 1962 with the opening of the first Wal-Mart discount store in Rogers, Arkansas. Sam's goal was to save people money as quoted in their mission statement 'we save people money so they can live better,' while serving its members over 200 million times a week at more than 8,416 stores in over 15 countries.

After investigating everything he could about discount retailing in 1962, Sam and his wife Helen contributed 95% of the financing of the first store at a time when 2 other major competitors, K-mart and Target also opened their doors. Ten years and 15 stores later Wal-Mart stock was traded for the first time on the New York Stock Exchange allowing for more expansion. By the end of that decade Wal-Mart grew to 276 stores in 11 states. The first Sam's Club member's warehouse was opened in 1983 followed by the first Super Centre in 1988. By 1989 there were 1402 Wal-Mart Stores and 123 Sam's Club location while sales rose from 1 billion in 1980 to 26 billion in 1989.

Today the same principles apply which is to offer great savings to the customers. Wal-Mart serves over 176 million customers a year with its 8,416 stores and club locations in 14 markets, with over 2.1 million employees in the U.S and abroad with the majority located in the U.S.A.