If Wal-Mart were a country instead of a company, it would rank as China’s sixth largest export country.
Gee Whiz Statistics for Wal-Mart
Wal-Mart (which includes Sam’s Club stores) is a record-breaking enterprise. Here are some of its breathtaking statistics:
- Wal-Mart is so large that its 2010 sales were about 50% more than the combined total of its top five closest competitors.
- Wal-Mart has 8,416 stores worldwide. Roughly half of them are in international markets.
- Most of Wal-Mart's foreign-based stores are in China and Central and South America.
- Wal-Mart’s fiscal year 2010 earnings topped $405 billion in earned revenue.
- Wal-Mart plans to open 145-160 new stores in 2011.
- The majority of its 2010 new store openings were in Mexico and that trend is expected to hold for 2011.
Wal-Mart and the Chinese Yuan
Wal-Mart’s income is tightly tied to the value of the Chinese Yuan. The company’s reliance on Chinese imports makes it vulnerable to a weakening dollar or strengthening of the Yuan. Not only does Wal-Mart purchase billions of dollars worth of inventory directly from China, but some of its other merchandise comes from such companies as Mattel, the large toy company that also purchases from China items made in China’s low cost labor market.
China announced an enhancement of the exchange rate flexibility of its currency in mid 2010. This would allow the value of its Yuan to rise. A stronger Yuan threatens Wal-Mart’s bottom line. It would mean Wal-Mart has to pay more for its Chinese merchandise.
Wal-Mart and the Bad Economy
Thanks to its gigantic size and the buying power that affords, Wal-Mart buys its merchandise at bottom-rung prices. Few suppliers buck Wal-Mart because the worldwide mammoth retailer represents a high percentage of their own sales. Quite the contrary.
A National Public Radio series on Wal-Mart talked about “Vendorville”. This refers to more than 200 major corporations whose business is so closely knit to Wal-Mart that they have opened offices near the Wal-Mart headquarters in Bentonville, Arkansas.
On the “wikinvest“ website for Wal-Mart, aimed at Wal-Mart stockholders, the claim is that “due to Wal-Mart’s low prices, consumers gravitate to Wal-Mart stores during economic downturns.” On the flip side, the same site maintains that “as the global economy emerges from recession, (it) stands to lose a lot as consumers opt to buy higher quality and more expensive items.” The company’s sales volume and comparable store sales for 2009 and 2010 seem to support such a trend, but the difference is not as marked as one might expect. The Wal-Mart profile may not undergo much change. Target, probably its closest competitor, remains leagues behind, as do Sears Holdings and the rapidly expanding Kohl’s chain. Only Target competes in the grocery market, which now provides about half of Wal-Mart’s income.
What Is in Wal-Mart’s Future?
In addition to expanding its international market, Wal-Mart plans to develop an e-commerce market to compete with Amazon. It has also launched a video sales operation called Vu Du to compete with Netflix. The future of the world’s biggest retailer continues to look rosy enough to stave off any large scale competition.
Morningstar’s advice to prospective investors in Wal-Mart stock sums it all up:
“Unmatched scale relative to most vendors leads to favorable terms on everything from the products on its shelves to store leases and distribution agreements. These competitive advantages generate positive economic returns and a wide economic moat, a rarity in retail.”
Sources:
“Wal-Mart’s Social and Economic Impact,” four-part series, National Public Radio, June 2-5, 2003
Stock: Wal-Mart (WMT), from Morningstar website; accessed Jan. 15, 2011
Stock: Wal-Mart (WMT), from wikinvest website; accessed Jan. 15, 2011
Rosemary E. Bachelor - Rosemary Bachelor, a prize-winning journalist, has had a career as an editor, feature writer, magazine publisher and author. Her latest ...
