Walmart Valuation Essay

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Business summary
Wal-Mart Stores, Inc. is a worldwide retailer focusing on helping customers save money and live better. Today Wal-Mart operates more than 10,000 retail units under 69 different banners in 27 countries. As the world’s largest employer, Wal-Mart have more than 2 million hard-working associates who serve 200 million customers and members every week. Wal-Mart operates under an everyday low price (EDLP) pricing philosophy and this founder of the company implemented policies that have been in use in the various segments of the company such as the Wal-Mart U.S segment, the International segment and the Sam’s Club. In fiscal year 2012, Wal-Mart added 1,094 stores and 42.2 million square feet around the world. In addition, San’s club has strong momentum that sets the stage for continued growth in the warehouse club segment. In order to keep pace with the change in the world of retail, Wal-Mart has operated online business in the U.S., the U.K. and Brazil and also has growing eCommerce businesses in Canada and China.Wal-Mart delivered strong returns to shareholders and returned $11.3 billion to them through dividends and share repurchases during 2012 .

Industry trends
The superstore and warehouse clubs industry includes roughly 3,000 stores and combined revenue of $200,000 billion. Warehouse clubs are typically able to resist some economic downturn due to the low pricing and high volume sales. Many other businesses depend on this.
The industry is expected to endure the current economic situation. These superstores are very appealing to price sensitive customers; along with the fact that they sell consumer essentials such as food and beverage. This will help to protect them from the hurting economy. Due to their competitive price strategies, it is believed that the superstores should see sales growth in the upcoming year. Demand from small business owners are expected to slow, which could in turn hurt club store operators’ profitability.
At the end of 2012, the industry’s stores saw improved year-over-year same store growth. However, many of these figures exclude gasoline sales and foreign exchange impacts.

Competitive analysis
Target is the nation’s second largest discount chain, following Wal-Mart. There are about 1,685 Target stores and SuperTarget stores in 48 states. They also operate an online business, Target.com. Target offers its customers more upscale and fashion forward products than their competitors. In 2004, Target sold its Marshall Field’s and Mervyns department stores after trying to turn them around.

Costco is the largest wholesale club operator in the nation. There are more than 53 million cardholders in 40 states, Puerto Rico, Canada, Japan, Mexico, South Korea, Taiwan, and the UK. There are roughly 545 membership wholesale stores. There are three different membership options that their customers have to choose from: the Business membership ($50), the Gold Star membership ($50), and the Executive membership ($100). The Executive membership allows their customers to purchase products and services, which include: insurance, mortgage services, and long distance phone service.

BJ’s Wholesale Club is the third largest membership wholesale club in the nation. The company has about 15 million members and 175 locations in 15 states. Roughly 7,300 products are sold, that consist of food products, apparel, house wares, office equipment, small appliances, and gas. One thing that sets BJ’s apart from their competitors is the company’s aim at individual retailers rather than small businesses. Two Stage Dividend Discount Model

Year Value DPS(t) or TV(t) Present value at 4.32%
0 DPS(0) 1.46
1 DPS(1) 1.67 1.61
2 DPS(2) 1.93 1.77
3 DPS(3) 2.22 1.96
4 DPS(4) 2.56 2.16
5 DPS(5) 2.95 2.39
5 TV(5) 129.87 105.12
Intrinsic value of 's common stock (per share) 115.01
Current share price $74.77

High growth rate &period:I assume that the length of high growth period for Wal-Mart is
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