Walmart 1996

In: Business and Management

Submitted By ahmadthiwul
Words 11673
Pages 47
Harvard Business School

9-794-024
Rev. August 6, 1996

DO

Wal*Mart Stores, Inc.

In Forbes magazine’s annual ranking of the richest Americans, the heirs of Sam Walton, the founder of Wal*Mart Stores, Inc., held spots five through nine in 1993 with $4.5 billion each. Sam Walton, who died in April 1992, had built Wal*Mart into a phenomenal success, with a 20-year average return on equity of 33%, and compound average sales growth of 35%. At the end of 1993, Wal*Mart had a market value of $57.5 billion, and its sales per square foot were nearly $300, compared to the industry average of $210. It was widely believed that Wal*Mart had revolutionized many aspects of retailing, and its was well known for its heavy investment in information technology.

David Glass and Don Soderquist faced the challenge of following in Sam Walton’s footsteps. Glass and Soderquist, CEO and COO, had been running the company since February 1988, when Walton, retaining the chairmanship, turned the job of CEO over to Glass. Their record spoke for itself—the company went from sales of $16 billion in 1987 to $67 billion in 1993, with earnings nearly quadrupling from $628 million to $2.3 billion. At the beginning of 1994, the company operated 1,953 Wal*Mart stores (including 68 supercenters), 419 warehouse clubs (Sam’s Clubs), 81 warehouse outlets (Bud’s), and four hypermarkets. During 1994 Wal*Mart planned to open 110 new Wal*Mart stores, including 5 supercenters, and 20 Sam’s Clubs, and to expand or relocate approximately 70 of the older Wal*Mart stores (65 of which would be made into supercenters), and 5 Sam’s Clubs. Sales were forecast to reach $84 billion in 1994, and capital expenditures were expected to total $3.2 billion. Exhibit 1 summarizes Wal*Mart’s financial performance 1984-1993. Exhibit 2 maps Wal*Mart’s store network. The main issue Glass and Soderquist faced was how to…...

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