Industry Analysis

Samir Mohan

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Industry Sector & the NAICS 2 Digit Code

Industry Sector: Retail Trade

NAICS 2 Digit Code: 44-45

The Sector as a Whole:

The Retail Trade sector comprises establishments engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of merchandise. The retailing process is the final step in the distribution of merchandise; retailers are, therefore, organized to sell merchandise to the general public.

Store retailers operate fixed point-of-sale locations, located and designed to attract a high volume of walk-in customers. In general, retail stores have extensive displays of merchandise and use mass-media advertising to attract customers. They typically sell merchandise to the general public for

personal or household consumption, but some also serve business and institutional clients.

Source: http://www.naics.com/

Industry Sub-Sector & the NAICS Code

Industry Sub-Sector: Warehouse Clubs & Supercenters

NAICS Code: 452910

This industry comprises establishments known as warehouse clubs, superstores or supercenters primarily engaged in retailing a general line of groceries in combination with general lines of new merchandise, such as

apparel, furniture, and appliances.

Source: http://www.naics.com/

Warehouse Clubs & Supercenters (452910)

# of Stores

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1997 2002

# of Stores

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

Sales

1997

2002

1997 2002 Growth# of Stores 1,530 2,912 90%Sales ($1,000) 81,918,756 191,252,396 133%

Source: http://www.naics.com/

Discount Industry & the NAICS Code

Industry Sub-Sector: Discount Department Stores

NAICS Code: 452112

This U.S. industry comprises establishments known as department stores that have central customer checkout areas, generally in the front of the store, and that may have additional cash registers located in one or more individual departments. Department stores in this industry sell a wide range of general merchandise (except fresh, perishable foods).

Source: http://www.naics.com/

Discount Department Stores (452112)

1997 2002 Growth# of Stores 6,378 5,650 -11%Sales ($1,000) 126,122,830 133,886,174 6%

# of Stores

5,200

5,400

5,600

5,800

6,000

6,200

6,400

6,600

1997 2002

# of Stores

Sales ($1,000)

122,000,000

124,000,000

126,000,000

128,000,000

130,000,000

132,000,000

134,000,000

136,000,000

1997 2002

Sales ($1,000)

Source: http://www.naics.com/

Warehouse Clubs & Supercenters (452910) + Discount Department Stores (452112)

Combined

1997 2002 Growth# of Stores 7,908 8,562 8%Sales ($1,000) 208,041,586 325,138,570 56%

# of Stores

7,400

7,600

7,800

8,000

8,200

8,400

8,600

8,800

1997 2002

# of Stores

Sales ($1,000)

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

1997 2002

Sales ($1,000)

Since Wal-Mart belongs to both Sub-Sectors, Wal-Mart data will be compared to the total of both NAICS codes 452910 & 452112

Source: http://www.naics.com/

Wal-Mart

1997 2002 GrowthSales ($1,000) 104,859,000 217,799,000 108%

Sales ($1,000)

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

1997 2002

Sales ($1,000)

Source: www.walmart.com

Wal-Mart’s performance relative to Warehouse Clubs & Discount Stores

19972002

Walmart Sales ($1,000)

WCS & DD Sales ($1,000)

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

Walmart Sales ($1,000)

WCS & DD Sales ($1,000)

In 1997 Wal-Mart contributed 50% of the Sub Sector’s overall Sales. (Warehouse Clubs - 452910 & Discount Stores - 452112)

By 2002 Wal-Mart sales grew to 66% of the Sub Sector’s overall Sales.

Source: http://www.naics.com and www.walmart.com /

Market Share & HHI

ENTERPRISE MARKET SHARELet's begin at the beginning. A two year time frame (2006-07) was used because their fiscal years have different closing dates. The fiscal years of Mal-Mart (WMT) and Sears (SHLD) closed in early 2007 while those of Costco (COST) and Target (TGT) closed in late 2006. The companies generated $456.6 billion in combined sales revenues. Wal-Mart's share was 62.2 percent of group revenues. The market shares of its three competitors were 13.2, 13.0 and 11.6 percent.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Source: http://www.customersandcapital.com/book/walmart/

HHI Calculations 2006-07 Market

Share

Market

Share Sqd.

62.2 3,868.84

13.2 174.24

13.0 169

11.6 23.2

HHI = 3,868.84 + 174.24 + 169 + 23.2 = 4235.28

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

QuickTime™ and aTIFF (Uncompressed) decompressorare needed to see this picture.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

QuickTime™ and aTIFF (Uncompressed) decompressorare needed to see this picture.

HHIThe higher the index, the more concentration and (within limits) the less open market competition. A monopoly, for example, would have an HHI index of 10,000, the maximum score.

If the 4 company’s had an equal share of 25% the HHI index would be 2500, with no particular company having a higher concentration over the others. Based on these parameters an HHI index of 4235.28, the Discount Department and Warehouse Clubs industry would be considered low to mid concentrated with Wal-Mart having the majority

of share.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Source: http://www.oligopolywatch.com/2003/08/15.html

Wal-Mart’s Performance Relative to Competitors within the same Sub-Sectors

Source: http://www.smartmoney.com/stock-quote/?referrer=/marketmap/index.cfm&story=competition&symbol=WMT

2008 Wal-Mart Stores Inc. BJ's Wholesale Club Inc. Costco Wholesale Corp. Target Corp. Family Dollar Stores IncIndustry Discount, Variety Stores Discount, Variety Stores Discount, Variety Stores Discount, Variety StoresDiscount, Variety StoreCurrent Share Price 47.12 28.68 45.03 31.2 27.77Market Value $184,831 mil $1,687 mil $19,509 mil $23,487 mil $3,885 milRevenues $404,040 mil $9,944 mil $73,068 mil $65,259 mil $7,054 milNet Earnings $13,705 mil $132 mil $1,284 mil $2,633 mil $240 mil5-yr Sales Growth 9.14% 7.62% 10.15% 7.25% 7.34%5-yr Earnings Growth 9.84% 4.37% 11.04% 8.59% 2.73%Net Profit Margin 3.40% 1.30% 1.80% 4.00% 3.40%Short Interest 2.1 5.9 3.9 4.8 2.3Proj. Long-Term EPS Growth (%) 10.30% 11.30% 12.10% 12.30% 9.80%Forward P/E 13.9 12.9 15.5 10.7 15.9PEG 1.35 1.14 1.27 0.87 1.63Price/Sales 0.5 0.2 0.3 0.4 0.6Price/Cash Flow 10.7 8.7 11.4 6.8 10Price/Book 2.8 1.7 2.2 1.7 3ROE 20.80% 13.60% 14.20% 18.60% 19.50%ROA 8.10% 6.50% 6.10% 5.90% 9.20%Dividends $0.95 $0.00 $0.64 $0.64 $0.54Dividend Yield 2.02% 0.00% 1.42% 2.05% 1.94%Payout Ratio 27.30% 0.00% 26.50% 17.70% 29.80%Total Return (12-mos) -5.30% -11.50% -32.80% -42.60% 34.40%Total Return (3-yr) 7.60% -10.80% -6.30% -40.20% 21.70%Beta 0.2 0.5 0.8 1.1 0.1% Off 52-wk High 26.20% 35.24% 40.14% 47.61% 14.55%% Above 52-wk Low 0.43% 1.13% 46.68% 21.87% 54.28%On-Balance Volume Index 53 85 69 86 161

Travel Agencies

NAICS code: 561510

This industry comprises establishments primarily engaged in acting as agents in selling travel, tour, and accommodation services to the general

public and commercial clients.

The travel agency industry has been seeing a decline in both sales (-6%) and # of establishments (-26%). The decline is sales from ‘97 to ’02 can be attributed to the slight 2001-02 recession in the US economy after the dot com bubble burst and 9/11 terrorist attacks. The number of establishments has decreased due to the popularity and convenience of e-ticketing options.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

1997 2002 Growth# of Establishments 29,332 21,705 -26%Sales ($1,000) 9,977,110 9,387,397 -6%

Source: http://www.naics.com/

NAICS code: 511130

This industry comprises establishments known as book publishers. Establishments in this industry carry out design, editing, and marketing activities necessary for producing and distributing books. These establishments may publish books in print, electronic, or audio form.

There has been an increase in both sales and # of establishments from ‘97 to ‘02. The outrageous cost of college books must be contributing to the increase in sales.

Book Publishing

1997 2002 Growth# of Establishments 2,684 3,570 33%Sales ($1,000) 22,648,251 27,162,866 20%

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Book Publisher’s & Travel Agency’s Sales

& No. of Establishments Compared.

19972002

Book Publishers # ofEstablishments

Travel Agency # ofEstablishments

0

5,000

10,000

15,000

20,000

25,000

30,000

Book Publishers # ofEstablishments

Travel Agency # of Establishments

19972002

Travel Agency Sales($1,000)

Book Publishers Sales($1,000)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Travel Agency Sales ($1,000)

Book Publishers Sales ($1,000)

Industry Life Cycle

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Based on the competitive and comparative analysis (Sales, # of establishments, growth rates) I would place Discount Stores in the low to mid section of The Maturity stage in the Industry Life Cycle,Book Publishers in the mid to high Maturity stage and Travel Agency's in the mid Decline stage.