Wal-Mart Case

M13_BARN4586_03_SE_M02.qxd

6/25/09

1:23 PM

Page 1–15

Case 1–2: Wal-Mart Stores Inc. in 2008*

As recently as 1979, Wal-Mart had been a regional retailer little known outside the South with only 229 discount stores compared to the industry leader Kmart’s 1,891 stores. In less than 25 years, Wal-Mart had risen to become the largest U.S. corporation in sales. With over $374 billion in revenues (see Exhibits 1 and 2), Wal-Mart had far eclipsed Kmart, whose sales had fallen to a fraction of WalMart’s. Yet another measure of Wal-Mart’s dominance was that it accounted for approximately 45 percent of general merchandise, 30 percent of health and beauty aids, and 29 percent of non-food grocery sales1 in the United States. Forbes put Wal-Mart’s success into perspective. With 3,550 stores in the U.S. and 1,000 Supercenters to be added in the next five years, all that’s left for Wal-Mart is mop-up. It already sells more toys than Toys “R” Us, more clothes than the Gap and Limited combined and more food than Kroger. If it were its own economy, Wal-Mart Stores would rank 30th in the world, right behind Saudi Arabia. Growing at 11 percent a year, Wal-Mart would hit half a trillion dollars in sales by early in the next decade.2 Despite its remarkable record of success, though, Wal-Mart was not without challenges. Many observers believed that the company would find it increasingly difficult to sustain its remarkable record of growth (see Exhibit 3). Wal-Mart faced a maturing market in its core business that would not likely see the growth rates it had previously enjoyed. Growth in same-store sales was only 1.9 percent in 2006, while other major retailers—Target, Costco, Kroger, Safeway, and Best Buy—all enjoyed same-store growth of at least twice that rate. Many investors believed that WalMart had reached a point of saturation with its stores. Supercenters had provided significant growth for WalMart, but it was not clear how long they could deliver the company’s...