Wal-Mart and their Competition

Answer

Wal-Mart and their Competition

 Wal-Mart and Target are prosperous firms where a more significant number of Americans regularly shop. These businesses find effective strategic ways of getting clients to purchase their merchandise. Both companies have significantly expanded, and commodities can be bought over the internet, and this makes shopping hassle-free, secure, and quick (Farris et al. 2017). It is worth noting that prospective clients no longer queue to obtain items they need from these companies. Wal-Mart and Target, however, differ concerning their key financial ratios, stock structure, risk capital structure, as well as dividend payout history.

Wal-Mart’s capital structure encompasses certain debts; nonetheless, the debts are much significantly skewed towards equity capital. Wal-Mart’s enterprise value (EV) has continuously been volatile, with the sentiments of investors instigating fluctuations in its stocks’ prices as well as debt reduction, putting forth downward pressure (Yue, Rao & Ingram, 2013). In January 2016, the total equity shareholder was 83.7 billion sterling pounds while the total debt was 46.9 sterling pounds. This reflects a changing outlook in regards to Wal-Mart’s current expense structure because it overhauls workforce compensation and does e-commerce platform enhancement. On the other hand, Target’s capital structure trends are quite different. In April 2016, Target had worth $602.7 million outstanding shares in comparison to $666 million outstanding shares in July 2015. Due to this, the market capitalization was down from $43.8 billion to $38.7 billion (Wilson & Wilson, 2017). The company’s short-term debt as well ominously increased from $90 million in February 2015 to $ 1721 million in May 2016.

Regarding stock structure, Target corporations operate large food and merchandise discount stores including super target and target stores. The company provides both fashionable differentiated commodities and everyday essentials at exceptional prices. Target Corporation takes part in operating and owning of general merchandise stores (Schuetz, 2015). Wal-Mart, on the other hand, engages in selling an array of grocery goods and public goods. The company takes part in selling clothes, jewelry, kitchen supplies, groceries, and hygiene products. The company’s physical retails involve mortar and brick presence in every marketplace where the staffs operate. The digital retail comprises mobile commerce applications as well as e-commerce websites.

Notably, financial ratio sheds light on the firms’ directions, for instance, whether the stock is valued rightly, undervalued or overvalued as well as the companies’ probability of lingering solvent. Wal-Mart’s price-earnings ratio is 13.3, which is below average. Target’s price earnings ratio is also 13.3. Outstandingly, this puts forward that Wal-Mart is a feasible plan for the value investor. A financial rate is an easy and invaluable way of interpreting numbers found in financial statements. According to Tybout (2017), the financial ratios aid in answering crucial questions, for example, whether a firm is carrying excess inventory or debt. It is also important to note that Wal-Mart’s annual cash dividend each year upon the declaration of a $0.04 per share has incredibly increased. Wal-Mart faces risks such as geopolitical, revenues, and costs (Freeman, 2016). A break in routes of shipping can damage the firm’s logistics chain, therefore, leading to product unavailability. A boom in an economy can also cause a universal shift away from purchasing at Wal-Mart. On the other hand, Target Corporation may suffer from data breach risk which can lead to theft payment by customers. 

In conclusion, Target Corporation is superb for fashion orientated purchasers. In contrary, Wal-Mart deliberately focuses on being trendy towards adolescent girls and women. In the same token, brand control is present at Wal-Mart but not at Target. Both Wal-Mart and Target aim at providing merchandises to the people efficiently, quickly, and at affordable prices. They offer the products through the internet, for example, through e-commerce to make it easier for the customers to access the merchandises easily and make orders.