Module 2 Case Study (2)

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Case Study Analysis #2 Prepared by Example For 6093 – Logistics and Supply Chain Management Dr. Basil Miller May 21, 2024 Financial Statements for Walmart Stores Inc. and Macy's Inc .

Financial Statements for Walmart Stores Inc. and Macy’s Inc. 1. Evaluate the financial performance of each company based on the various metrics discussed in Section 3.1, such as ROE, ROA, profit margin, asset turns, APT, C2C, ART, INVT, and PPET. Below in Table 1 are the financial metrics calculated for both Walmart Stores, Inc. and Macy’s Inc. based upon the financial reporting found in Appendix B – Table 3-8. Table 1 - Comparison of Financial Metrics for Walmart Stores Inc. and Macy's Inc. Metric Unit Walmart Macy's ROE % 21.72% 24.56% ROA % 9.46% 8.28% ROFL % 12.26% 16.28% Profit Margin % 4.10% 6.22% Asset Turns Ratio 2.31 1.33 APT Ratio 5.96 3.38 ART Ratio 69.32 75.29 INVT Ratio 8.05 3.15 PPET Ratio 4.02 3.41 C2C Years -0.03 0.03 Weeks -1.51 1.80 SG&A/Revenue % 18.94% 30.22% Comparing the two companies’ financial metrics is a good way to evaluate their respective supply chain strategies. Return on Equity (ROE) - The return on equity (ROE), the primary measure of a firm’s performance, Macy’s 24.56% outperforms Walmart ’s 21.72% by about 3%. Return on Assets (ROA) - The return on assets for Walmart at 9.46% compared to Macy’s at 8.28% shows that both generate returns from operating and investing activities by the firm in assets. Profit Margin – The profit margin for Macy’s at 6.22% indicates that, in part, their customer’s willingness to pay and their good supply chain management allows them to decrease the expenses incurred to serve customer demand. That is not to say that Walmart does not. Other factors, such as everyday low pricing, increase sales of lower-margin items. Asset Turns – Walmart collected its money from sales relatively quickly, with an ART of 69.32. While Macy’s had a slightly higher ART of 75.29, their inventory turnover and PPET were much lower than Walmart’s. When the above are all considered, Walmart achieved a higher asset

turnover than Macy’s by turning its inventory fas ter and generating higher revenue per dollar invested in PP&E. Accounts Payable Turnover (APT) - The small APT of 3.38 indicates that Macy’s could use the money it owed suppliers to finance a considerable fraction of its operations in 2013. They financed their operations for about 15.38 weeks with their suppliers’ money. Walmart’s ratio APT of 5.96 results in 8.72 weeks of financing with their suppliers’ money. Accounts Receivable Turnover (ART) – Macy’s and Walmart collected their money from sales relatively quickly, with an ART of 75.29 and 69.32, respectively, averaging turnover about every five days. Inventory Turnover (INVT) – Walmart’s INVT of 8.05 turns over almost three times faster than Macy’s , turning over about every 45 days, whereas Macy’s turns over about every 115 days. Property, Plant, and Equipment (PP&E) – Walmart generated $4.02 of revenue for each dollar invested in PP&E compared to $3.41 for Macy’s. Cash-To-Cash (C2C) – Walmart collected its money for the sale of products more than 1.5 weeks before it had to pay its suppliers. On the other hand, Macy’s had to pay its suppliers about 1.8 weeks after it had to pay its suppliers. Selling, General, and Administrative (SG&A) – Macy’s spending for each dollar of revenue was much higher than that of Walmart. Coupled with their low PPET, this could indicate that Macy’s is leasing facilities instead of building or buying them. 2. Can you explain the differences you see in their performance based on their supply chain strategy and structure? Walmart ’s performance in the analyzed metrics shows that they use all the drivers and levers to maximize their supply chain surplus while still obtaining an excellent ROE. Knowing they have their distribution centers (DC) geographically located according to their store locations (PPET) as well as their ability to maintain inventory at these DCs (INVT), along with their multiple mode transportation system to deliver goods to stores or homes, as appropriate, Walmart sets the example for the use of logistical drivers. Keeping ART and their C2C low shows the responsiveness and efficiency of their supply chain. Their everyday low pricing (EDLP) increases sales volume, aiding their profit margin and asset turns. Altogether, it is evident that their complete supply chain is focused on the goal of balancing responsiveness with efficiency. Macy’s performance in the varying metrics analyzed is not all that bad either. Their ROA, Asset Turns, and PPET indicate they probably lease more facilities than they build or purchase. The C2C and INVT indicate their responsiveness is slower than Walmart’s, but their efficiency may be as good. Macy’s APT and profit margin are strong and indicate their use of the pricing driver to drive profitability. Macy’s has also achieved their focus on the complete supply chain, balancing both responsiveness and efficiency, albeit in a different way than Walmart.

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3. Compare the metrics for each company with similar metrics for Amazon and Nordstrom from Table 3-1. Which metrics does each company perform better on? Table 2 - Comparison of Financial Metrics for Wlamart Stores Inc., Macy's Inc., Amazon.Com, and Nordstrom Inc. Metric Unit Walmart Macy's Inc. Amazon.Com Nordstrom Inc. ROE % 21.72% 24.56% 2.81% 38.42% ROA % 9.46% 8.28% 0.91% 10.37% ROFL % 12.26% 16.28% 1.90% 28.05% Profit Margin % 4.10% 6.22% 0.49% 6.91% Asset Turns Ratio 2.31 1.33 1.85 1.50 APT Ratio 5.96 3.38 2.48 7.35 ART Ratio 69.32 75.29 15.62 5.71 INVT Ratio 8.05 3.15 7.31 5.46 PPET Ratio 4.02 3.41 6.80 4.71 C2C Years -0.03 0.03 -0.20 0.22 Weeks -1.51 1.80 -10.50 11.56 SG&A/Revenue % 18.94% 30.22% 26.23% 27.75% Walmart Stores, Inc. – Walmart performs better in Asset Turns and INVT. Macy’s Inc. – Macy’s performs better in ART and SG&A/Revenue. Amazon. Com – Amazon performs better in APT, PPET, and C2C. Nordstrom, Inc. – Nordstrom performs better in ROW, ROA, ROFL, and Profit Margin. 4. What supply chain drivers and metrics might explain this difference in performance? Walmart, Macy’s, and Nordstrom are all considered brick -and-mortar companies, but they have an online component competing with Amazon. However, their supply chains will differ from Amazon’s because they have the added need to supply stores on a recurring basis. The differing metrics shown above in Table 2 illustrate this pronounced difference. Amazon, for example, outperforms the others in PPET because they have maximized their facilities geographically with the massive volume of online sales. The C2C shows that they, in essence, utilize the suppliers’ money to finance their operations for about 10.5 weeks before they must pay them. The fast inventory turnover rates for Walmart and Amazon reflect the responsiveness of their supply chain, getting the product to the customer promptly. It appears that all have utilized the six

drivers to varying degrees to their success. Walmart sets the standard for supply chain management, with all others to follow. They have hit the right balance between all the interactive drivers, both logistical and cross-functional. That is not to say the others have not. The others have their variation of the supply chain that works for them. Nothing is perfect, and all can still be improved. Appendix A - References Chopra, S. (2017). Supply Chain Management (7th ed., pp. 40–68). Pearson Publishing. ISBN: 9780134731889

Appendix B - Table 3-8 from page 68 of the textbook as a reference to answer the questions for this Case Study. Table 3-8 Selected Financial Data for Walmart Stores Inc. and Macy's Inc. Year Ended January 31, 2013 ($ millions) Walmart Macy's Net Operating Revenues 469,162 27,931 Cost of Goods Sold 352,488 16,725 Gross Profit 116,674 11,206 Selling, General, and Administrative Expense 88,873 8,440 Other Costs 88 Operating Income 27,801 2,678 Interest Expense 2,251 388 Other Income (loss) - Net 187 134 Income before Income Taxes 25,737 2,290 Income Taxes 7,981 804 Net Income 17,756 1,486 Assets Cash and Cash Equivalents 7,781 1,836 Net Receivables 6,768 371 Inventory 43,803 5,308 Prepaid Expenses and Other 1,588 361 Total Current Assets 59,940 7,876 Property, Plant, and Equipment 116,681 8,196 Goodwill 20,497 3,743 Other Intangible Assets 561 Other Assets 5,987 615 Total Assets 203,105 20,991 Liabilities and Stockholder Equity Accounts Payable 59,099 4,951 Short-term Debt 12,719 124 Total Current Liabilities 71,818 5,075 Long-Term Debt 41,417 6,806 Other liabilities 3,059 Total Liabilities 121,367 14,940 Stockholder Equity 81,738 6,051

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