Financial Comparison between Carrefour SA and Walmart

Résumé du document

Carrefour SA is a France-based company that is primarily engaged in retail distribution. The company is the world's second largest retailer and the largest in Europe. Currently it operates four main grocery store formats: hypermarkets, supermarkets & hard discount, cash & carry and convenience stores.

The firm is present mainly in Europe, Argentina, Brazil, China, Colombia and in Dominican Republic. Carrefour has been listed in the Paris Stock Exchange since 1970. Moreover, the current strategy of the company is to invest in markets with growth potential such as Asia. In 2010, Carrefour launched in Europe Carrefour Planet, a new concept composed of eight poles: health foods, frozen foods, beauty, fashion, baby, house. The company is currently facing a crisis since the CEO is likely to be dismissed because of his behavior and financial markets will probably react to the disadvantage of Carrefour.

Walmart is an American corporation running chains of large discount department stores and warehouse stores founded in 1962 and publicly traded on the New York Stock Exchange since 1972. The firm is the largest public corporation when ranked by revenue, the largest retailer in the world and the biggest private employer. About 40% of products stored in Walmart are private label store brands. Walmart's credo is to provide its customers products whose prices are the lowest possible. But it leads the firm to reduce costs such as wages and this is wrong for its reputation. That is why Walmart fears a change in American legislation.

Extraits

[...] This industry presents many legal constraints: employment law, concurrence law, and especially health and environment laws that are becoming more and more constraining. Hypermarkets are heavily investing in brand image, in developing proprietary products and services and current opening programs or downsizing and store-­‐location strategies. They are also investing in adopting a multi-­‐channel approach, branding, private label products, and developing their online sales. Whereas it is less affected than other industries, retail sector has to face the decreasing of purchasing power because of inflation and currency rates. [...]

[...] Financial Comparison between Summary Introduction I Characteristics of the industry Objectives of the companies a. Carrefour objectives b. Walmart objectives III Risks a. Risks for existing shareholders b. Risks for potential institutional equity investors c. Risks for creditors d. Risks for management and employees e. Risks for government and society generally IV Parameters used in developing forecasts a. Net asset value (NAV) and discount to NAV b. Capital Asset Pricing Model c. [...]

[...] we used data from the previous year's financial reports and returns on stock price but we ignore if the crisis is over and how much the data is biased by the crisis), the company's fundamentals such as its earnings, and investor perceptions. For this reason a private equity company's NAV is a somewhat arbitrary number and won't tell you as much about the company's performance. Furthermore NAV simply drops when there is distribution of capital gains or payment of dividends. Therefore we decided the NAV needed to be looked at in conjunction with its total return percentages for five years. [...]

[...] Cash flows generated by Carrefour hardly finance investments to redress the brand. Therefore, the next dividend will be financed by debt, which will further increase the financial structure of society. d. Risks for management and employees Management and employees are mainly concerned about two salary decrease and offs risks. Salaries reductions are unlikely, because, in contrary to dividends, the turnover of Carrefour is growing consistently for the 4 last years. Therefore, the operating income does not need a wages reduction in order to grow again. [...]

[...] Therefore, in the same goal, Carrefour has implemented a strong strategy as follow: Drive growth enhancing client culture: the goal is to revitalize the Carrefour brand, improve their price image and reinvent the hypermarket with their new concept store: Carrefour Planet Drive profit redefining the group organization, revamping the operating model and improving the purchasing practices. The goal is to have a better share of the best practices and innovations. Drive ROCE (Return On Capital Employed) and cash flow. In order to optimize the financial strategy, Carrefour wants a strict CAPEX discipline and a better portfolio asset optimization. b. Walmart objectives Walmart's priority is to increase comparable sales and investing in new stores. To reach these goals, Walmart has to lower prices as far it's possible by principally keeping the expenses low. [...]