Sears vs. Walmart

Financial Performance Comparison proceeds Margin Profit Margin, Sears Co.|  | 1997|  | 1996|  | 1995| Net income| 1,188| -6.53%| 1,271| -29.43%| 1,801| wide-cut revenues| 36,371| 7.76%| 33,751| 8.41%| 31,133| Profit Margin| 3.27%|  | 3.77%|  | 5.78%| This Profit Margin ratio is acceptable, though not high. The result means that for each dollar of sales at Sears Co., the company earns only 3.27 cents in 1997, comp ard to 3.77 cents and 5.78 cents in 1996 and 1995 respectively. This slender and downward trend profit margin obviously wont make its investor happy. Profit Margin, Wal-Mart Inc. (Fiscal years ended Jan 31)|  | 1998|  | 1997|  | 1996| Net income| 3,526| 15.38%| 3,056| 11.53%| 2,740| complete revenues| 119,299| 12.36%| 106,178| 12.03%| 94,773| Profit Margin| 2.96%|  | 2.88%|  | 2.89%| Assets Turnover Rate Assets Turnover Rate| Sears| Wal-Mart| | 1997| 1996| 1997| 1996| gross revenue| 36,371| 33,751| 119,299| 106,178| Total Assets| 38,700| 36,167| 45,384| 39,604| Assets Turnover|  | 0.94| 0.93| 2.63| 2.68| The net income increases in parallel with the add up revenues increase, which is a positive indicator.

There is no significant difference in profit margin amongst Sears and Wal-Mart. The upward trend PM together with unbeatable assets disturbance rate, make Wal-mart ahead of Sears. Sears high margin wont ineluctably earn healthy returns for its shareholders. It all depends on the assets turnover they are able to maintain given that level of profit margin. However, Sears roe is 22% in 1997, exceeded Wal-Marts ROE of 20%. To check this, we believe the disaggregation analysis should be introduced. ROE Disaggregation Analysis ROE = Profit Margin * Assets Turnover * Leverage Ratio Return on equity being made up of three part - profit margin, asset turnover rate, and leverage. Breaking ROE into these luck parts not only allows investors to... If you want to get a full essay, order it on our website: Orderessay

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