Walmart 2005 Annual Report Download - page 27

WAL-MART 2005 ANNUAL REPORT 25
• Total assets increased 14.1%, to $120.2 billion at January 31, 2005,
when compared to January 31, 2004. During fiscal 2005, we made
$12.9 billion of capital expenditures which was an increase of
25.1% over capital expenditures of $10.3 billion in fiscal 2004.
• Our International segment had an operating income increase of
26.1% and a sales increase of 18.3% compared to fiscal 2004.
The largest contributors to the strong international performance
were our operations in Mexico and the United Kingdom. Fiscal
2005 operating income for the International segment includes
a favorable impact of $150 million from changes in foreign cur-
rency exchange rates.
• SAM’S CLUB’s continued focus on our business members
helped drive a 13.7% increase in operating income on a 7.5%
increase in sales when comparing fiscal 2005 with fiscal 2004.
• When compared to fiscal 2004, our Wal-Mart Stores segment
experienced a 9.7% increase in operating profit and a 10.1%
increase in sales in fiscal 2005.
Company Performance Measures
Management uses a number of metrics to assess its performance.
The following are the more frequently discussed metrics:
• Comparative store sales is a measure which indicates whether
our existing stores continue to gain market share by measuring
the growth in sales for such stores for a particular period over the
corresponding period in the prior year. Our Wal-Mart Stores seg-
ment’s comparative store sales were 2.9% for fiscal 2005 versus
3.9% for fiscal 2004. The lower comparative store sales growth in
fiscal 2005 is generally reflective of the softer economy in fiscal
2005, including the impact of higher fuel and utility costs on our
customers. Our SAM’S CLUB segment’s comparative club sales
were 5.8% in fiscal 2005 compared to 5.3% in fiscal 2004. The
more favorable growth in fiscal 2005 resulted from our continued
focus on the business member.
• Operating income growth greater than net sales growth has long
been a measure of success for us. For fiscal 2005 our operat-
ing income increased by 13.8% when compared to fiscal 2004,
while net sales increased by 11.3% over the same period.
Both International and SAM’S CLUB segments met this target;
however, the Wal-Mart Stores segment fell slightly short.
• Inventory growth at a rate less than half of sales growth is a key
measure of our efficiency. Total inventories at January 31, 2005,
were up 10.7% over levels at January 31, 2004, and sales were
up 11.3% when comparing fiscal 2005 with fiscal 2004. This
ratio was affected in fiscal 2005 by sales which were weaker than
anticipated, as well as by increased levels of imported merchan-
dise, which carries a longer lead time.
• With an asset base as large as ours, we are focused on continu-
ing to make certain our assets are productive. It is important
for us to sustain our return on assets at its current level. Return
on assets is defined as income from continuing operations
before minority interest divided by average total assets. Return
on assets for fiscal 2005, 2004 and 2003 was 9.3%, 9.2% and
9.2%, respectively.
Our total net sales increased by 11.3% and 11.6% in fiscal 2005
and 2004 when compared to the previous fiscal year. Those
increases resulted from our expansion programs and compara-
tive store sales increases in the United States. Comparative store
sales increased 3.3% in fiscal 2005 and 4.1% in fiscal 2004. As we
continue to add new stores in the United States, we do so with
an understanding that additional stores may take sales away from
existing units. We estimate that comparative store sales in fiscal
2005, 2004 and 2003 were negatively impacted by the opening
of new stores by approximately 1%. We expect that this effect of
opening new stores on comparable store sales will continue during
fiscal 2006 at a similar rate.
During fiscal 2005 and 2004, foreign currency exchange rates had
a $3.2 billion and $2.0 billion favorable impact, respectively,
on the International segment’s net sales causing an increase in
the International segment’s net sales as a percentage of total net
sales relative to the Wal-Mart Stores and SAM’S CLUB segments.
Additionally, the decrease in the SAM’S CLUB segment’s net
sales as a percent of total company sales in fiscal 2005 and 2004
when compared to fiscal 2003 resulted from the more rapid devel-
opment of new stores in the International and Wal-Mart Stores
segments than the SAM’S CLUB segment.
Results of Operations
The company and each of its operating segments had net sales (in millions), as follows:
Fiscal year ended January 31, 2005 2004 2003
Percent Percent Percent Percent Percent
Net sales of total increase Net sales of total increase Net sales of total
Wal-Mart Stores $191,826 67.3% 10.1% $174,220 68.0% 10.9% $157,120 68.4%
SAM’S CLUB 37,119 13.0% 7.5% 34,537 13.5% 8.9% 31,702 13.8%
International 56,277 19.7% 18.3% 47,572 18.5% 16.6% 40,794 17.8%
Total net sales $285,222 100.0% 11.3% $256,329 100.0% 11.6% $229,616 100.0%