Walmart 2007 Annual Report Download - page 30

Wal-Mart 2007 Annual Report 28
Overview
Wal-Mart Stores, Inc. (“Wal-Mart,” the “Company” or “we”) operates
retail stores in various formats around the world and is committed to
saving people money so they can live better. We earn the trust of our
customers every day by providing a broad assortment of quality mer-
chandise and services at every day low prices (“EDLP”), while fostering
a culture that rewards and embraces mutual respect, integrity and
diversity. EDLP is our pricing philosophy under which we price items
at a low price every day so that our customers trust that our prices
will not change erratically under frequent promotional activity. Our
focus for Sam’s Club is to provide exceptional value on brand-name
merchandise at “members only” prices for both business and personal
use. Internationally, we operate with similar philosophies. Our  scal
year ends on January 31.
We intend for this discussion to provide the reader with information
that will assist in understanding our  nancial statements, the changes
in certain key items in those  nancial statements from year to year,
and the primary factors that accounted for those changes, as well as
how certain accounting principles a ect our  nancial statements. The
discussion also provides information about the  nancial results of the
various segments of our business to provide a better understanding
of how those segments and their results a ect the  nancial condition
and results of operations of the Company as a whole. This discussion
should be read in conjunction with our  nancial statements and
accompanying notes as of January 31, 2007, and the year then ended.
Throughout this Management’s Discussion and Analysis of Financial
Condition and Results of Operations, we discuss segment operating
income and comparable store sales. Segment operating income
refers to income from continuing operations before net interest
expense, income taxes and minority interest. Segment operating
income does not include unallocated corporate overhead and dis-
continued operations. Comparable store sales is a measure which
indicates the performance of our existing stores by measuring the
growth in sales for such stores for a particular period over the corre-
sponding period in the prior year. Beginning in fiscal 2007, we
changed our method of calculating comparable store sales. We now
include in our measure of comparable store sales all stores and clubs
that have been open for at least the previous 12 months. Additionally,
stores and clubs that are relocated, converted or expanded are excluded
from comparable store sales for the  rst 12 months following the
relocation, conversion or expansion. For  scal 2006 and prior years, we
considered comparable store sales to be sales at stores that were open
as of February 1st of the prior  scal year and had not been expanded,
converted or relocated since that date. Stores that were expanded,
converted or relocated during that period are not included in the
calculation. Comparable store sales is also referred to as “same-store”
sales by others within the retail industry. The method of calculating
comparable store sales varies across the retail industry. As a result, our
calculation of comparable store sales is not necessarily comparable
to similarly titled measures reported by other companies.
Operations
Our operations are comprised of three business segments: Wal-Mart
Stores, Sam’s Club and International.
Our Wal-Mart Stores segment is the largest segment of our business,
accounting for 65.6% of our  scal 2007 net sales. This segment con-
sists of three di erent traditional retail formats, all of which operate in
the United States, and Wal-Mart’s online retail format, walmart.com.
Our traditional Wal-Mart Stores retail formats include:
• Supercenters, which average approximately 187,000 square feet in
size and o er a wide assortment of general merchandise and a full-
line supermarket;
• Discount stores, which average approximately 107,000 square feet
in size and o er a wide assortment of general merchandise and a
limited variety of food products; and
• Neighborhood Markets, which average approximately 42,000 square
feet in size and o er a full-line supermarket and a limited assortment
of general merchandise.
Our Sam’s Club segment consists of membership warehouse clubs,
which operate in the United States, and the segment’s online retail
format, samsclub.com. Sam’s Club accounted for 12.1% of our  scal
2007 net sales. Our focus for Sam’s Club is to provide exceptional
value on brand-name merchandise at “members only” prices for both
business and personal use. Our Sam’s Clubs average approximately
132,000 square feet in size.
At January 31, 2007, our International segment consisted of retail
operations in 12 countries and Puerto Rico. This segment generated
22.3% of our  scal 2007 net sales. The International segment includes
several di erent formats of retail stores and restaurants, including dis-
count stores, supercenters and Sam’s Clubs that operate outside the
United States. For certain  nancial information relating to our operating
segments, see Note 11 to our Consolidated Financial Statements.
The Retail Industry
We operate in the highly competitive retail industry in both the United
States and the countries we serve internationally. We face strong sales
competition from other discount, department, drug, variety and spe-
cialty stores and supermarkets, many of which are national, regional
or international chains, as well as internet-based retailers and catalog
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
2007 Sales by Segment
Net sales in  scal 2007 were a
record $345.0 billion, up 11.7%
from  scal 2006.
65.6% – Wal-Mart
22.3% – International
12.1% – Sam’s Club