Wal-Mart - Bigger Than reality?
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wal-Mart (NYSE: WMT) - The majority of people either love it or hate it. Regardless of their feelings, not many people can avoid the massive "super center." My home town is ranked as the 7th lowest cost of living in America, yet the average grocery store has the highest prices of anywhere else in Colorado. Yes, there are other choices, but nearly everyone shops at Wal-Mart. After all, they sell just about everything, but are they worth buying?
Wal-Mart's SGA (Sales, General, and Administrative expenses) have been on a steady rise for a long time and has continued rising in the past year. While their SGA has gone up just over 5% over the past year, their sales have increased just under 6%. This is good considering their sales have outdone their expenses. However, in the past quarter the story is quite different. In the past three months, Wal-Mart's SGA has gone up only 2.3% and their sales have only increased 1.1%. The interesting part is their free cash flow (FCF) has gone up almost 17% from 2011 through the TTM (Trailing Twelve Months), due largely in part to their SGA barely being increased. So, how have its competitors done?
Sears Holding Corporation (NASDAQ: SHLD), is often said to be one of Wal-Mart's largest competitors in the distribution arena, but does it hold the same title when it comes to investments? Sears' SGA has basically remained level over the past year, not even rising a full 1%. Supervalu (NYSE: SVU) (the public segment of Albertsons) has actually decreased its SGA by 5.8%, but also lost 43% of its FCF during the TTM while sears increased its FCF by 232%, respectively. Sears increase in FCF is due, in part, to their net income being up. Supervalu has been struggling for a while, and many believe it is on the verge of bankruptcy.
Seeing these figures made me wonder, "did any of them increase their net worth in the past year?" Remember, to find a net worth, we subtract the companies total liabilities from its total assets. Sears has accrued an additional 8.5% of new liabilities while losing 13.5% of its total assets. Albertsons has decreased its total liabilities by 3.2% and also decreased its assets by 14.1%. So, Sears lost a total of 22% net worth. Albertsons lost only 10.9% of its net worth in the past year.
Safeway, (NYSE: SWY) like the rest, has the same results. Their sales have increased 6.6%, a pretty good figure considering their SGA which was up just over 2%. As for their net worth, they show the same basic results as Albertsons and Sears. Safeway's liabilities increased by 17% as their assets decreased by just 1.1%. This didn't do much for their net worth, as it was down a total of 18.1%. Their FCF was also down 38% through the past TTM.
Remarkably, Albertsons, Safeway, and Sears are not the only companies that have a decreasing net worth. Walmart followed suit by increasing its liabilities by 8.9%, but increased its assets by 7%. This means they also decreased their net worth - but only by 1.9%.
Before researching the numbers, I would have thought that Wal-Mart would be one company not effected by the recession. It is a store that everyone uses all the time, especially in mid sized towns with not a whole lot of other choices. Everyone still needs to eat, buy clothes, buy soda, but even with this, it has still decreased in a couple areas.
I would have a hard time investing in any of these companies knowing that all of their net worths have decreased. Apparently this is a trend among the retail grocery industry. They all seem to decrease their assets, increase their liabilities, which leaves them with a lower net worth. After seeing the trend of whats going on, I would probably suggest staying away from these companies, at least for the time being. The truth is that the recession isn't just affecting individuals, but even the biggest of companies. No, not even Wal-Mart can escape the reality of a recession.
tlwofford has no positions in the stocks mentioned above. The Motley Fool owns shares of Supervalu. Motley Fool newsletter services recommend Supervalu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!