Finance Wal-Mart - Assignment Example

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The percentage of revenue that Walmart derived from foreign operations in 2013 was 30% of the consolidated net sales, which amounted to $135.201 billion (Walmart 1). In 2014, this percentage rose by 1.3% to 31.3%, which exceeded $136 billion (Walmart 5). Walmart’s foreign…
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Finance Assignment Wal-Mart QUESTION The percentage of revenue that Walmart derived from foreign operations in was 30% of the consolidated net sales, which amounted to $135.201 billion (Walmart 1). In 2014, this percentage rose by 1.3% to 31.3%, which exceeded $136 billion (Walmart 5). Walmart’s foreign activity is increasing as Sam’s Club opened 12 new joints in different countries and improved its stock offerings. The value of membership in Walmart stores and Sam’s Clubs rose with fees in overseas stores and clubs respectively (5). Walmart’s headquarters are in Bentonville, Arkansas, United States (Walmart n.d.). Walmart operates in Mexico with its first overseas store being a Sam’s Club situated in Mexico City in 1991. In Mexico, there are 2,290 retail stores as of 2015 with 251 Walmart Supercenters, and 160 Sam’s Clubs. By January 2014, Walmart had 209,878 employees in its Mexican stores, clubs, and retails (n.d.).
a) Walmart’s annual report for the financial year that ended 2014 addresses foreign exchange risk management in the section “Foreign Currency Risk” (Walmart 31). This segment argues that Walmart is susceptible to variations in the value of foreign currency because of its “net investments and operations in nations other than the United States” (31).
b) Walmart hedges a share of its overseas currency risk (Chan, Buckland, and Murphy 2013).
c) The type of currency exposure that Walmart hedges is instabilities in overseas currency exchange rates. This type of exposure is related often to the predicted outflows of “principal and interest of non-US denominated debt” (31).
d) One hedging techniques used by Walmart is taking part in currency swaps and labeling particular overseas-currency denominated, longstanding debt as “net investment hedges” (31). Another technique is labeling overseas-currency denominated, longstanding debt as “nonderivative hedges of net investments” of particular overseas activities (32).
Nigeria seems to be the biggest concern in terms of currency volatility and country risk. Today, political views and policies are dependent on key deviation in policy course provide the personality-oriented characteristic of Nigerian political affairs. In 2015, currency matters will be the focus of the Central Bank of Nigeria (BMI Research 2015). After the aggressive tightening of monetary measures in November 2014, the Central Bank of Nigeria may find it essential to add tightening courses of action in an attempt to anchor inflation anticipations and calm nervous markets. These tightening courses of action make up the leading cause of currency issues in Nigeria for Walmart (2015). Other causes of currency issues include the instability of oil prices that pose a substantial risk to export income and government proceeds and the outcome of the February 2015 general elections.
In conclusion, revenue from Walmart’s foreign operations in 2014 rose by 1.3% to 31.3%, which interprets to over $136 billion. In 2014, Walmart increased its presence in overseas countries with 12 new Sam’s Clubs and increased values in memberships and fees. Walmart recognizes foreign exchange risk and hedges as a result. Walmart hedges by swapping currencies and labelling overseas-currency denominated, longstanding debt as “net investment hedges” or “nonderivative hedges of net investments.” Other companies can try swapping currencies and labelling them as a form of hedging to reduce exposure to foreign currency risk. This type of hedging saved Walmart a possible $274 million in the value of swaps in January 2014.
Works Cited
BMI Research. Nigeria Country Risk Report. 2015. Business Monitor International a Fitch Group Company. Web. 3 Mar. 2015.
Chan, Vinicy, Kevin Buckland, and Lauren S Murphy. Wal-Mart $680 Million Hit Shows Risk of Not Hedging. 2013. Bloomberg business. Web. 3 Mar. 2015.
Walmart. Walmart 2013 Annual Report. 2015. Wal-Mart Stores, Inc. Print. 3 Mar. 2015.
Walmart. Walmart 2014 Annual Report. 2015. Wal-Mart Stores, Inc. Print. 3 Mar. 2015.
Walmart. Walmart International. N.d. Wal-Mart Stores, Inc. Web. 3 Mar. 2015. Read More
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