Wal-Mart's components

There is only one way to break down Wal-Mart’s overall operations in order to gain clarity by its various operating units.

It is the same way that Wal-Mart breaks itself down. There are no separate disclosures other than via the following four segments.

- Core Wal-Mart U.S. operations
- Sam’s Club U.S. operations
- Wal-Mart international operations
- “Other”

Core Wal-Mart U.S. operations are comprised of Discount Stores (the original Wal-Mart store concept), Supercenters, and Neighborhood Markets in the United States.

Sam’s Club operations are comprised of domestic U.S. Sam’s Club stores.

Wal-Mart International operations are comprised of multiple store formats (including Supercenters, Sam’s Clubs, and local brand name stores) all located outside of the United States.

It is unclear to me exactly what is in the “Other” segment, although we do have a couple of clues (which I will mention later).

Operating income (EBIT) by segment        dollars in thousands

		fiscal years
		Jan 2005	Jan 2004	Jan 2003
Wal-Mart Stores		14,163	12,916	11,840
Sams Club		1,280	1,126	1,023
International		2,988	2,370	1,998
Other		-1,340	-1,387	-1,566
Total		17,091	15,025	13,295

The only bummer about the above numbers is the weighting of the assets in the non-core U.S. segments (as shown below).


Total Assets by segment        dollars in thousands

		fiscal years
		Jan 2005	Jan 2004	Jan 2003
Wal-Mart Stores		29,489	27,028	24,868
Sams Club		5,685	4,751	4,404
International		40,981	35,230	30,709
Other		44,068	38,396	30,709
Total		120,223	105,405	92,900

The EBIT return on Assets (EBIT/Assets) from the above tables is as follows for 2005:

Wal-Mart Stores 50%
Sams Club 25%
International 8%
Other -3%
Total (weighted) 15%

What the above tables show is that the shocking returns (EBIT/Assets) on core domestic assets is tempered by the much lower returns on the international and “other” assets.

The real bummer of the above data, of course, is this negative return on the whopping $44 billion of assets in the "Other" category.

Wal-Mart discloses very little about this "Other" operating segment.

What we do know is this:
Corporate overhead is placed in this category.
Seiyu is in this category.
McLane’s used to be in this category.

Since McLane’s is long gone, I am more than a bit befuddled as to what the heck is actually in this segment. ..$44 billion in assets and no explanation? The investment in Seiyu makes up only $670 million of the $44 billion.

(The Seiyu investment will eventually rotate out of “Other” and into “International” when Seiyu is consolidated.)

The only tantalizing figures we have for the "Other" segment for 2005 are as follows.
Revenues from external customers  $ 0
Intercompany real estate income  $ 3,267
Depreciation & amortization expense  $ 1,510
Operating loss  $ 1,340

Based on the above information, I believe that Wal-Mart has put all of its real-estate assets into this "Other" segment. I need to think about this in regard to how to better demystify this segment.