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Wal-Mart Stores Inc. international exchange exposure.

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Introduction

Wal-Mart Stores Inc. international exchange exposure. Wal-Mart Stores Inc. is the largest retailer in the world. They operate in the US and International market. Even if they did not have an international segment, they would be exposed to fluctuations in international exchange rates. More and more Wal-Mart is buying there products internationally. Their strategy as low price supplier forces them to buy products from countries that have a lower cost structure. The following is an extract from the management discussion of Annual report of 2003: "Wal-Mart is in the business of serving customers. In the United States, our operations are centered on operating retail stores and membership warehouse clubs. Internationally, our operations are centered on retail stores, warehouse clubs and restaurants. We have built our business by offering our customers quality merchandise at low prices."1 It is important to note that Wal-Mart is offering quality merchandise, not the highest quality, at the low prices, not the lowest prices. It is interesting to know that often the larger quantity packages offered by Wal-Mart are more expensive (per item) than the lower quantity packages. In other stores that is generally not the case, but consumers are generally unaware of this fact and think it is cheaper to buy lager quantity packages. Because of Wal-Marts strategy, offering our customers quality merchandise at low prices, it is essential for Wal-Mart to control their cost. ...read more.

Middle

Other reimbursements and promotional allowances - suppliers may provide funds for specific programs including markdown protection, margin protection, new product lines, special promotions, specific advertising and other specified programs. These funds are recognized at the time the program occurs and the funds are earned. At January 31, 2003 and 2002, the Company had $286 million and $279 million respectively, in accounts receivable associated with supplier funded programs. Further, the Company had $185 million and $178 million in unearned revenue included in accrued liabilities for unearned vendor programs at January 31, 2003 and 2002, respectively. If these suppliers are international suppliers and the products are used for the US market there is again transaction exposure. If they are supplying a local market (within the country) it might end up as translation exposure. Wal-Mart uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to interest and foreign exchange rates. Use of derivative financial instruments in hedging programs subjects Wal-Mart to certain risks, most noticeable as market and credit risks. Market risk represents the possibility that the value of the derivative instrument will change. In a hedging relationship, the change in the value of the derivative is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to derivatives represents the possibility that the counterparty will not fulfill the terms of the contract. ...read more.

Conclusion

$ 25,834 Comprehensive Income Net income 6,295 6,295 Other accumulated comprehensive income Foreign currency translation adjustment -1,126 -1,126 Hedge accounting adjustment 897 897 Total Comprehensive Income 6,066 Cash dividends ($.24 per share) -1,070 -1,070 Purchase of Company stock -4 -8 -185 -193 Issuance of Company stock 11 1 580 581 Stock options exercised and other 6 125 125 Balance - January 31, 2001 4,470 447 1,411 30,169 -684 31,343 Comprehensive Income Net income 6,671 6,671 Other accumulated comprehensive income Foreign currency translation adjustment -472 -472 Hedge accounting adjustment -112 -112 Total Comprehensive Income 6,087 Cash dividends ($.28 per share) -1,249 -1,249 Purchase of Company stock -24 -2 -62 -1,150 -1,214 Stock options exercised and other 7 135 135 Balance - January 31, 2002 4,453 445 1,484 34,441 -1,268 35,102 Comprehensive Income Net income 8,039 8,039 Other accumulated comprehensive income Foreign currency translation adjustment 1,113 1,113 Hedge accounting adjustment -148 -148 Minimum pension liability adjustment -206 -206 Total Comprehensive Income 8,798 Cash dividends ($.30 per share) -1,328 -1,328 Purchase of Company stock -63 -5 -150 -3,228 -3,383 Stock options exercised and other 5 148 148 Balance - January 31, 2003 4,395 $ 440 $ 1,482 $ 37,924 ($509) $ 39,337 Appendix 5, Goodwill as it is recorded on the balance sheet 31-Jan-03 31-Jan-02 International $ 8,985 $ 8,028 Sam's Club 305 305 Other 231 233 Total Goodwill $ 9,521 $ 8,566 1 Management's Discussion and Analysis, Wal-Mart Sores Inc. Annual Report 2003 2 Wal-Mart Annual report 2003, EX-13 6 ex13final.htm, http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000104169&owner=include 3 (www.oanda.com currency site) Page 2 of 15 ...read more.

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