The annual reports (FORM 10-K) filed with the United States securities and exchange commission provide relevant information about the two firms: Wal-Mart has operations in U.S., Africa, Argentina, Brazil, Canada, Central America, Chile, China, India, Japan, Mexico, and the United Kingdom. Walmart U.S. retail with about 325 million square feet for 4,500 points of sale is the largest segment of the group contributing 62% of net sales with the highest gross profit as a percentage of net sales. The highest sale volume is expected in the quarter ending on January 31 (Wal-Mart, 2016, pp. 7-9); the fiscal year ends 31 December. Costco has operations in U.S., Puerto Rico, Canada, United Kingdom, Mexico, Japan, Australia, Spain, Taiwan, and Korea. …show more content…
Indeed, increasing the cost of sales results in greater gross margins; on the other hand, given a cost of sales, increasing inventory reduces gross margin because of unsold units (Kesavan et al., 2010, p. 1523). Gross profit. An increase in gross margin implies an increase in the average inventory level and a decrease in the expected inventory turnover; moreover, gross margin is positively correlated with price, product variety, and length of the product cycle (Gaur, Fisher, & Raman, 2005, p. 185). Historical gross margin and inventory data are often employed to forecast yearly sales (Kesavan et al., 2010, p. 1532). Inventory. It is assumed to increase when the economy is expanding and the firm opens new stores; generally, it is affected by managerial efficiency, location, marketing, segment, and economic conditions. Depending on the valuing method (FIFO, LIFO), inventory and cost of goods sold estimation may considerably vary. Gaur, Fisher, and Raman (2005, p. 186) evidenced annual inventory turnover correlation to gross margin (negative), the ratio of fixed to total assets (positive), and the ratio of actual to expected sales (positive). Therefore, inventory turnover should not be considered