U.S. RETAIL INDUSTRY

Presented by: Kris Li Queenie Nguyen Ravi Khunkhun Sunny Singh

1 Agenda

● U.S. Retail Market Analysis ● Costco ● Home Depot ●

2 What Is Retailing?

● Retail is the process of selling consumer goods and/or services to customers through multiple channels of distribution to earn a profit ● Retail is important because it allows manufacturers to focus on producing goods without having to be distracted by the enormous amount of effort that it takes to interact with the end-user customers who want to purchase those goods

3 U.S. Retail Industry Overview

In 2016, total retail sales were $4.846 trillion for the year, a 2.5% jump from $4.73 trillion in 2015

4

Total Retail Sales in the U.S. from 1992 to 2015 (in trillion US$)

5 Estimated Per Capita Sales in the U.S. from 2000 to 2015 (in US$)

6 Gross Domestic Product (GDP) of the U.S. at Current Prices from 2010 to 2020 (in billion US$)

7 Real Gross Domestic Product (GDP) Growth Rate in the U.S., 2010 - 2020 (compared to previous year)

8 Projected Annual Inflation Rate in the from 2008 to 2021*

9 SPDR S&P Retail ETF (XRT)

SPDR S&P Retail ETF

10 Relationship Between the Retail Industry and the U.S. Economy

● The correlation between the S&P 500 (SPX) Broad Market Index and the SPDR S&P Retail ETF (XRT) is 0.91 ● The US GDP (gross domestic product) has a correlation of 0.94 with the retail ETF

11 Projected Number of Employees in the Retail Industry in the U.S. from 2016 to 2026 (in million)

12 Projected Number of Employees in the Retail Industry in the U.S., 2016 and 2026, By Firm Size

13 Projected Number of Firms in the Retail Industry in the U.S. from 2016 to 2026

14 Leading American Retailers in 2015, Based on U.S. Retail Sales (in billion US$)

15 U.S. Retail Industry Overview

16 U.S. Retail Industry Overview

● Sales per square foot is a popular sales metric used in the retailing industry; Sales per square foot is simply the average revenue a retail business creates for every square foot of sales space ● Retail sales per square foot is a popular way for retailers to determine how successful store sales have been ● The average regional mall sales per square foot is $341 and most big box retailers average between $250 to $350

17 Retail Sales Per Foot

18 U.S. Retailers with the Highest Sales Per Square Foot in 2014 (in US$)

Sales per square foot of the Home Depot and Walmart in 2015 are respectively $370.55 and $434

19 Leading Most Valuable Retail Brands in 2017 (in million US$)

20 Structure of the Industry: Competition and Market Dynamics

Big-Box & Department Store Retailers: ● Broad range of general merchandise, such as apparel, jewelry, cosmetics, home furnishings, general household products, toys, appliances and sporting goods ● Discount department stores are also include ● Walmart, Best Buy, The Home Depot and Ikea

Warehouse Club & Supercenter Retailers: ● General line of grocery products, along with merchandise items ● Warehouse clubs offer customers a wide selection of goods (often in bulk) at discounted prices, in exchange for a membership fee paid by each customer ● Costco and BJ’s Wholesale Club

21

Structure of the Industry: Competition and Market Dynamics

Supermarkets & Grocery Stores: ● General lines of food products, including fresh and prepared meats, poultry and seafood, canned and frozen foods, fresh fruits and vegetables and various dairy products ● Safeway, Whole Foods Market and The Kroger Company

E-tailers: ● Selling retail goods on the Internet ● Including e-commerce and online auction websites whose primary activity is selling goods online Dell and Amazon.com

22 Structure of the Industry

23 Key Factors for Success

Ability to Control Stock on Hand Seasonal goods and products Most of annual sales occurring between October and December Require tight stock control measures to ensure reordering and to maximize sales Customer Centric Workforce Retail stores require sales staff that are friendly, helpful and provide excellent customer service Ability to Expand and Curtail Expand operations during peak periods to meet increased demand (i.e., Christmas trading) Curtail operations during weaker trading conditions (i.e., economic slowdown) Attractive Product Presentation Effective layout and design, good shelf management, friendly and helpful service and a clean environment Strong Logistics and Distribution Backbone Control margins and costs through efficient and effective logistics and distribution systems between its manufacturers and among its stores to properly manage inventory 24 Key External Factors of Growth

Internal Industry Competition

Per Capita Disposable Income

Consumer Confidence Index

Population

25 Retail Industry Mature Life Cycle

Industry value added (IVA): a measure of an industry or industry segment’s contribution to the U.S. economy

Decline phase: IVA falls below GDP

Growth phase: IVA outpaces GDP

Mature phase: IVA mirrors GDP

U.S. GDP is anticipated to rise an at annualized rate of 2.5% in the 10 years to 2020

26 Retail Industry Mature Life Cycle

The Big-Box & Department Store Retailer: ● Decline phase ● In the 10 years to 2020, IVA is expected to decline at an annualized rate of about 4.6% The & Supercenter Retailer: ● Mature phase ● In the 10 years to 2020, IVA is forecast to increase at a rate of 2.5% per year on average, mirroring U.S. GDP

27 Retail Industry Mature Life Cycle

The Supermarkets and Grocery Stores: ● Mature phase ● The Supermarkets and Grocery Stores industry is in the mature stage of its life cycle. However, in the 10 years to 2020, IVA is expected to increase at a relatively slow rate of 0.6% per year on average The E-tailer: ● Growth phase ● In the 10 years to 2020, IVA is expected to increase at an average annual rate of 12.8%. High IVA growth relative to the economy as a whole is highly indicative of a growing life cycle stage

28 Retail e-commerce Sales in the U.S. from 1st Quarter 2009 to 1st Quarter 2017 (in million US$)

29 The Supply Chain for Retail Foods

Final Sale Price = COGS + Wholesalers’ Gross Margin + Retailers’ Gross Margin

Retailers’ Gross Margin = Retailers’ Profit Margin + Cost of Doing Business

30 Retail Cost of Doing Business

Main Cost = Labor Cost (47%) + Occupancy Cost (15%) Other costs of doing business include utilities, professional and financial services, and distribution

31 Retail Cost of Doing Business

Labor costs include wages, other workers’ compensation and payroll taxes

32 Retail Cost of Doing Business

Occupancy costs include those costs associated with maintaining a shop, office or warehouse space

Occupancy costs generally include rent and other fees paid to landlords for shared services and facilities such as security, air conditioning, lighting, marketing, and the operation of car parks

33 Retail Industry Is Evolving

Changes in consumer behavior The household saving ratio is the ratio of net saving to net disposable income

34 Retail Industry Is Evolving

Technological change

35 COSTCO WHOLESALE CORP Prepared by: Queenie Nguyen

36 Stock Overview

37 5-Day Performance

38 6-Month Performance

39 1-Year Performance

40 3-Year Performance

41 5-Year Performance

42 10-Year Performance

43 Max Timeframe Performance

44 Performance Comparison - Index

45 Company Overview

• 2nd largest global retailer

• 15the largest in Fortune 500

• $77B market capital

• 213K employees worldwide

• >2.5M transactions/day

• 729 warehouses worldwide

• 88.9M total cardholders • 88% membership renewal rate worldwide

46 Company Overview

• Merchandise offered at Costco: ➢ Food (dry foods, packaged foods, and groceries) ➢ Sundries (snacks, candy, alcohol and non-alcohol beverages, and cleaning supplies) ➢ Hardlines (major appliances, electronics, health and beauty aids, hardware, and garden and patio) ➢ Fresh Foods (meat, produce, deli, and bakery) ➢ Softlines (apprarel and small appliances) ➢ Others (gas stations and pharmacy)

47 Percentage of Net Sales by Merchandise Category

48 Historical Highlights

• First warehouse for business shoppers only was opened in San Diego, CA in 1976 under the name “Price Club” • First Costco was founded in 1983 in Seattle, WA • In 1993, the Price Company and Costco merged to form PriceCostco, then changed the name to Costco Companies Inc. in 1997 • Costco was the first company to ever grow from $0 to $3B in sales in less than 6 years • Its strategy is to “keep costs down and pass on the savings to our members”

49 Mission

To continually provide our members with quality goods and services at the lowest possible prices

50 Code of Ethics

• Obey the law

• Take care of our members

• Take care of our employees

• Respect our suppliers

If we do these four things throughout our organization, then we will achieve our ultimate goal, which is to: Reward our shareholders

51 Strategies

• Cost leadership

• Private label

• Membership

• Expansion

52 Strategies - Cost Leadership

• Wal-Mart and other retail giants also use this strategy • No-frills approach, doesn’t advertise as much as other giants, then use that savings to pay employees high wages, so they can better serve customers with higher productivity; The employee turnover is also reduced to save money for the company • Offer limited number of items and private labels to increase sale volume, help drive discounts and further differentiate from competitors (suppliers must bid for Costco shelf space, thus willing to give better price; save shipping costs and time spent to organize inventory) • Sell packaged items in large sizes or multiple-packs, so the cost per unit is usually materially less than other retailers

53 Strategies - Cost Leadership • Previous financial statements showed that maximum mark-up is 14% and ability to negotiate the lowest costs with suppliers to keep the consistently lower prices • Unlike regular stores who do loss leader strategy by sending out weekly flyer with amazing sale drops, Costco keeps the same loss leaders week after week (such as gas, rotisserie chicken, hot dog and soda combo, etc.) • To attract more memberships, Costco has continued to expand gasoline operations globally, with almost all new U.S. and Canadian warehouses opening with gasoline stations, and other international locations adding stations where regulations allow and space permits (although gasoline is very price sensitive and has lower margin compared to other businesses) • Costco has managed to resist the tendency with only around 3% of its sales occurring from e-commerce and still outperform other retailers due to its millions of loyal shoppers

54 Strategies - Private Label • Private label - Kirkland Signature offers high quality with generally 10% - 15% lower price than other brands • More profitable than name brand products as less middlemen involved • Costco continuously adds new products to the brand • Costco offers more items under the private label in the US than in international market • These products occupy 20% of products in Costco’s warehouses and contribute to 25% global sales • The Kirkland Signature name is used across a wide range of product areas, which enables the company to build strong consumer awareness of the name and make it a main reason to visit its outlets, by being perceived as a label offering an assurance of quality

55 Strategies - Private Label

• According to Jim Sinegal, Kirkland Signature can help to: ➢ Develop popular items with wide appeal to expand sales volume ➢ Control the quality of the product ➢ Drive down prices on national brands ➢ Control the packaging ➢ Achieve pallet efficiencies To obtain “pallet efficiencies” by shipping more product in the same amount of space. Most shipping costs are driven by volume of shipments so any dead air in the shipments (via truck/rail/etc.) is wasted. Costco realized this and changed the shape of their packaging from round to square to turn the dead freight into a cost savings. • In 2015, Costco expanded Kirkland Signature by offering organic food products, apparel and cookware resulting in $4B sales increase in 2015

56 Strategies - Membership

57 Strategies - Membership

• Costco’s membership revenue is an important component of its operating income • There are two types of membership cards available to individuals and businesses respectively: gold star membership and business membership; either can upgrade to executive membership by paying $55 upgrade fee • Executive membership is advised for annual spending higher than $2,750

58 Strategies - Membership

59 Strategies - Expansion

• Intensive growth strategies to continue expanding worldwide with the purpose of gaining new customers and increasing words of mouth or reputation

• As of December 2016, Costco has 715 stores worldwide

• Recently opened its first store in France in June 2017

• Plan to open 8 new warehouses in North America in 2017

60 Strategies - Expansion

61 Strategies - Expansion

62 Management Team

63 Chairman of BODs - Jeffrey H. Brotman

• In Costco: ➢ Inception - Oct 1993: Co-founder and Chairman of the Board ➢ Oct 1993 - Dec 1994: Vice Chairman ➢ Jan 2015 - now: Chairman of the Board • He is on the Board of Directors at United Way of King County • Undergraduate degree in Political Science and Law from University of

64 President, CEO & Director - W. Craig Jelinek

• In Costco: ➢ Feb 2010 - now: President and Director ➢ Jan 2012 - now: CEO ➢ Feb 2010 - Jan 2012: President and Chief Operating Officer • 2004 - February 2010: various senior management positions in Operations and Merchandising, including Executive Vice President in charge of merchandising • Before joining Costco in 1984: various management positions with Fed Mart and • He spent previous 20 years in various management positions in warehouse operations and merchandising

65 Executive VP, CFO & Director: Richard A. Galanti • In Costco: ➢ Mar 1984: Vice President-Finance ➢ Jan 1985 - Oct 1993: Senior Vice President, CFO and Treasurer ➢ October 1993 - now: Executive Vice President and CFO ➢ January 1995 - now: Director • Before joining Costco: an Associate with Donaldson Lufkin & Jenrette Securities Corporation • He is now on the Board of Directors at the Federal Reserve Bank of San Francisco • MBA from Stanford University with finance and financial reporting skills

66 Director - Susan L. Decker

• Oct 2014: enter the Broad as a Director • Other experiences: ➢ Since 2009: Principal of Deck3 Ventures LLC, a consulting and advisory firm ➢ 2009 - 2010: Entrepreneur-in-Residence at ➢ Jun 2007 - Apr 2009: President of Yahoo! ➢ Jun 2000 - Jun 2007: Executive Vice President and CFO at Yahoo! ➢ Previously on the Board of Intel Corporation, LegalZoom and Pixar • She has extensive experiences in senior leadership positions, particularly in finance, technology and marketing

67 Director - Daniel J. Evans

• Jan 2003: enter the Broad as a Director • Other experiences: ➢ Since 1989: Chairman of Daniel K. Evans Associates, a consulting firm ➢ 1983 - 1989: U.S. Senator for the State of Washington ➢ 1977 - 1983: President of the Evergreen State College ➢ 1965 - 1977: Governor of the State of Washington ➢ Previously on the Board of NIC Inc. • He has broad-ranging experiences on the Board of public companies as well as in government and public services

68 Director - John W. Meisenbach

• Inception - now: Director • Other experiences: ➢ 1962 - now : President of MCM, a financial services company ➢ Now: Director of M Financial Holdings ➢ Before: Director and Chair of Compensation Committee of Expeditors International • He graduated in pre-law from Seattle University, but have broad-ranging experiences in the insurance industry

69 Director - James D. Sinegal • In Costco: ➢ Inception - now: Co-founder and Director ➢ Until Feb 2010: President ➢ Until Dec 2011: CEO ➢ Jan 2012 - Apr 2013: non-officer employee • He is now on the Board of Directors at Costco Wholesale Corp., United Negro College Fund, Inc., Fred Hutchinson Cancer Research Center, and The National Mentoring Partnership, Inc. • Business Administration graduate of San Diego State University with extensive career in the retail industry

70 Director - John W. Stanton • Oct 2015: entered the Board as a Director • Other experiences: ➢ 1992 - 2005: founded and served as Chairman and CEO of Western Wireless Corporation ➢ 1994 - 2004: Chairman and Director of T-Mobile USA ➢ 1998 - 2003: CEO of T-Mobile USA ➢ 2008 - 2013: Director of Clearwire Corporation ➢ 2011 - 2013: Chairman of Clearwire Corporation • Now: Chairman of Trilogy International Partners Inc., Trilogy Equity Partners, and First Avenue Entertainment LLLP, and Director of Microsoft and Columbia Sportswear Company • He has extensive background as a CEO and Director of public and private companies and his insights into global operations, strategic planning and financial matters 71 Director - Mary Agnes Wilderotter • Oct 2015: entered the Board as a Director • Other experiences: ➢ Apr 2015 - Apr 2016: Executive Chairman of Frontier Communications ➢ Nov 2004 - Apr 2015: Chairman and CEO of Frontier Communications ➢ 2002 - 2004: Senior Vice President of Microsoft ➢ 1997 - 2002: President and CEO of Wink Communications ➢ 2006 - 2015: Director of Xerox Corporation ➢ 2015 - 2016: Director of DreamWorks Animation SKG ➢ 2009 - 2015: Director of Procter & Gamble Company • Now: Director of Juno Therapeutics Inc. and Hewlett Packard Enterprise, and on President’s Commission on Enhancing National Cybersecurity • She received her undergraduate degree from the College of the Holy Cross () and has broad-ranging experiences including senior leadership in areas of telecommunications and technology 72 Management Compensations

73 Major Institutional Holders

74 Major Institutional Holders

75 10-Year Dividends Payout

76 77 Share Repurchases

78 Stock Splits

79 Credit Ratings

• Fitch: A+

• Moody’s: A1

• S&P: A+

Top of the Upper-medium Grade

80 Key Ratios

81 Key Ratios

82 Key Ratios

83 Balance Sheet 10Q

84 Balance Sheet 10Q

85 Balance Sheet 10K

86 Balance Sheet 10K

87 Income Statement 10K

88 Income Statement 10Q

89 Cash Flow Statement 10K

90 Cash Flow Statement 10K

91 Cash Flow Statement 10Q

92 Cash Flow Statement 10Q

93 Recommendation

HOLD

94 THE HOME DEPOT INC Prepared by: Ravi Khunkhun

95 Stock Overview

96 5-Day Performance

97 1-Year Performance

98 5-Year Performance

99 10-Year Performance

100 Max Timeframe Performance

101 Performance Comparison - Index

102 Performance Comparison - Competitors

103 Shares Outstanding (in billion)

Home Depot Shares Outstanding Chart

104 5-Year Historical Dividend Yield

Home Depot Dividend Yield (TTM) Chart

105 5-Year Revenue

Home Depot Revenue Chart

106 Home Depot Revenue by Product Category (As of January 31, 2016)

107 Home Depot History

1979 - In Atlanta, , founded by Bernie Marcus and Arthur Blank when they opened their first two one-stop do-it-yourself warehouse-style stores

1981- The Home Depot went public on NASDAQ

1984 - They moved to the Stock Exchange

1994 - The company arrived in Canada with the acquisition of Aikenhead's home improvement centers

1999 - Added to the Dow Jones Industrial Average

2002 - They expanded into Mexico through the acquisition of Del Norte 108 Home Depot History

2003 - The Home Depot had grown from three stores employing 200 people to more than 1,700 stores employing 300,000 people

2005 - Acquired National Waterworks Holding for $1.35 billion in cash

2006 - The company extended its reach to China by acquiring The Home Way, a 12 store chain

2015 - Acquired Interline Brands Inc for $1.63 billion in cash

Today - More than 2,200 stores in the U.S., Canada, and Mexico with an average of 105,000 square feet of indoor retail space, interconnected with an e-commerce business.

109 Home Depot Founders Arthur Blank

● Co-Chairman until retiring in 2001 ● Owner of Atlanta Falcons of NFL and Atlanta United of MLS ● Chairman, President, and CEO of AMB Group, LLC

Bernard Marcus

● Chairman of the Board until retiring in 2002 ● CEO for 19 years ● Inducted into the Junior Achievement U.S. Business Hall of Fame in 2006.

110 Home Depot U.S. Locations

111 Home Depot International Locations

112 Home Depot Values

113 Inverted Pyramid

Putting Customers First

Taking Care of Our People

A Support System of Regional Leadership

Store Support Center in Atlanta, GA

Driving Innovation Through Strategic Leadership

114 Three-Legged Stool

115 Management CRAIG MENEAR

Chairman, CEO and President

Craig Menear is chairman, CEO and president of The Home Depot.

Joined The Home Depot in 1997

Served in various roles with retailers such as IKEA, Builders Emporium, Grace Home Centers and Montgomery Ward in addition to also previously operating his own independent retail business.

He currently serves on the board of the Atlanta Committee for Progress.

Earned a bachelor of arts degree from State University’s Eli Broad College of Business.

116 Management

JEFF KINNAIRD

President - Canada

Responsible for the sales and operations of 182 stores and approximately 28,000 associates

Jeff joined The Home Depot in 1996 as a lumber associate

Most recently, he served as merchandising vice president of Canada where he was responsible for merchandising strategy and operations

Jeff has over 25 years of Home Improvement retail experience. Prior to joining The Home Depot, he worked at Windsor Plywood

Jeff has an Executive MBA from Queen’s University

117 Management

MATT CAREY

Executive Vice President & Chief Information Officer

Joined The Home Depot in 2008

Before joining The Home Depot in 2008, Matt served as senior vice president and chief technology officer at eBay.

Matt spent more than 20 years with Wal-Mart, where he was senior vice president and chief technology officer. During his tenure at Wal-Mart, he managed the rollout of the wireless RF infrastructure.

Matt earned an associate’s degree in information systems from State University

118 Management TIM CROW

Executive Vice President – Human Resources

Joined The Home Depot in 2002

During his tenure, the company has dramatically increased Success Sharing, our profit sharing program for frontline hourly and non-management associates. The company also reinstated its equity awards program for assistant store managers, the only program of its kind in retail. Previously, Tim was senior vice president of organization, talent and performance systems.

Served as senior vice president of human resources at Kmart.

Spent almost 20 years with Sears, Roebuck & Co.

Earned a bachelor’s degree from State University at Northridge 119 Management TED DECKER

Executive Vice President – Merchandising

Joined The Home Depot in 2000 as director of business valuation.

Worked in business development, strategic planning, finance and treasury at Kimberly-Clark Corp. and Scott Paper Co. Prior to that, Ted held various corporate finance, lending and credit positions at PNC Bank.

He has extensive international experience, having lived and worked in London, England, and Sydney, Australia.

Ted earned a bachelor’s degree in English from The College of William and Mary and a master’s degree in business administration from Carnegie Mellon University.

120 Management MARK HOLIFIELD

Executive Vice President - Supply Chain & Product Development

Joined The Home Depot in 2006 as senior vice president of supply chain.

Prior to The Home Depot, he most recently served as executive vice president of supply chain management at Office Depot

Prior to Office Depot, Mark worked in supply chain roles at Dallas Systems Corporation, Frito-Lay North America Inc., and H.E. Butt Grocery Company.

Mark earned his bachelor’s degree in business administration with honors from the University of and his master’s degree in business administration from Baylor University.

121 Management

BILL LENNIE

Executive Vice President – Outside Sales & Service

His career at The Home Depot began in 1992, when he joined as a merchant for Millwork and Building Materials. Bill returned to The Home Depot in 2009 from Dick’s Sporting Goods

Previously, Bill served as president of The Home Depot Canada where he was responsible for the sales, merchandising, ecommerce, supply chain, human resources, IT development and operations of 182 stores in Canada

Before joining The Home Depot, Bill was a divisional merchandise manager for Lowe’s. Prior to that, he spent eight years with Menards in Eau Claire, Wis., as the millwork plant manager for its manufacturing division. 122 Management TERESA WYNN ROSEBOROUGH

Executive Vice President – General Counsel and Corporate Secretary

Joined The Home Depot in 2011

Was a partner at Sutherland Asbill & Brennan LLP

Teresa was named one of 25 Influential Black Women in Business by The Network Journal and as one of America’s top black attorneys by Black Enterprise.

Teresa earned a bachelor of arts degree from the University of , a master’s degree in education from Boston University, and a juris doctor with high honors from the University of School of Law, where she was editor-in-chief of the Law Review.

123 Management ANN-MARIE CAMPBELL

Executive Vice President - U.S. Stores

Joined The Home Depot in 1985 as a cashier in South

During her career at the company, she has served as vice president of operations, vice president of merchandising and special orders, vice president of retail marketing and sales for Home Depot Direct, vice president of vendor services and, most recently, president of the Southern Division of The Home Depot.

In 2014, Fortune Magazine listed her among the top 50 most powerful women in business.

Graduated from Georgia State University, where she earned a bachelor’s degree in philosophy and a master’s degree in business administration.

124 Management CAROL B. TOMÉ

Chief Financial Officer & Executive Vice President – Corporate Services

Joined The Home Depot in 1995. Served as chief financial officer since May 2001 and was named executive vice president of corporate services at The Home Depot in January 2007.

In 2012, The Wall Street Journal ranked Carol No. 2 on its list of the best chief financial officers in corporate America and in 2013, Fortune magazine listed her among the top 50 Most Powerful Women in Business, for the second consecutive year.

Holds a bachelor’s degree in communication from the University of and a Master of Business Administration in finance from the University of Denver.

125 Interconnected Retail: One Home Depot

126 Shift to More Digital Marketing

127 Mobile Experience Enhancements

128 Looking Ahead

● Connect associates to customer needs: Empower associates to provide industry-leading customer service with differentiated staffing models, tools and organizational support to meet the needs of do-it-yourself and Pro customers

● Interconnected experience; stores to online, and online to stores: Offer an interconnected shopping experience for customers by leveraging our stores online platform and mobile app

129 Looking Ahead

● Connect products and services to customer needs: Help customers tackle any project with compelling assortments at the right prices and services delivered by trusted Pros

● Connect product to shelf, site and customer: Build efficient end-to-end supply chain that delivers products to customers when and where they want

● Innovate our business model and value chain: Seek ways to operate more efficiently to support growth opportunities

130 Renewable Energy

● Purchased wind farm in Texas to power 100 Home Depot stores for a year ○ Purchased 50 megawatts (MW) a year through a 20-year power purchase agreement (PPA) with EDP Renewables North America

● The Home Depot's goal is to procure 135 megawatts of various renewable energy sources, including solar and wind, by the end of 2020

● Also procures energy from solar farms in and Massachusetts with a combined annual output of 14.5 million kilowatt hours (kWh)

131 Financial Targets

By the end of fiscal 2018, they expect to:

● Grow sales to $101 billion

● Achieve a 14.5% operating margin

● Achieve a 35% return on invested capital

132 Major Institutional Holders

133 Balance Sheet 10Q

134 Balance Sheet 10Q

135 Balance Sheet 10K

136 Balance Sheet 10K

137 Statement of Earnings 10K

138 Statement of Earnings 10K

139 Statement of Earnings 10Q

140 Statement of Earnings 10Q

141 Statement of Cash Flows 10K

142 Statement of Cash Flows 10K

143 Statement of Cash Flows 10Q

144 Statement of Cash Flows 10Q

145 Recommendation SELL

146 WAL-MART STORES INC Prepared by: Sunny Singh

147 Stock Overview

148 Shares Outstanding

149 5-Day Performance

150 3-Month Performance

151 YTD Performance

152 1-Year Performance

153 5-Year Performance

154 5-Year Comparison WMT, DJI, IXIC, GSPC

155 10-Year Performance

156 Max Timeframe Performance

157 Annual Dividend Rate

Walmart has increased its annual cash dividend every year since first declaring a $0.05 per share annual dividend in March 1974

158 Dividend Payable Dates

159 History of Stock-Splits

Wal-Mart Stores, Inc. was incorporated on Oct. 31, 1969. On Oct. 1, 1970, Wal-Mart offered 300,000 shares of its common stock to the public at a price of $16.50 per share. Since that time, we have had 11 two-for-one (2:1) stock splits. On a purchase of 100 shares at $16.50 per share on our first offering, the number of shares has grown as follows:

160 Major Institutional Holders

161 Wal-Mart Overview

● Wal-Mart competes on price, invest in differentiating access to retail locations

● Wal-Mart U.S. is the largest segment and operates retail stores in all 50 states in the U.S., Washington D.C. and Puerto Rico, with three primary store formats, as well as digital retail. Wal-Mart U.S. generated approximately 62% of total net sales in fiscal 2016*; Wal-Mart U.S. has historically contributed the greatest amount to the Company's net sales and operating income

● Wal-Mart International is the second largest segment and consists of operations in 27 countries outside of the U.S. and includes numerous formats as well as digital retail; Wal-Mart International generated approximately 26% of fiscal 2016* net sales

● Sam's Club consists of membership-only warehouse clubs and operates in 48 states in the U.S. and in Puerto Rico, as well as digital retail. Sam's Club accounted for approximately 12% of fiscal 2016* net sales; As a membership-only warehouse club, membership income is a significant component of the segment's operating income 162 Wal-Mart Overview

163 Looking Forward

164 Quarterly Sales Change

165 Wal-Mart Values

166 History of Wal-Mart

1962: Sam opened first Wal-Mart store in Rogers, Ark 1967: The owns 24 stores, with $12.7mm in sales 1969: Wal-Mart officially incorporates 1970: Wal-Mart hits IPO at $16.50/share 1972: Wal-Mart is listed in the NYSE, with 50+ stores totaling $70M in revenue 1980’s: Known as decade of firsts. First to a $1 billion in annual sales 1983: The first Sam’s Club opened in Midwest City, Oklahoma 1988: The first Wal-Mart Supercentre opened in Washington, 1990: Wal-Mart was the nation's number-one retailer 1991: Wal-Mart goes global, opened a Sam’s Club in Mexico City 1992: Employed 371,000 associates in 1,928 stores and clubs 1994: Wal-Mart expanded into Canada with the purchase of 122 Woolco stores 1996: Wal-Mart opens first store in China 1997: Wal-Mart reaches $100bb in total sales 167 History of Wal-Mart

2000: Walmart.com was founded 2002: Wal-Mart topped the Fortune 500 ranking of America's largest companies 2009: Wal-Mart exceeded $400 billion in annual sales 2011: With the acquisition of in South Africa, Wal-Mart surpassed 10,000 retail units around the world 2014: Doug McMillon succeeded as CEO 2015: Announces a $2.7 billion investment over two years in its U.S, and increased minimum

168 Walton Family

● Net worth: 35.1 billion USD ● Net worth: 34.9 billion USD ● American war veteran ● Walton received a bachelor's degree in Business ● Went on to attend the College of ● Graduated from Trinity Administration (BA) Marketing Wooster in Wooster, . He University with a B.A. in ● ’s retirement from the board and the dropped out of college in 1968 to economics and finance nomination of , his son, mark a leadership spend more time playing the flute transition to the next generation of Walton family and enlisted in the U.S. Army representation ● Died in 2005 while flying a plane ● Jim Walton served on the board for over 10 years and was a member of the Technology and e-commerce Committee, as well as the Strategic Planning and Finance Committee during his tenure 169 Walton Family

● Steuart Walton, CEO

● Is the chief executive officer of Game Composites, Ltd., a company he founded in 2013 that designs and builds small composite aircraft

● Elected to the Wal-Mart Board of Directors in 2016, he is the grandson of Wal-Mart founder

● He previously worked for the London office of Allen & Overy, LLP handling matters related to debt equity offerings by non-U.S. entities

● Steuart also worked for Wal-Mart’s international division focusing on mergers and acquisitions

● Steuart holds a bachelor’s degree in business administration from the University of at Boulder and a law degree from Georgetown University Law Center

170 Walton Family

● Rob Walton: Executive; Global Compensation; Strategic Planning & Finance

● Son of Wal-Mart founder, Sam Walton, Rob Walton served as Wal-Mart’s chairman of the board of directors from 1992 to 2015

● Rob joined the company in 1969. Prior to becoming chairman, he held a variety of positions with Wal-Mart, including senior vice president, corporate secretary, general counsel and vice chairman

● Before joining Wal-Mart, Rob was a partner with the law firm of Conner & Winters in Tulsa, Okla

● Graduated from the University of in 1966 with a bachelor of science degree in business administration

171 Wal-Mart Map of Global Stores

172 Number of Stores Today, Wal-Mart operates over 11,700 retail units under 59 banners in 28 countries and employ approximately 2.3 million associates around the world – 1.5 million in the U.S. alone

173 Store Segment Breakdown

174 Wal-Mart Compared to Competitors

175 Sam’s Club Statistics

176 International Statistics

177 U.S. Statistics

178 How Wal-Mart Selects the Board

179 Board Members

180 Board Members

181 Walmart Board Committee Members

182 Compensation of Board Members

183 Compensation of Board Members

184 CEO Payout Strategy

185 Where Wal-Mart Currently Stands in the E-Commerce

186 Shifting the Future Focus to E-Commerce

187 Acquisition of JD

● Wal-Mart announced that it had increased its stake in Chinese e-commerce giant JD.com to 12.1%, worth roughly $4.87 billion

● This is up from the 10.8% stake it had in October, and its 5.9% stake in June of last year

● Inflation in China remains under 2%, while wages have been increasing by 8-9% over the last few years, according to data cited by Forbes ● Wal-Mart is putting faith in JD.com to remain one of the top players in China’s e-commerce space, where consumers are projected to spend nearly $6.4 trillion a year by 2025 ● Total net revenue for JD.com grew 38% YoY, totaling over $9 billion in Q3 2016 ● On the innovation front, the company is expanding its drone delivery routes to cut transportation costs and increase focus on rural areas of China, which will ultimately help it compete against Chinese e-commerce market leader Alibaba 188 Acquisition of Jet.com

● Agreed to acquire Jet for approximately $3 billion in cash, a portion of which will be paid over time. Additionally, $300 million of Wal-Mart shares will be paid over time as part of the transaction

● Demonstrated ability to scale with speed, reaching $1 billion in run-rate Gross Merchandise Value (GMV) and offering 12 million SKUs in its first year

● A growing customer base of urban and millennial customers with more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders

● Best-in-class technology that rewards customers in real time with savings on items that are bought and shipped together, thereby reducing the supply-chain and logistics costs often buried in the price of goods

● A select group of more than 2,400 retailer and brand partners tailored to create an attractive and distinctive assortment for consumers

189 Open New E-commerce Fulfillment Centre

● The new facility will house millions of items dedicated to fulfilling online orders and will enable faster shipping directly to customers or to stores for free pickup

● It is the latest addition to the next-generation fulfillment network Walmart is building to support its rapidly growing e-commerce business

● 50-acre campus, located near the intersection of I-4 and Highway 27 in Polk County, features two buildings spanning a total of more than 2.2 million sq. ft.

● The campus employs more than 550 recently hired associates and there are plans to hire at least 1,000 more associates over the next year. These associates would join the more than 107,000 in the state currently working at Wal-Mart’s stores, clubs and distribution centers

190 2-Year E-Commerce Sales Trend

191 Post Acquisitions

● Wal-Mart reported that U.S. online sales rose a staggering 63% in the first fiscal quarter of the year, following last year's overhaul of its online marketplace and a series of acquisitions of e-commerce companies since then, most notably its $3 billion purchase of Jet.com ● Walmart.com now sells 50 million first and third party items, up from 10 million a year ago (and 34 million a quarter ago) ● In addition to Jet.com, Wal-Mart recently bought e-commerce companies ModCloth, ShoeBuy, and , but McMillon said those deals were small and meant to speed up innovation within Walmart.com ● For the quarter ended April 30, Wal-Mart earned $1 per share, above analysts' average estimate of 96 cents, according to Thomson Reuters I/B/E/S; Net income fell to $3.04 billion from $3.08 billion, due to an increase in the tax rate ● Wal-Mart's U.S. comparable sales were above the 1.3% growth analysts had been expecting, according to Consensus Metrix ● For the current quarter, the retailer expects U.S. comparable sales to be up 1.5% to 2%

192 Financial Snapshot

In fiscal 2017:

● annual revenue approached $486 billion with operating income of approximately $22.8 billion; ● operating cash flow reached a record level of $31.5 billion and return on investment* was 15.2 percent; ● operated nearly 11,700 stores serving more than 260 million customers a week; ● made several strategic transactions, including the acquisition of Jet.com and the alliance with JD.com; and ● returned $14.5 billion to shareholders through dividends and share repurchases

193 Balance Sheet 10Q

194 Balance Sheet 10Q

195 Balance Sheet 10K

196 Balance Sheet 10K

197 Income Statement 10K

198 Income Statement 10K

199 Income Statement 10Q

200 Income Statement 10Q

201 Cash Flow Statement 10K

202 Cash Flow Statement 10K

203 Cash Flow Statement 10Q

204 Cash Flow Statement 10Q

205 Net Income Per Common Share 10Q

206 Property and Equipment 10K

207 Goodwill and Other Acquired Intangible Assets

208 Consolidated Operations Statement

209 FCF Statement

210 ROI Review

211 Earnings to Fixed Cost

212 Share Repurchases Q2

213 Share Repurchases Q2

214 Long-Term Debt

215 Net Cash Used and Provided

Net cash flows used in financing activities generally consist of transactions related to our short-term and long-term debt, financing obligations, dividends paid and the repurchase of Company stock; Transactions with noncontrolling interest shareholders are also classified as cash flows from financing activities; Net cash used in financing activities decreased $1.5 billion for the three months ended April 30, 2017, when compared to the same period in the previous fiscal year, primarily due to a reduction in share repurchases and lower debt repayments

Net cash provided by operating activities was $5.4 billion and $6.2 billion for the three months ended April 30, 2017 and 2016, respectively; The decrease in net cash provided by operating activities was due to an increase in incentive payments

216 Recommendation HOLD

217 218