Part B

Part A of Integrative Case $4\mathrm{.}1$ analyzed the profitability and risk of Walmart Stores for its fiscal years $2018,2019,$ and $2020.$ Part B of this case compares the profitability and risk ratios of Walmart and two other leading discount retailers, Carrefour and Target, for their $2018$ through $2020$ fiscal years.

CARREFOUR

Carrefour, headquartered in France, is Europe$$s largest retailer and the second largest retailer in the world. Carrefour is organized by geographic region $($France$,$ Europe excluding France, Asia, and Latin America$).$ Each segment is organized according to store formats, which include the following:

Hypermarkets: Offer a wide variety of household and food products at competitively low prices under the Carrefour store brand.

Supermarkets: Sell traditional grocery products under the Market, Bairro, and Supeco store brands.

Convenience Stores: Offer a limited variety of food products in smaller stores than those of hypermarkets and supermarkets at aggressively low prices under Express, City, Contact, Bio, Montagne, and other store brands.

Cash & Carry: Provides professional restaurant and shop owners food and nonfood products at wholesale prices, under the Promocash and other store brands.

E$-$commerce: Operates an online shopping website unique to each country in which Carrefour operates.

France represents the largest segment, followed by Rest of Europe, Latin America, and Asia.

TARGET

Target Corporation, headquartered in the United States, is a retailer that includes large$-$format general merchandise and food discount stores as well as an online business at www$.$target.com. Target stores offer a wide variety of clothing, household, electronics, sports, toy, and entertainment products at discount prices. Target stores attempt to differentiate themselves from Walmart$$s discount stores by pushing trendy merchandising with more brand$-$name products, but Target also owns a significant number of their own brands, which account for approximately one$-$third of sales. Target emphasizes customer service, referring to its customers as $$guests$$ and focusing on the theme of $$Expect More, Pay Less.$$ Target Corporation attempts to differentiate itself from competitors by providing wider aisles and a less cluttered store appearance.

Exhibits $4\mathrm{.}48$ and $4\mathrm{.}49$ present profitability ratios for Carrefour, Target, and Walmart for their $2018$ through $2020$ fiscal years. Exhibit $4\mathrm{.}50$ presents risk ratios for the three firms. Exhibit $4\mathrm{.}51$ presents selected other data for these firms. $($Exhibits Attached$)$

Required

Walmart and Target follow somewhat different strategies. Using information in Exhibits $4\mathrm{.}48$ and $4\mathrm{.}51,$ suggest reasons for differences in operating profitability.

Walmart and Carrefour follow similar strategies, but Walmart consistently outperforms Carrefour on ROA. Using information in Exhibits $4\mathrm{.}48$ and $4\mathrm{.}51,$ suggest reasons for these differences in operating profitability.

Refer to Exhibit $4\mathrm{.}49.$ Which firm appears to have used financial leverage most effectively in enhancing the rate of ROCE? Explain your reasoning.