in whole or in part.
• More favorable purchase prices are a result of Walmart’s increased size
and bargaining power with suppliers. Walmart credits worldwide sourcing
through its distribution centers as part of the reason for the decreased cost
of goods sold to sales percentage.
Selling and Administrative Expense to Sales: The selling and administrative ex-
pense to sales percentage increased between fiscal 2006 and fiscal 2008. Possible
explanations include the following:
• Increased advertising and other promotion costs in an increasingly com-
petitive environment, especially as Walmart expands internationally. In
addition, utility costs have increased due to the continuing increases in
such costs. Indeed, in the 2008 10-K, Walmart attributes part of the in-
crease in operating expenses to higher utility costs.
• Increased compensation costs. Walmart has come under attack in the press
for its low wages, resulting in increased external efforts to unionize em-
ployees. Perhaps Walmart has responded to these pressures by increasing
compensation levels. In fact, 2008 includes a pretax charge of $352 mil-
lion for the settlement of 63 wage and hour class action lawsuits.
• Increased coordination costs as the company expands internationally. The
2008 10-K claims that “Corporate expenses have increased primarily due
Segment Data: Text Exhibit 4.48 indicates that the sales mix shifted away from
Walmart Stores and Sam’s Clubs toward the International segment during the last
three years. The mix shift away from Walmart Stores should decrease the overall
profit margin because this segment has the highest profit margin. The mix shift
ternational segment produced lower increases in net sales due to unfavorable fluc-
tuations in foreign currency exchange rates during 2008, which increases the
impact of recurring or fixed costs on operating profitability.