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Which is healthier from a cash flow standpoint, Sears or Wal-Mart?

Sears Holding Corporation (SHLD) announced in April 2016 that it would be closing 68 Kmart and 10 Sears stores during the second half of 2016. The stores it is closing have not been profitable for Sears and it is looking to improve profitability with the closures.

Similarly, Wal-Mart Stores, Inc., (WMT) announced in January 2016, that it would be closing 269 stores worldwide. Again, this move is an effort to increase profitability for Wal-Mart.

Sears fiscal year-end is the Saturday closest to January 31. Below are its statement of cash flows for the most recent three years.

Wal-Marts fiscal year-end is January 31. Below are its statements of cash flows for the most recent three years.

Questions

1. Using its statements of cash flows, answer the following questions about Sears:
   1. Is Sears generating cash from its operations?
   2. Describe what investing activities Sears has been involved in over the past three years. Are investing activities an overall source or use of funds for Sears?
   3. What financing activities has Sears been undertaking in the past three years? Has it been paying dividends to its common stockholders? (Note: Sears Canada is a holding that does not represent Sears common stockholders.)
   4. How will the closure of the Kmart and Sears stores impact the 2016 statement of cash flows?
2. Using its statements of cash flows, answer the following questions about Wal-Mart:
   1. Is Wal-Mart generating cash from its operations?
   2. Describe what investing activities Wal-Mart has been involved in over the past three years. Are investing activities an overall source or use of funds for Wal-Mart?
   3. What financing activities has Wal-Mart been undertaking in the past three years? Has it been paying dividends to its common stockholders?
   4. How will the closure of the Wal-Mart stores impact the 2016 statement of cash flows?
3. Judging from the statements of cash flows, which company, Sears or Wal-Mart, is healthier?
4. Why do you think Sears and Wal-Mart would have fiscal year-ends around January 31 rather than using a calendar year-end of December 31?

Sears Holding Corporation Statements of Cash Flows (in millions) Year Ended Jan 30, 2016 Jan 31, 2015 Feb 1, 2014 Operating activities: Net income (loss) (1,128) (1,810) (1,116) Adjustments to convert to cash basis (1,039) 423 7 Net cash from operations (2,167) (1,387) (1,109) Investing activities: Sales of property and investments 2,730 424 995 Purchases of PP&E (211) (270) (329) Other investing activities 173 (2) Net cash used in investing 2,519 327 664 Financing activities: Proceeds from issuance of debt 1,025 994 Repayments of debt (1,405) (80) (83) Other increases (decreases) in debt 1,091 (1,117) 238 Dividends paid for Sears Canada (50) (27) (14) Other financing activities 484 (233) Net cash provided(used) by financi (364) 285 902 Effect of exchange rates (3) (38) Net change in cash (12) (778) 419 Cash, beginning of year 250 1,028 609 Cash, end of year 238 250 1,028 Wal-Mart Stores, Inc. Statements of Cash Flows (in millions) Fiscal Years Ended Jan 31, 2016 Jan 31, 2015 Jan 31, 2014 Operating activities: Net income (loss) 15,080 17,099 16,695 Adjustments to convert to cash basis 12,309 11,465 6,562 Net cash from operations 27,389 28,564 23,257 Investing activities: Purchases of PP&E (11,477) (12,174) (13,115) Proceeds from disposal of PP&E 635 570 727 Proceeds from disposal of some ops 246 671 Other investing activities (79) (192) (138) Net cash used in investing (10,675) (11,125) (12,526) Financing activities: Net change in borrowings 1,235 (6,288) 911 Proceeds from issuance of debt 39 5,174 7,072 Repayments of long-term debt (4,432) (3,904) (4,968) Dividends paid (6,294) (6,185) (6,139) Purchase of company stock (4,112) (1,015) (6,683) Other financing activities (2,558) (2,853) (982) Net cash provided(used) by financii (16,122) (15,071) (10,789) Effect of exchange rates (1,022) (514) (442) Net change in cash (430) 1,854 (500) Cash, beginning of year 9,135 7,281 7,781 Cash, end of year 8,705 9,135 7,281

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