Peer Responses

Responding to Person 1

Hello,

Thank you for sharing your post. Your analysis of Walmart’s retained earnings and EPS reporting is great. I concur with you that the company’s retained earnings strategy could be less transparent than that of other companies that provide many details in the notes in the financial statements. I find it insightful to learn how you dug into inputs and outputs like stock repurchases to understand retained earnings: Peer Responses.

In addition, the information might be enough to inform an investor’s decision since EPS is one of the major lookouts for investors (Wahlen et al., 2023). I am delighted by Walmart’s historical context provided in the analysis, which underscores its long-term financial endurance. In addition, it would be even more interesting if the historical context was applied to the retained earnings strategy. Notably, this would assist us in evaluating how it has evolved and make it easier to understand the current reported retained earnings.

References

Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2023). Intermediate accounting: Reporting and analysis (4th ed.). Cengage.

Responding to Person 2

Hello,

Thank you for sharing your discussion post with us. Your analysis of Nike and Under Armour is thoroughly undertaken. Notably, this makes it possible to effectively highlight how the two companies differ in their strategies for retained earnings. I am delighted to learn that Nike maintains a steady dividend payout ratio of 47.5%, which is essentially a commitment by the company to deliver value to its shareholders (SEC, 2024).

Your concern about how the company can deploy its retained earnings is commendable because the company holds a significant amount in the form of retained earnings that can be channeled to various investments. The contrast made with Under Armour, which pays no dividend, makes Nike look like a better investor destination. The contrast offers an insight into how various companies prioritize reinvestment in comparison to shareholder return. Additionally, it would be valuable to determine how each company’s retained earnings strategies align with their broader growth strategies.

Reference

SEC. (2024). Nike Inc. 10-k forms. Sec.gov. https://www.sec.gov/Archives/edgar/data/320187/000032018724000044/nke-20240531.htm

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Instruction: reply to the threads.

Person 1

In Walmart’s most recent 10-K filing retained earnings amount can be found in the equity section of the balance sheet and the statement of shareholders equity. You can find the earning per share or “Net Income per common share” in the income statement beneath consolidated net income. Walmart lists out both based and diluted EPS as required when you have the possibility of dilutive shares. There is also sub sections to get a better idea of Walmart’s net income found in “Consolidated Results of operations”.

Retained earnings did not show up that much in Walmart’s 10-K. It only was shown when listed on the balance sheet and statement of shareholders equity. This surprised me as most of the time Walmart will have subsections beneath these explaining the plan with the account (cash/long term investments etc). You have to dig for Walmart’s thinking behind their retained earnings.

To do this you have to look at the inputs and outputs of retained earnings such as net income, repurchasing of stock and cash dividends. EPS was listed under the income statement however it was not followed up thoroughly. I believe this is because it is a metric more so for investors rather than internal stakeholders. Yes, they will elaborate on shares outstanding and of course net income & dividend payouts but the end result (EPS) does not need to be elaborated on.

Walmart does pay dividends on a regular basis, which goes back to 1987 where they paid .03$ quarterly dividends. Throughout the years as the company has grown so has the dividend payment which is now scheduled to be .83c a share annually.

Walmart is one the select few companies to have always increased their dividend amount every year since incorporation. The last three years Walmart has paid approximately 40%-52% of their annual net income out as dividends. On the other hand, Target is slightly higher when it comes to % of net income where they issue around 50%-60% of a payout.

Peer Responses

Person 2

Company: Nike and Under Armour

1. In Nike’s most recent 10k, they report retained earnings in their consolidated balance sheet under shareholders equity. Retained earnings has its own specific line with a total amount. Earnings per share (EPS) is reported in their consolidated statements to income. EPS has its own section with two specific lines under it labeled as “basic” and “diluted”.For required reporting, Nike must report retained earnings in the shareholders equity section in the consolidated balance sheet as well as a detailed view of beginning to end numbers for retained earnings.

   EPS is also required to be shown in the consolidated statements of income as well as breakdowns for both basic and diluted EPS. For reporting under specific circumstances, Nike should report things such as the amount spent on buybacks if they were to repurchase some of their shares and to disclose impacted amounts of retained earnings if they were to take some write-downs on their assets.

2. What stands out to me in Nike’s reporting is that they have a history of regularly paying out their dividends. With the payout ratio sitting around 47.5%, this shows that close to half of Nike’s net income is distributed to shareholders and strong commitment to restoring value to their many investors. An element of their reporting that I have a question about involves how Nike will go about managing and using their retained earnings. It would be useful to know if there are any kind of investments that will be funded through their retained earnings to see how it would impact their total numbers.
3. Based on the information in the most recent 10k for Nike and Under Armour, we can conclude that while Nike does pay dividends on a regular basis as they show a consistent history of paying out quarterly dividends, Under Armour does not pay out dividends at all. For Nike, the percentage of net income they pay on a regular basis sits around 47%. Since Under Armour does not pay dividends, their percentage ratio is simply zero. Based on these findings, Nike pays dividends on a regular basis with around 47% of their net income going to shareholders/investors while Under Armour does not pay dividends at all.

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