Financial Analysis of Sainsbury's Performance

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Introduction
J Sainsbury plc was founded in 1869 in Drury Lane by John James and Mary Ann Sainsbury, and is one of the oldest supermarkets in the United Kingdom. Its current company structure comprises of a chain of 547 supermarkets, 343 convenience stores and the recent addition of Sainsbury’s Pharmacy and Sainsbury’s Bank (which is a joint venture with the Lloyd’s bank group). Currently their customer profile consists of approximately 19 million customers’ each week and a surplus of an estimated 2,000 suppliers. Its employee structure consists of approximately 150,000 individuals and it is still expanding. The current Chief Executive Justin King believes the Sainsbury’s success and profitability can be accredited by “... our values underpin our goal to provide health, safe, fresh and tasty food at fair prices. These values are at the heart of our business; they determine our priorities and guide us in ensuring that we conduct ourselves in an honest, ethical and sustainable manner...”. Sainsbury’s supermarkets pride themselves with placing customer interests primarily as illustrated by the four general goals: •Best quality of food with customer health in mind

Sourcing food and its components with integrity
Environmentally friendly
Community growth and development

In addition the company has set aside three main objectives to ensure it adheres to bearing in mind its rapid expansion: 1.Excellent food at fair prices
2.Accelerating the expansion of the growth of the complementary non-food range and services for example clothing 3.Rapid an effective expansion within the United Kingdom for example: the introduction of online grocery shopping.

J Sainsbury plc supermarkets have won five coveted awards this past year within the supermarket field: Leaders in HR and people management, Supermarket of the year, Official partner of the London 2012 Paralympics games, Leader in quality, Green to the Core (by consumer focus for their customer engagement on green issues). The extent of the success achieved will be examined within this report to give a clearer representation of J Sainsbury’s as a potential investment. The report also gives a comparison of Sainsbury’s with Tesco, its main competitor.

Share Analysis
Sainsbury Annual report from 2010 shows that authorized share capital remained the same as the previous year. However the figures also show that there was an increase in the amount of issued ordinary shares between March 2009 and March 2010, which also occurred between March 2008 and March 2009. This illustrates that the company used shares to create more capital. Although the authorized share capital has remained the same for the two financial periods, as of 2010 Sainsbury still has a potential 690million shares left to issue. This may be done in the future for the company to raise further capital, using equity instead of debt.

Between 2008 and 2009 there was no increase in the amount of shares issues to ordinary investors. However there was an increase in the revenue created by shares but this was due to share option schemes. However between 2009 and 2010 there was an increase in the amount of shares issued of 107million shares, of which 78million were share issue and 29million were in respect of share option schemes. This increase in share issue bought an increase of £31million in total, 22million in share issue and 9 in share option.

The financial report states that in June 2009 there was an issue of 78.1million ordinary shares with a nominal value of 28.57pence each. These were issued for the company to raise revenue. It resulted in an increase in ordinary share capital of £22million and a share premium of £113million, net of transaction costs. This gave 11.1% of share premium increase on the previous year.

Authorised Share Capital
2010 (Million)2009( Million)2010 (£m)2009 (£m)
Ordinary Shares @ 28.571pence24502450700700
Preference B Shares @ 35pence21002100735735...
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