This research analysis report is based on topic 8,the business and financial performance of organisation over a three year period. I have chosen to analyse the financial and business position of Tesco Plc. The analysis is carried from an investor’s point of view and will be achieved by evaluating key financial ratios, past trends and other key aspect to make investors in making investment decision while also making a comparison with its close rival J.Sainsbury Plc. 1.2INTRODUCTION OF THE COMPANY CHOSEN
Tesco plc is a UK based company. It is largest British retailer by both global sales and domestic market share with profits exceeding £3 billion. It is currently third larges retailer based on revenue behind Wal-mart and France Carrefour but is second largest based on profit ahead of Carrefour. It has diversified market such as food, drink, clothing, consumer, electronics, financial services, telecoms, home, health, car insurance. Tesco was founded in 1919A.D in East London by Jack Cohen. It consists of employees approximately 440000(2008) and number of stores approximately 3729 (2008).Tesco’s UK stores are divided into six forms, differentiated by size and the range of products sold. They are Tesco extra, Tesco, Tesco metro, Tesco express, one stop, Tesco Home plus. Tesco’s market share in UK is 30.9% .Here is the chart which shows the Tesco market share with its competitors. Tesco market share is nearly double of its competitors.
According to Citi group retail analyst David McCarthy “Tesco has pulled off a trick that I ’m not aware of any retailer achieving that is to appeal all segments of the market”. Its biggest strategy has been Tesco’s use of its own brand products from finest, mid-range and low price.
1.3 REASON FOR CHOOSING THE TOPIC
I have chosen this topic of analysing the financial position of Tesco Plc because of my interest in retail market and I also wish to develop my career in this field. As we all know Tesco is the UK market leader in retail industry with share of 30.9%it is my obvious choice to choose Tesco because it would give me more and depth knowledge about retail industry. As an ACCA student analysing business and financial performance of a company will increase my knowledge in accounting and business field and a strategy company should adopt to become successful. Diversity and complexity of business provides me more challenge and scope for the analysis. Tesco operates in diversified market and product as it has stores in 13 countries. It offers various products such as food, home furnishing, electronic goods, financial services, and mobiles etc, which offer investor a diversified portfolio. Tesco Plc opens its first store in U.S.A in 2007 November with a name “Fresh and Easy”. Tesco plans to open new stores in every two and half days in Unites States. Now, Fresh and Easy operates in 135 stores in Unites States. However, in February 22 2009, Sunday times Tesco admit it had gone wrong in US sating as “the head of Tesco’s USA operation, Fresh and Easy has said its early market research was mistaken and it may make big change to the stores”. In website skynews.com in July 28, 2008 it states that “Tesco pays £950m to become bank”. Recently, until July 2008 Tesco bank was a joint venture between Tesco and Royal Bank of Scotland. However, in July 2008 Tesco announced that they were buying out RBS 50% stake in the company for £950m and transaction was completed later that year in October 2009 .Tesco personal finance service was renamed Tesco bank.
After all these News about Tesco I was more interested in doing my analysis on Tesco plc. To make financial analysis clear, I have chosen Sainsbury as its comparator as it deals with similar product range.
1.4 AIM AND OBJECTIVE OF THE REPORT
For any investor the main factor for their decision is risk and return. Any investor will look for risk in his investment and wants the return as proportion to its risk....