Tesco vs Sainsbury's Comparative Financial Analysis

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Introduction

The financial report that follows sets out to analyse and compare the current financial and Market position of Sainsbury’s against Tesco.

The report covers five areas of financial and market review, namely; •Situation Analysis
Proposed Recovery Plan
Investment Appraisal of recommended Investment Projects
Risk Assessment
Sources of Finance

Recommendations made within this report are made with the intention of increasing Sainsbury’s market share over the next 5 years.

Executive Summary Format / Template
Company needed to move from a Task focused to a Customer Service focused organisation and prepare for substantial future growth Training Department established in 1998
Induction Training course designed using latest training methodology and technology Fully developed in-house – 100% relevant to the company and the business Induction Course requirements – task training, system training, product training and customer service training Training Manual and keying instructions developed

Courses geared towards 80/90% knowledge retention
Coaching and Mentoring strategy in place
Policy of continuous improvement monitored by a process of on-going evaluations and assessments Training Course Evolution – web based skills acquired – Intranet facility and online training Tangible Commercial Benefit – a saving of xxxx over a three year period References

http://en.wikipedia.org/wiki/Image:Market_Share_top_supermarkets.jpg http://www.igd.com/search/index.asp?sc=supermarket+value&ns=1 http://www.tescocorporate.com/page.aspx?pointerid=A8E0E60508F94A8DBA909E2ABB5F2CC7 http://www.sainsburys.co.uk/aboutsainsburys

http://www.morrisons.co.uk/Corporate/Investors/
http://www.about-asda.com/inside-asda/our-history.asp
http://www.investorcentre.tescoplc.com/
http://www.jsainsburys.co.uk/?pageid=204
http://en.wikipedia.org/wiki/Economy_of_the_People%27s_Republic_of_China http://en.wikipedia.org/wiki/List_of_UK_universities_by_size

Analysis of Sainsbury’s and Tesco’s Financial and Market Position

In reviewing the broker packs for both Sainsbury’s and Tesco Plc there were two areas of financial performance indicators that showed each company in a very different light, namely, Sales and Profit.

Sainsbury’s sales figures over the past 5 years from 2003 to 2007 show that in terms of growth, only a 2% increase was achieved. In isolation this figure could suggest a slow down in the industry in general, however when comparing this to the sales performance of Tesco, we see a completely different picture.

Sales for Tesco in the same period reported an increase of some 65% from 28,280 (£M) in 2003 to 46,611 (£M) in 2007.

In terms of sales we can see from the above that Tesco out performed Sainsbury’s by 63% highlighting the fact that rather than an industry wide trend, the cause was more likely one of strategic direction.

In analyzing the preliminary results for both companies through 2006/2007 it is clear that Tesco fundamental strategy was one of growth / expansion, both in the UK and internationally. To highlight this contention the below table shows, from Tesco’s preliminary results, a comparison of number of stores in 2006/07 year end to 2007/08 year end forecasts.

Area2006/07 Year End2007/08 Year End (ForecastedGross Store Number Gain UK1,9882,106142
Asia636900265
Europe639816177
International1,2751,716442
Group3,2633,822584

In analyzing the profit records of Sainsbury’s and Tesco over the same five year period (2003 – 2007) the shear gap is equally as alarming as the differences highlighted in sales.

Sainsbury’s reported Net Profit before tax of 695 (£M) in 2003 in comparison to 380 (£M) in 2007, a decrease of 45%, whereas Tesco reported Net Profit before tax of 1,345 (£M) in 2003 in comparison to 2,653 (£M) in 2007, an increase of 97%.

More alarming than the...
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