J Sainsbury - Financial Performance of Last 5 Years

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J Sainsbury plc is a UK based company, into grocery, related retailing an financial services business. The study is primarily to do financial assessment of this company and its performance relative to its peers and industry. Seeing the last 5 years report, it is evident that company was in a bad share 3 years ago, and now its in the stage of recovery. Starting 2004, there has been a major change in the board, as well as management. Since then company has taken several large and aggressive approach. This can be summarised as renovating/ ex-panding retail space, re-engineering of supply chain, and improvement in IT system. Also there has been focus on brand repositioning through quality improvement, cost reduction through increasing volume, etc. This has resulted into good numbers for its sales and profit margin. The first thing the new CEO Justin King did was to reduce price by 5% in most of the items, so that they re-gain custom-ers confidence. If we see from a year’s perspective, company is highly squeezed in terms of cash flow, very less net profit margin compared to industry. They have a high pressure on improving their margins. Comparing them with their peers Tesco, Wm Morrison, and others, we found that Tesco is obviously market leader, so have a very high profit margin. If compare with the closest competitor Wm Morri-son, even though they relatively smaller in size of business, but they have much better profit margin and revenue per sq ft, with less number of stores. In terms of investors point of view also they have tried to compensate it with higher dividend of 9.75p compared to last years’ 8p. They have also ensured to keep the dividend cover to 1.5. Ana-lysts and investors are not very upbeat about this stock, seeing the bad performance in last 3 years and would be very conscious in investing. Seeing the last year’s growth pattern and the achievement of some of the set targets (sales, cost cutting, quality growth) one should be confidant that if the same continues of another 2 years, it should outperform and will give tough competition to its peers.


2.1Company Overview
Sainsbury plc is a United Kingdom-based company principally engaged in grocery and related retail-ing, and financial services. The Company's businesses are organized into two operating divisions: Re-tailing (supermarkets and convenience stores) and Financial Services (Sainsbury's Bank). J Sainsbury plc consists of Sainsbury’s, a chain of 490 supermarkets and 298 convenience stores, and Sainsbury’s Bank. A typical Sainsbury’s store offers around 30,000 products and many stores also offer comple-mentary non-food products and services. During the fiscal year ended March 24, 2007 (fiscal 2007), 114 stores provided an Internet-based home delivery shopping service. Sainsbury’s Bank is jointly owned by J Sainsbury plc and HBOS plc. The Company’s subsidiaries (100% owned) include Bells Stores Ltd, Jacksons Stores Ltd, JS Insurance Ltd, JS Information Systems Ltd, Sainsbury’s Super-markets Ltd, Swan Infrastructure Holdings Ltd, JB Beaumont Ltd, SOL Shaw Ltd and Sainsbury's Card Services Ltd.

2.2Company Business & Strategy
On February 8, 2007, the Company sold a 5% shareholding in Sainsbury’s Bank plc (the Bank) to the Bank of Scotland (a wholly owned subsidiary of HBOS plc). Consequently, the Bank be-came a 50:50 joint venture between the Company and HBOS plc. In September 2006, the Company relaunched its Taste the Difference range, which comprises nearly 1,400 products. In October 2006, the Company introduced the Sainsbury’s Dairy Development Group, working with around 400 dairy farmers to supply all 420 million litres of conventional milk bought by its customers each year. The Company stocks a variety of food ranges to suit all budgets. Around 50% of customers buy from both ends of Sainsbury’s food range: Basics and the Taste the Difference range. It provides a choice of own brand Sainsbury’s So...
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