Retail Stores Financial Analysis

Topics: Morrisons, Asda, Financial ratio Pages: 20 (3669 words) Published: March 19, 2010

1. Objective of the report--------------------------------------------- 3

2. Overview of UK grocery retail market-------------------------- 3

3. J Sainsbury’s plc---------------------------------------------------- 3

1. Management-------------------------------------------------------- 4

2. Sectors and geography-------------------------------------------4

3. Economy------------------------------------------------------------- 5

4. Wm Morrison supermarkets plc---------------------------------5

4.1 Management--------------------------------------------------------- 6

4.2 Sectors and geography--------------------------------------------6

4.3 Economy---------------------------------------------------------------6

5. Ratio analysis---------------------------------------------------------7

6. Post Financial Statements Period------------------------------ 11

7. SWOT------------------------------------------------------------------ 12

8. Future plans/ prospects------------------------ -------------------13

9. Investment decision and conclusion----------------------------14

10. References and bibliography-------------------------------------16

Objective of the report

The purpose of this report is to analyse the position of two major food retailers of U.K. - J Sainsbury plc and Wm Morrison supermarkets plc so as to decide which company is in better position. Afterwards I have to suggest my friend to invest in ordinary shares of that company. My friend is a conservative investor and not a speculative one.

For comparison, I have gone through various aspects of both the companies. I have used ratio analysis as a tool to help in investment decision. Ratio analysis is a straightforward and quick means of examining the financial situation of a company. It helps in assessing the profitability of a company. Also I have done SWOT(Strengths, Weaknesses, Opportunities, Threats) analysis of both companies to SWOT analysis shows the key areas which have a strong impact on a company’s strategic development.(Johnson et al 2008).

Overview of UK grocery retail market

The following chart shows major retail supermarkets in U.K. along with their market share in March 2008.

|S. No. |Company |Market Share (%) | |1 |Tesco |31.0 | |2 |ASDA |17.1 | |3 |J Sainsbury |16.2 | |4 |Morrisons |11.6 | |5 |Somerfield |3.6 |

Source: TNS Worldpanel

J Sainsbury plc

The first Sainsbury store was opened in 1869 by John James and Mary Ann Sainsbury at Drury Lane, London. Soon it became popular and later on its branches opened in Stepney , Islington and Kentish town. Since then it has a constant track record of growth and it has now become one of the major retail supermarket chains of U.K.

By 2007, Sainsbury has 490 supermarkets and 298 convenience stores across U.K. The company employs 148000 employees and has 800 suppliers. It is a constituent of the FTSE 100 Index. Around 30000 products are offered by a large Sainsbury’s supermarket -50% among these are own brand of Sainsbury including fresh produce. Along with food and grocery products, many stores provide a range of complimentary non food products and services.

Sainsbury received ‘Supermarket of the Year’ award at the Retail Industry Awards in October 2006.


The Sainsbury’s Board of Directors consists of 2 executive directors and 6 non-executive directors. The present chairman is Sir Philip Hampton and Chief Executive is Justin King. Responsibilities are apparently divided between the Chairman and the Chief Executive. Also non- executive directors are independent.

The board...

References: as on 6/5/2008
WATSON, Denzil and HEAD, Antony(2004).CORPORATE FINANCE:PRINCIPLES AND PRACTICE.3 rd ed., Harlow, FT Prentice Hall.
JOHNSON, Gerry, SCHOLES, Kevan and WHITTINGTON, Richard (2008).EXPLORING CORPORATE STRATEGY.8 th ed., Harlow, FT Prentice Hall.
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