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Analysis of the supermarket

2020-06-24 来源: 51Due教员组 类别: Essay范文

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下面为大家整理一篇优秀的essay代写范文 -- Analysis of the supermarket,文章讲述TESCO成立于1919年,最初是由Jack Cohen先生在市场上设立的一个小摊位。 TESCO已成为英国领先的零售商,并且是世界三大零售公司之一。 TESCO已在全球13个国家/地区开展业务。员工总数超过50万,TESCO每周为超过5000万客户提供服务。 TESCO集团的业务不仅包括零售,还涉及金融,加油站,电信和医药等领域。

 

 

Analysis of the supermarket

1. Introduction

TESCO was founded in 1919, initially in the form of a small stall set up by Jack Mr. Cohen in the market. TESCO has become the UK's leading retailer, and one of the world's top three retail companies. TESCO has been in 13 countries around the world to carry out business. The total number of employees is more than 500 thousand and TESCO provide services to more than 50 million customers per week. TESCO group's business includes not only the retail, but also related to finance, gas stations, telecommunications and medicine and other fields. In addition, TESCO is also actively expanding its popular online retail business. (Wikipedia, 2015)

Morrisons is the fourth largest supermarket in the United Kingdom, which is headquartered in Bradford. Morrisons was founded in 1899 by William Morrisons and its initial form was a small stall in Rawson Market. Before 2004, Morrisons’ stores were located in the north of England. With the takeover of Sateway in 2004, Morrisons increased stores in the south of England. (Wikipedia, 2015)

Sainsbury's is the second largest supermarket in the United Kingdom. It is founded by John James Sainsbury in 1869. Its initial form was a shop in Drury Lane. The group’s headquarter is in London. The group’s business also involves in property industry. (Wikipedia, 2015)

2. Basic Financial Data

The basic financial data for TESCO, Morrisons and Sainsbury's are listed as follows. The period is from the year of 2011 to 2015. Overall, the three supermarkets are all in difficult situations and the whole supermarket in the United Kingdom are experiencing a critical crisis moment.

TESCO Financial Data

Item / Year

2011

2012

2013

2014

2015

Balance Sheet

Total Assets

47,260

50,781

50,129

50,164

44,214

Current Assets

11,608

12,353

12,465

13,085

11,819

Inventory

3,162

3,598

3,744

3,576

2,957

Current Liabilities

17,731

19,180

18,703

20,206

19,805

Trade Receivables

2,330

2,657

2,525

2,190

2,121

Income Statement

Turnover

60,455

64,539

63,406

63,557

62,284

COGS

55,330

59,278

59,252

59,547

64,396

Gross Profit

55,125

5,261

4,154

4,010

-2,112

EBIT

4,124

4,272

2,574

2,823

-5,715

Interest Charges

483

417

517

564

661

Profit Before Tax

3,641

3,855

2,057

2,259

-6,376

Basic Earnings Per Share

34.43

36.75

19.07

23.75

-70.24

Annual report of TESCO from 2011 to 2015, Official Website of TESCO

Generally speaking, as the largest supermarket in the United Kingdom, the pace of the Company’s development is slower in recent years. From the financial data, it can be inferred that the Company has developed steadily from 2011 to 2012. From 2012 to 2014, the Company has not developed by a large margin. Even worse, from 2014 to 2015, the Company has suffered an unprecedented loss in history. In the year of 2015, the Company has suffered great difficulties. The total assets decrease by a large margin and the profit and EPS are negative.

Morrisons’s Financial Data

Item / Year

2011

2012

2013

2014

2015

Balance Sheet

Total Assets

9,149

9,859

10,527

10,729

9,171

Current Assets

1,138

1,322

1,342

1,430

1,228

Inventory

638

759

781

852

658

Current Liabilities

2,086

2,303

2,334

2,873

2,273

Trade Receivables

197

191

168

180

178

Income Statement

Turnover

16,479

17,663

18,116

17,680

16,816

COGS

15,311

16,446

16,910

16,606

16,055

Gross Profit

1,148

1,271

1,206

1,074

761

EBIT

917

994

954

-89

-987

Interest Charges

43

47

75

87

105

Profit Before Tax

869

947

879

-176

-792

Basic Earnings Per Share

23.00

26.68

26.65

-10.23

-32.63

Annual report of Morrisons from 2011 to 2015, Official Website of Morrisons

For Morrison, as the fourth largest supermarket in the United Kingdom, it also suffered a hard year in 2015. From 2011 to 2013, the Company’s development is upward. However, in the year of 2014 and 2015, the Company’s operation is sluggish and suffered a great loss.

Sainsbury's Financial Data

Item / Year

2011

2012

2013

2014

2015

Balance Sheet

Total Assets

11,399

12,340

12,659

16,540

16,537

Current Assets

1,708

2,032

1,901

4,362

4,421

Inventory

812

938

987

1,005

997

Current Liabilities

2,942

3,136

3,115

6,765

6,923

Trade Receivables

343

286

306

433

471

Income Statement

Turnover

21,102

22,294

23,303

23,949

23,775

COGS

19,942

21,083

22,026

22,562

22,567

Gross Profit

1,160

1,211

1,277

1,387

1,208

EBIT

943

937

925

1,057

108

Interest Charges

116

138

153

159

180

Profit Before Tax

827

799

772

898

-72

Basic Earnings Per Share

34.40

32.00

32.00

37.70

-8.70

Annual report of Sainsbury's from 2011 to 2015, Official Website of Sainsbury's

For Sainsbury’s, as the second largest supermarket in the United Kingdom, its development and operation are also in a dilemma. From the year of 2011 to 2014, the Company embraces a sound development trend and its total assets and turnover are all upward. However, in the year of 2015, the Company suffered loss, which demonstrates the Company is in a tough mud.

2.1 Environment Analysis-PEST Analysis

For both airlines, they are in the same market in the United Kingdom and Europe, so they are facing similar macro environment analysis. PESTE analysis methodology can be applied in this dimension. PEST means the five elements in the aspects of politics, economy, society, technologies and environment. (Wikipedia, 2015)

In the first place, in the political perspective, TESCO, Morrisons and Sainsbury's are in different situations. For Morisons and Sainsbury’s, they mainly focus on the domestic market in the United Kingdom. However, TESCO is a multinational supermarket company, which has dimensions in the United States, Asia and other European countries. For TESCO, it is also being investigated by British authorities due to the accounting fraud in 2014, which has severely influenced the business operation in 2015. (Ring and Beardsworth, 2014)

Number of Stores

Company / Year

2011

2012

2013

2014

2015

TESCO

5,380

6,234

6,784

7,305

7,817

Morrisons

439

475

500

605

667

Sainsbury's

934

1,000

1,106

1,200

1,312


From the number of stores, it is clearly that the number of stores of TESCO far surpasses that of Morrisons and Sainsbury's. In the perspectives of political supervisions and regulations, Morrisons and Sainsbury’s need to adhere to the policies of the United Kingdom. TESCO needs to be conformed to regulations and requirements in different regions and countries. For TESCO, it has suffered great pressure in compliance. With the outbreak of the accounting scandal, the Company has become a political focus, so the Company is now in a extremely tough situation.

In the second place, in the economic perspective, the three supermarkets all face the same situation that the global economy is sluggish and these companies are suffered from the pressure of deflation in the economy of the United Kingdom.

As a result, in 2015, the three major markets have to cut down goods prices due to the deflation. Deflation means that when the circulation of money in the market decreases, the people's money income is reduced. The purchasing power decreases, which leads to the fall of the price. Long term monetary tightening will inhibit investment and production, resulting in increased unemployment and economic recession. (Wikipedia, 2015) The deflation can lead to the profit margin decreased and the high unemployment rate.

Number of Employees

Company / Year

2011

2012

2013

2014

2015

TESCO

492,741

519,671

537,784

505,544

517,802

Morrisons

132,000

131,000

129,000

125,000

117,000

Sainsbury's

150,000

150,000

157,000

161,000

161,000


From the table, it can be clearly noticed that TESCO has reduced the staff headcount from the peak of over 537 thousand in 2013 to the lowest point of over 505 thousand in 2014. For Morrisons, it has also reduced the number of employees from 2011 to 2015. For these supermarkets, they have no choice but to reduce the cost to main the operation. The lay-offs is an effective way to save cost.

Gross Profit Margin

Company / Year

2011

2012

2013

2014

2015

TESCO

8.48%

8.15%

6.55%

6.31%

-3.39%

Morrisons

6.97%

6.89%

6.66%

6.07%

4.53%

Sainsbury's

5.50%

5.43%

5.48%

5.79%

5.08%

 

Net Profit Margin (Operating Profit Margin)

Company / Year

2011

2012

2013

2014

2015

TESCO

6.82%

6.62%

4.06%

4.44%

-9.18%

Morrisons

5.56%

5.63%

5.27%

-0.50%

-5.87%

Sainsbury's

4.47%

4.20%

3.97%

4.41%

0.45%

 

After calculation of the gross profit margin and net profit margin, it can be clearly noticed that the margin demonstrate a downward tendency. For all three companies, they margin has been reduced by a large proportion, which shows the decrease of revenue and the increase of the cost of sales. Especially in the year of 2015, the gross profit margin of TESCO is negative and the net profit margin of TESCO and Morrisons is negative, which shows the three major supermarkets have suffered a great loss and in a difficult economic situations.

In the third place, in the social perspective, the shopping channels have been greatly changed and people are keen on the mode of online shopping. Customers are more likely to buy goods online or in small and medium-sized stores instead of large supermarkets.

Market Share in UK

Company / Year

2011

2012

2013

2014

2015

TESCO

30.60

30.20

30.50

29.00

28.00

Morrisons

12.80

12.80

11.80

11.40

11.10

Sainsbury's

16.60

16.60

16.80

16.80

16.50

Others

40.00

40.40

40.90

42.80

44.40

 

 

 

From the pie chart of the market share of the three companies from the year of 2011 to 2014, the market share of the three supermarkets are declining. The market share of TESCO has been reduced from 30.6 percent to 28 percent. The market share of Morrisons has been decreased from 12.8 percent to 11.1 percent. And the market share of Sainsbury's has been slipped from 16.8 percent to 16.5 percent. Meanwhile, the market share of other supermarkets has been increased from 40 percent to 44.4 percent, which has showed a change in the shopping channel and mode.

In the fourth place, in the technological perspective, the development of e-commerce and the widespread of Internet, online shopping and apps have been widely improved to a large extent. With the development of technologies, the supply chain and distribution modes have been greatly changed in accordance with the new modes. The fast express and delivery tracks have been rapidly developed to meet the needs of the customers. Meanwhile, more online shopping platforms and apps have been establish to create a wide e-commerce network, which make the shopping more convenient than ever. People are less walking into the supermarkets now due to the development of online shopping centers.

Stock Turnover Period

Stock turnover period is a good way to demonstrate the less frequency of shopping in the supermarket. This ratio indicates the average number of days that items of stock are held for.  Although it can only provide an approximation, it is useful to identify the trend from year to year.

Company / Year

2011

2012

2013

2014

2015

TESCO

19.43

20.81

22.61

22.43

18.51

Morrisons

14.48

15.50

16.62

17.95

17.16

Sainsbury's

13.86

15.15

15.95

16.11

16.19

From the table, it can be clearly identified that the stock turnover period is longer with the time passed. This means that the stocks are held in the supermarket longer and the supermarkets have to spend more time and cost to maintain and take care of the goods. It is the development of online shopping mode that leads to such situation. Therefore, the supermarket industry is facing huge challenges.

3. Other Financial Ratios Analysis

1. Return on Capital Employed

Profit before interest and taxation   x  100

Total assets minus current liabilities

Company / Year

2011

2012

2013

2014

2015

TESCO

13.99%

13.52%

8.19%

9.42%

-23.41%

Morrisons

12.98%

13.16%

11.64%

-1.13%

-14.31%

Sainsbury's

11.15%

10.18%

9.69%

10.81%

1.12%

From the table, it can be clearly inferred that three companies’ return on capital employed is declining every year, especially in the year of 2015. This means that the yield rate of capital is not sound and the industry is in a tough situation.

 

2. Interest Cover

Profit before interest and tax

     Interest charges

Company / Year

2011

2012

2013

2014

2015

TESCO

8.54

10.24

4.98

5.01

-8.65

Morrisons

21.33

21.15

12.72

-1.02

-9.40

Sainsbury's

8.13

6.79

6.05

6.65

0.60

Interest cover is ratio used to measure the ability to pay interest of a loan. From the table, it can be clearly inferred that the three companies’ interest cover is declining every year, especially in the year of 2015. Therefore, there is a risk that the interest cannot be repaid in time.

 

3. Current Ratio

Current assets

  Current liabilities

Company / Year

2011

2012

2013

2014

2015

TESCO

0.65

0.64

0.67

0.65

0.60

Morrisons

0.55

0.57

0.57

0.50

0.54

Sainsbury's

0.58

0.65

0.61

0.64

0.64

Current ratio can reflect the short-term solvency of enterprises and 2 is a reasonable indicator. From the table, it can be clearly inferred that the three companies’ current ratio is steady in the five years. However, the ratio is below 1, which means the current risk is relatively high.

 

4. Liquidity Ratio (quick ratio or acid test ratio)

Current assets minus inventories

       Current liabilities

 

Company / Year

2011

2012

2013

2014

2015

TESCO

0.48

0.46

0.47

0.47

0.45

Morrisons

0.24

0.24

0.24

0.20

0.25

Sainsbury's

0.30

0.35

0.29

0.50

0.49

Liquidity ratio can also reflect the short-term solvency of enterprises. From the table, it can be clearly inferred that the three companies’ liquidity ratio is steady in the five years. However, the ratio is below 1, which means the current risk is relatively high and ability to repay to the loan is low.

 

5. Debt Collection Period

Average trade receivables      x 365

       Credit Sales

Company / Year

2011

2012

2013

2014

2015

TESCO

12.73

14.10

14.92

13.54

12.63

Morrisons

3.79

4.01

3.62

3.59

3.89

Sainsbury's

4.83

5.15

4.64

5.63

6.94

This ratio represents the speed of the collectiveness of trade receivables. The smaller the ratio is, the better the ability of the collectiveness is. From the table, it can be inferred that TESCO has longer turnover days.

 

6. Dividend Yield

Dividends per share   x 100

 Current market price of the share

Company / Year

2011

2012

2013

2014

2015

TESCO

3.50%

4.10%

5.00%

4.60%

2.40%

Morrisons

3.20%

3.69%

4.17%

6.21%

 

Sainsbury's

3.50%

3.60%

5.10%

4.50%

5.60%

This data reflects the divided payment situation. From the table, it can be inferred that the three companies maintain a low dividend yield rate.

 

7. Earnings Per Share (EPS)

Company / Year

2011

2012

2013

2014

2015

TESCO

34.43

36.75

19.07

23.75

-70.24

Morrisons

23.00

26.68

26.65

-10.23

-32.63

Sainsbury's

34.40

32.00

32.00

37.70

-8.70

This data reflects the yield per share. From the table, it can be clearly noticed that the three companies’ share yield is in a negative performance due to the unsound business operations.

4. Conclusion

In a nutshell, TESCO, Morrisons and Sainsbury's are experiencing a tough situation in the supermarket industry in the United States. From the financial ration and non-financial ratio, it can be clearly reflected that the tough industry environment and huge challenges.

Reference

Wikipedia. (2015). TESCO. Website.

 

Wikipedia. (2015). Morrisions. Website.

 

Wikipedia. (2015). Sainsbury's. Website.

 

Wikipedia. (2015). PEST Analysis. Website.

 

Wikipedia. (2015). Deflation. Website.

 

Annual report of TESCO from 2011 to 2015, (2015), Official Website of TESCO.

 

Annual report of Morrisons from 2011 to 2015, (2015), Official Website of Morrisons.

 

Annual report of Sainsbury's from 2011 to 2015, (2015), Official Website of Sainsbury's.

 

Ring, S. and Beardsworth, T. (2014), Tesco Faces U.K. Criminal Investigation of Accounting Practices, Accountingtoday Com.

 

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