Supermarket analysis report

下面为大家整理一篇优秀的essay代写范文 --Supermarket analysis report，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。

 

 

Supermarket analysis report

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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