FINANCIAL STATEMENT ANALYSIS

Strategic and Financial Statement Analysis of Corporations in Retail Industry

Strategic and Financial Statement Analysis of Corporations in Retail Industry

Introduction

Retail industry is one of the predominant sectors of the British Economy contributing significantly to the GDP. There are number of players in the market but primarily it is dominated by Tesco followed by Asda and Sainsbury. All the companies are public listed companies therefore data is readily available. However, in case of Asda, we have employed data of its parent company as it is wholly owned by Wal-mart which is based in America.

Tesco (or "the company") is one of the leading food and grocery retailers in the world. The company has been building a sustainable business model over the years through diversification into new geographies and value oriented retailing. International diversification helps Tesco to reduce its business risk as well as facilitate incremental sale through operations in growth markets. On the other hand, value oriented retailing builds on customer loyalty and helps to sustain revenue growth even in a difficult economic scenario.

Asda Stores Limited (Asda), a wholly-owned subsidiary of Wal-Mart, is a grocery and general merchandise retailer in the UK. Asda offers a broad range of products and services through its stores. A diversified business portfolio enables Asda to target different customer segments. However, slowdown in the UK economy may adversely affect the company's revenues.

J Sainsbury (Sainsbury or “the company”) is engaged in retailing services with business interests in financial services and property investments. The company is one of the leading retail chains in the UK. It has a market share of around 16.1% and serves over 19 million customers per week. Strong presence in the UK imparts distinct competitive advantage and favourable market dynamics for Sainsbury, which facilitate revenue and business expansion growth prospects. However, rising labour cost in the UK could impact the company's margins adversely.

Tesco Plc

The competition is intensifying in the UK market; customer retention can become a primary concern for the company and can also lead to loss of market share. A key factor that has helped the company to build a sustainable business model is its value oriented retailing. Tesco's customer loyalty programme, Club card launched in 1995, is one of the longest running loyalty schemes in the UK. At the end of FY2011, Club card had 15 million customers as its active members compared with 13 million at the start of FY2009 (marketingweek.co.uk). Customers have also responded well to the company's new Club card initiatives in FY2011. Nearly three million customers participated in the Big Club card Voucher Exchange promotions held between August and November 2010. Tesco registered a growth of 60% in rewards given through its Partner Reward Scheme. It was also observed that benefits offered by Club card were one of the key reasons behind customers switching to Tesco for their weekly shopping during FY2011 (TESCO Annual Report, 2011). Additionally, during the first half of FY2012, Tesco invested more than £500 million (approximately ...