TESCO

Business Analysis of Tesco

Company Profile2

UK supermarket industry2

Tesco's financial performance and comparison with the competitors3

Profitability ratio4

Liquidity ratio5

Debt Management6

Asset Management6

Book Value per share7

Resource Based View7

Porters Value Chain8

References10



Business Analysis of Tesco

Company Profile

Tesco PLC (Tesco) is United Kingdom's largest retailer. It has existence in Europe and Asia and the US. Its headquarters are in Hertfordshire, UK. Tesco has employed 519,671 people as per financial year 2012. Tesco's revenues reached £64,539 Million ($ 103,223.7) for FY2012, a growth of 6.8% over the preceding year. The Net Profit for the year was £2806 Million (approximately $4,487.9 Million), an increase of 5.7% over the preceding year. By the end of FY2012, it was operating 2,979 retail stores (Marketline, 2013). Tesco's market share at Jan 20 2013 stood at 30.4 % and with a 3.3 % as compared to the same month last year (Ruddick, G, 2013). Due to the fact that, Tesco has retail presence in Asian countries such as South Korea, Thailand, Malaysia, and India; therefore, its presence in Asia was really important, as result the company sources majority of its products from China and India. Tesco's international sourcing headquarter is based in Honk Kong (Marketline, 2013).

UK supermarket industry

The 2012 retail sector growth has been the lowest of the last 40 years at 1.2%. The other critical element is that Non-food component has been shrinking for the fourth year running and has even fallen by £740 Million, which shows a decrease of 0.5%. The retailing pattern inside UK is comparatively different from the rest of Europe, due to these deviations in terms of buying patterns. The retail industry consists of a number of participants namely, Tesco itself, ASDA, J Sainsbury, Wm Morrison, Marks and Spencer, etc. However, Tesco's main competitors would be J Sainsbury and ASDA.

Tesco's financial performance and comparison with the competitors

Tesco's financial performance could be measured in context its financial ratios as follows, which depict its performance. Tesco's performance has been compared with its main competitor, J Sainsbury's and also Morrison, which is available on the following page.

Tesco

Sainsbury's

Profitability Ratios

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

ROA % (Net)

0.25

5.74

5.73

4.92

5.05

5.77

ROE % (Net)

0.72

16.4

17.15

10.84

10.85

12.35

ROI % (Operating)

8.89

12.67

12.27

9.72

9.78

9.78

Liquidity Ratios

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

Quick Ratio

0.44

0.43

0.43

0.26

0.33

0.29

Current Ratio

0.7

0.67

0.67

0.61

0.65

0.58

Net Current Assets % TA

(11.19)

(12.44)

(12.42)

(9.46)

(8.95)

(10.71)

Debt Management

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

LT Debt to Equity

0.6

0.56

0.59

0.46

0.46

0.43

Total Debt to Equity

0.65

0.66

0.67

0.49

0.49

0.44

Interest Coverage

7.9

11.91

10.13

5.82

5.62

6.14

Asset Management

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

Total Asset Turnover

1.29

1.32

1.31

1.87

1.88

1.9

Receivables Turnover

30.09

31.92

36.47

78.94

71.08

75.84

Inventory Turnover

16.55

17.54

18.97

22.88

24.09

26.34

Property Plant & Equip Turnover

2.57

2.58

2.52

2.44

2.47

2.49

Cash & Equivalents Turnover

26.99

31

26.13

37.21

36.06

31.63

Per Share

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

Cash Flow per Share

0.35

0.55

0.5

0.52

0.57

0.46

Book Value per Share

2.07

2.21

2.05

3.03

2.99

2.9

Tesco

Morrisons

Profitability Ratios

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

ROA % (Net)

0.25

5.74

5.73

6.24

7.28

7.08

ROE % (Net)

0.72

16.4

17.15

11.98

12.79

12.22

ROI % (Operating)

8.89

12.67

12.27

16.11

16.46

15.96

Liquidity Ratios

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

Quick Ratio

0.44

0.43

0.43

0.24

0.24

0.24

Current Ratio

0.7

0.67

0.67

0.57

0.57

0.55

Net Current Assets % TA

(11.19)

(12.44)

(12.42)

(9.42)

(9.95)

(10.36)

Debt Management

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

LT Debt to Equity

0.6

0.56

0.59

0.57

0.4

0.3

Total Debt to Equity

0.65

0.66

0.67

1.01

0.83

0.69

Interest Coverage

7.9

11.91

10.13

14.03

116.01

107.78

Asset Management

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

Total Asset Turnover

1.29

1.32

1.31

1.75

1.86

1.85

Receivables Turnover

30.09

31.92

36.47

58.34

60.24

70.47

Inventory Turnover

16.55

17.54

18.97

21.96

23.54

25.24

Property Plant & Equip Turnover

2.57

2.58

2.52

2.15

2.29

2.24

Cash & Equivalents Turnover

26.99

31

26.13

70.45

75.53

69.87

Per Share

2/23/2013

2/25/2012

2/26/2011

3/16/2013

3/17/2012

3/19/2011

Cash Flow per Share

0.35

0.55

0.5

0.45

0.36

0.34

Book Value per Share

2.07

2.21

2.05

2.23

2.13

2.04

Profitability ratio

Tesco's profitability has deteriorated during the last three years, as in all the three ratios it has been shown that the ratios have all fallen. It's Net Income has fallen during the last year (2013), due to which all three of its profitability ratio have all deteriorated.

Tesco's sales have significantly dropped over the year, as its non-food sales have not shown any positive signs and the impact of the frozen and chilled products has been felt greatly, due to the horsemeat ...