TESCO

Tesco



Tesco

Introduction

Tesco is a leading food and grocery retailer. The company operates 4,811 stores in 14 countries worldwide. It operates in the UK, other European countries, the US and Asia. The company operates in a single segment: retail. However, Tesco's operations can be examined by the store formats operated by it: Express, Metro, Superstore, Extra and Homeplus. The company has over 961 Express stores (up to 3,000 sq ft) offering fresh food at convenient locations. These stores sell a range of up to 7,000 products including fresh produce, wines and spirits and bakery products. The company has over 174 Metro stores (approximately 7,000-15,000 sq ft) in town and city centre locations. Tesco operates about 448 superstores (approximately 20,000-50,000 sq ft) at which it offers food as well non-food products such as DVDs and books.

Basically the chain was founded by Jack Cohen in 1919. The company has started its brand after Cohen bought a shipment of tea from T.E. Stockwell. The name TESCO came from using the initials (T.E.S) and adding the first two letters of his own surname (CO). The company opened its first Tesco store in 1929 in Burnt Oak, Edgware, Middlesex. Basically the company's focus was at UK and specializing in food and drink. It has diversified both geographically and by product, into areas such as clothing, electronics, financial services, telecoms, home, health, car and dental insurance, retailing and renting DVDs, CDs, music downloads, Internet services and software. The company is listed on the London Stock Exchange and is a member of the FTSE 100Index. The company has started its operations in India.

Tesco PLC has continued to grow despite the current economic downturn. It has recently acquired the remaining 50% of Tesco personal finance from Royal Bank of Scotland. Tesco has 37 green stores across the group; including the most recently opened and the greenest in Manchester, United Kingdom. Tesco has also been involved in charity and has raised £6.2 million for Marie Currie Cancer Care (Parker, 2010, pp. 10).

Tesco's Business strategy

The objective of Tesco plc is to become one of the largest retailers in the world by providing all necessities of life at a reasonable price and exceptional quality. (Annual reports 2009)

Tesco has four strategic business units, core UK, non-food, international, and retailing services that constitute its fundamental business strategy. Tesco has a consistent strategy of growth, which concentrates on strengthening their core UK business and expanding into new market (Porter, 2008, pp. 45).

Financial Ratios of Tesco PLC

Ratios

2011

2010

 

 

 

 

 

 

Profitability

 

 

Return on capital employed

12.90%

11.50%

Gross profit margin

8.30%

8.10%

Net profit margin

6.30%

6.10%

Asset turnover

2.07

1.9

 

 

 

Gearing

 

 

Gearing

43.60%

51.10%

Interest cover

13.81

12.3

 

 

 

Efficiency

 

 

Inventory days

21

19

Receivables days

14

12

Payables days

68

66

Operating cycle (days)

-34

-35

 

 

 

 

 

 

Liquidity

 

 

Current ratio

0.67

0.73

Acid test

0.49

0.56

Ratios analysis

Financial ratios are used to look at the financial position and performance of Tesco PLC to be able to look at the financial strengths and weaknesses. The accounting policies adopted by Tesco PLC have been consistent (International Financial Reporting Standards), although there were few changes this year, as noted in the financial report. The changes were in financial instruments and service concession arrangements. These however have no impacts on this year's net ...