Essay on Tesco vs Sainsbury's Comparative Financial Analysis

2039 Words Aug 15th, 2008 9 Pages
Introduction

The financial report that follows sets out to analyse and compare the current financial and
Market position of Sainsbury’s against Tesco.

The report covers five areas of financial and market review, namely;
• Situation Analysis
• Proposed Recovery Plan
• Investment Appraisal of recommended Investment Projects
• Risk Assessment
• Sources of Finance

Recommendations made within this report are made with the intention of increasing Sainsbury’s market share over the next 5 years.

Executive Summary Format / Template
 Company needed to move from a Task focused to a Customer Service focused organisation and prepare for substantial future growth
 Training Department established in
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Tesco’s have seen a steady increase in revenue, and in turn operating profit, highlighting consistent cost of sales / operating costs, whereas Sainsbury’s financial reports highlight inconsistencies in performance, in terms of fluctuating operating profit and sporadic net profit, particularly for the financial year 2004/05 where sales plummeted by 9% from
18,239 (£M) in 2004 to 16,030 (£M) in 2005 and net profit in turn dropped by a staggering 62%.

The table below highlights the trends reported by both Sainsbury’s and Tesco PLC over the five year period in terms of Sales and Profit. 2003 2004 2005 2006 2007
Tesco £m £m Variance on Previous Year £m Variance on Previous Year £m Variance on Previous Year £m Variance on Previous Year Total Variance
Revenue 28280 33557 18.7% 37070 10.5% 43137 16.4% 46611 8.1% 65%
Operating Costs 26788 31779 18.6% 35006 10.2% 40857 16.7% 43963 7.6% 64%
Operating Profit 1492 1778 19.2% 2064 16.1% 2280 10.5% 2648 16.1% 77%
Net Profit before tax 1345 1574 17.0% 1930 22.6% 2235 15.8% 2653 18.3% 97%

2003 2004 2005 2006 2007
Sainsbury's £m £m Variance on Previous Year £m Variance on Previous Year £m Variance on Previous Year £m Variance on Previous Year Total Variance
Revenue 18144 18239 0.5% 16573 -9.1% 17317 4.5% 18518 6.9% 2.1%
Operating Costs 14553 14927 2.6% 16030 7.4%

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