Performance Evaluation of Sainsbury's

Most businesses need a supplier of some sort, Tesco and Sainsbury’s are no different. Tesco Plc are an extremely large organisation, and therefore need to keep expenditure to a minimum, as if supplier costs get too high then profit margins will undoubtedly decrease, meaning prices will have to go up in order to retain a sustainable

Sainsbury's has two major shareholders and the latest figures on 5th July 2017 show that: Qatar Holding LLC holds majority of the shares with 21.99% and Credit Suisse AG holding 11.4% in shares.

Finally, Sainsbury’s being one of the oldest supermarkets in the country it has not been keeping up to date with its management strategies in order to better adapt with the current market. It particularly had problems in inventory and supply management, these problems were the reason what the company experienced losses in 2004, as it is shown in the graph (appendix

This indicates that Sainsbury’s gearing ratio has increased continuously. Sainsbury's gearing ratio increased in 2014 from 2012 due to net debt increased year-on-year. It increased in 2013 from 2012 because of small increase in working capital, an increase in corporation tax payments, lower sale and leaseback activity and investment in estate development (Sainsbury’s Annual Report, 2013). Net debt also increased in 2014 due to Sainsbury’s has taken over full control of Sainsbury’s Bank from Lloyds Banking Group. Sainsbury’s Bank has become now a wholly owned subsidiary (Brooks, 2014).

Sainsbury Plc established in 1869 is a leading retail organisation with a chain of Sainsbury's 502 supermarkets and 290 convenient stores (Annual report 2009) across United Kingdom. It also has a financial interest venture in the form of Sainsbury's bank. The company workforce consists of over 148,000 employees across United Kingdom. The company caters to 18 million customers per week.

But in D/E ratio, Sainsbury has less potential risk than Morrison.Also in a price-to-earnings (P/E) ratio, Sainsbury perform very well, the increase rate reach 13.9 first time and this indicates that there’s plenty of scope for an upward rerating. To boost the ROCE, Sainsbury purchase Home Retail and let Argos brand within its asset base should allow Sainsbury’s to tap into significant cross-selling opportunities. It intends on having Argos concessions within Sainsbury’s stores which should boost click and collect sales, while Sainsbury’s focus on a simplified pricing structure should also help to improve customer satisfaction and boost sales. As the result, Sainsbury's total sales during the Christmas period rose by 0.8pc, Mike Coupe, Sainsbury's chief executive, commented: "credible performance in a challenging

In order for Sainsbury’s to succeed over time, perhaps they should have taken more time to develop their strategy instead of jumping into it by opening many stores. They should have defined their brand more with their target market and understood the politics of the market more fully. Sainsbury’s thought that applying the strategy they used in

Sainsbury’s trending gross profits look much steadier at 5.48% in 2013 only down 0.01% from the 2011 figure (and up to 5.80% in 2014). Operating profit is likewise down slightly from 2011 to 2013 (but recovering again in 2014). Overall the trend illustrated by these ratios would suggest that Sainsbury’s ability to generate earnings (over expenses) is more stable than that of Tesco for the period in question. This would suggest that as sales increase, the cost of sales are increasing in an appropriate and scalable way. That is to say, with more goods ordered, more discounts can be earned which will proportionally reduce the rate at which the cost of sales increases.

Sainsbury is aware that it needs to put its customers as the centre of its focus, therefore, they have made certain that not only their stores, but also their colleagues and channels provide the best kind of shopping experience. Sainsbury pays special attention to its quality and makes certain the prices kept of products are fair in every way. Sainsbury has around 23 sites in United Kingdom itself, and the stores are supported by delivering approximately 16 million stocking points every day. There are around 1.2 billion cases to over 1,000 stores every year. Furthermore, the corporation provides approximately 1.1 million deliveries to stores every year.

The net profit margin ratio shows us how much profit is from a percentage of sales. For the year 2014 this was 13.7% and for 2015 this is showing at 15.7% which is due to an increase of sales. This increase is from the expansion into Austria and Germany where 467,000 new customers were added as a result. (Sky Accounts 2015 p 4&6) Another reason for this increase could be down to revenues from SkyStore, Adsmart and Skyvision increasing by 122%. (Sky Accounts pg1) There are also 4.6million new paid for prescription products and an overall growth of 973,000 new customers. (Sky Accounts 2015 pg1) The return on capital ratio shows us what the percentage of profits come from total assets. For 2014 this was standing at 17.11% and in 2015 it decreased to 6.32%. The main reason for the decrease is due to Sky PLC selling off intangible assets. (Sky Accounts 2015 pg24) This included Sky’s stake in the national geographic channel and a sale of the controlling stake in SkyBet. (Sky Accounts 2015 pg9) As these have been sold the income from this can no longer be counted towards sales. The figure has declined also as

The Profit Margin on Sales and Rate of Return on Assets indicate that PepsiCo is a profitable company, and is seeking ways to increase profits. The Pay Out Ratio is smaller for 2006 than 2005 but is not informative taken by itself. Net Income and Cash dividends both increased in 2006 over 2005. Retained earnings increased 18%. The increase in retained earnings came principally from greater net income, not from a decrease in cash dividends, because there was an overall increase of 13% in cash dividends paid in 2006 over 2005.

Sainsbury's continued their programme of change aimed at releasing the talents of their colleagues, helping them to focus on the customer, and restoring their pride in working for Sainsbury's. It's clear to them that new and exciting working environments add to this pride. This will grow as they increase the pace of their programme of developing and extending stores. It is also why they're keen to tell everybody about their acknowledged successes, such as organics and ready meals, their record in protecting the environment and supporting farmers, and new initiatives, such as their innovations in e-commerce.

operating margins and growth in total operating profits of 15%. The high levels of operating profits

J Sainsbury Plc is in a stable position and it is in better position in all the three years than the net profit margin of Tesco. This is the consequence of better implementation and introduction of higher quality products in their sales mix.

In measuring the companies’ profitability we examine their gross profit, net profit and return on capital employed (ROCE). The gross profit ratio is a tool used to assess afirm’s financial health by showing the proportion of profits generated by sales before selling and administrative expenses. Both Tesco and GlaxoSmithKline have seen decreases in their gross profit margin over the past three years. GlaxoSmithKline is a more efficient company as it has higher gross profits. The net profit ratio calculated as net income divided by revenue is useful in measuring the overall profitability of a company. It measures how much out of every dollar of sales a company keeps as earnings. GlaxoSmithKline is the more profitable company based on its higher net profit ratios. The ROCE calculated as earnings before interest and tax (EBIT) divided by the sum of shareholders equity and debt liabilities is a measure of a company’s profitability and efficiency with which its capital is employed. GlaxoSmithKline appears more favourable because its ROCE is more stable and higher. A high ROCE indicates more efficient use of capital.