Tesco Case Study
Over the last decade Tesco is expanding its business despite recession and downfall of share price in the grocery market. Tesco is known as one of the fastest growing retail giant over the last decade. According to Microsoft 2011, the sale growth of Tesco is slowed from 3.5% in 2008 to 3% in 2009, 2.6% in 2010 and just 1.2% in the first few weeks of 2011. The expansion in Tesco business and minor downfall in sales growth despite recession are interesting factors that forced me to select Tesco Plc for the said assignment
Financial Analysis of Tesco plc 3.1 Economic Growth of Tesco
The worldwide economic conditions have directly influenced the Tesco performance. But UK’s economic condition has played the principal and major role in its slowed down growth of sale that is indicated by the growth of GDP (Gross domestic product) that has fallen continuously in the years 2008 and 2009 with a slight recovery in 2009.
3.2 Operational Performance of Tesco
Any company’s operational performance is usually measured by its financials. By looking at its Grocery market share which has been decreased recently in the UK. In 2010 it was 31% last year there was no increase in this growth. Overall Sainsbury grew faster than the period while the market leader Tesco’s share was stagnant (Hall, …show more content…
The total amount of money arrived by paying all the expenses and taxes which is usually distributed to shareholders is called profitability. Investors decide their investment keeping in view the profitability.
The following are ratios covered in profitability and their brief overview on Tesco. a) Gross profit margin
It measures the cost of goods sold as a percentage of sales giving an idea how well a company controls its cost, manufactures its products and subsequently passes on the costs to its customers.
Gross Profit margin = GP ×100 ÷ Net Sales
Graph 2: Gross profit margin of Tesco (financial statement of Tesco2008, 2009 and 2010)
Tesco’ GP Margin has increased constantly and gradually in 2008.2009 and 2010. It was 7.64% in 2008 and reached at 7.76% in 2009, of which UK sales was increased by 6.7% to £37.9 billion even in recession of last year due to the strategies of expansion, novelty, launching new ideas and variety of products and last but not least introducing online shopping facility to the