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Tesco Plc and J Sainsbury Plc: A Comparative Analysis

Executive Summary
Tesco Plc is the third largest retailer in the world measured by profits and second-largest
retailer in the world measured by revenues have been facing challenges when preparing an
effective annual report (Woods, 1074). On the other hand, J Sainsbury Plc is the second largest
chain of supermarkets in the United Kingdom with a share of the UK supermarket sector. Tesco
Plc in 2013 values have been re-presented to be consistent with 2014 and they have also been represented to account for the impact of IAS 19. The Gross profit ratio of Tesco was 8.12 in 2007
which meant that the company is performed well. Thus, the agenda is to compare the financial
performance of two of the largest UK food retailers J Sainsbury plc and Tesco plc. The scope of
the analysis would be the three latest financial years 2007-2009. The main analytical technique
would be ratio analysis looking at companies profitability, performance, and financial stability
of both companies.
Introduction
Organizations should have annual reports because they can be used in the determining the
strength and weaknesses of the company or an organization. Consequently, they can be used as
balanced scorecards to show whether the strategies implemented by an organization are yielding
the desired outcomes. In addition the companies should prepare annual reports that can be used
by investors to decide whether to invest in the company or not and financial analysts can use the
annual reports to determine the health of the company.
Operations and Financial Reporting Review

The ability to prepare proper books of account and good quality annual reports has been a
major challenge to most companies and organizations. It is a legal requirement to every company
to prepare annual reports and they should follow the reporting standard required like
International Financial Reporting standard rule. Tesco Plc and J Sainsbury Plc have annual
reporting in both financial reporting and corporate reporting and they have to practice the
reporting because it a legal requirement of which failure to do so will lead to legal consequences.
The two companies had good performance in the financial review in their reports. They
both concentrated more in looking at their profits performance. They concentrated less in other
areas such as cash flow, and there was included some features that are rarely included in such
reports. Financial analysis is vital in the identification of the strengths and weaknesses of any
organization. This is because it indicates the capability of the company to meet its financial
obligations. The ratio analysis is the most reliable method employed by experts to determine the
financial situation of an organization. When the ratio analysis is employed in an effective
manner, they can indicate the financial situation of a company.
Tesco Plc has many stores across Asia and Europe and they have laid down strategies on
how they do their financial reporting. Both companies were listed on the London Stock
Exchange in 2014. Tesco Plc has superstores that include large supermarkets and stocking
groceries. Despite facing many challenges in preparing the financial reports, the Company has
tried to include other activities in their financial reporting such as risks and corporate social
responsibility. According to the Annual report 2014, there was an increase in profits and
revenues of the company. It simply means that the company has good management. Tesco Plc
has opened new stores in USA and it is planning to open other stores to new areas such as Africa.

The Tesco Plc profit in the year 2014 was 2,259 lower than in the year 2013 which was
3,453. In the year 2012, the profit was 2,814 which mean that the company did not perform well
do to stiff completion from other companies the same industry such as J Sainsbury Plc. Tesco
Plcs decline in profits in the year 2014 was also as result of low volume of sales and poor
management. The company may had more risks as compared to benefits, so the company
incurred more expenses. Despite the recession experienced in the year 2010, the Tesco Plc made
high profits, but in the year 2014 the company seems to have lost a quite number of customers to
its competitors in the same industry.
Tesco Plc has been involved in the corporate social responsibility as from the year 2006
where it has been sponsoring many events such as Tesco cup, football completion for young
players in UK (Dandy, p.16). Consequently, Tesco Plc had was the leading in the market share in
the year 2012, whereas J Sainsbury Plc was ranked third. The financial performance of J
Sainsbury Plc has not been consistent according to the annual reports in the last five years. J
Sainsbury was listed in the London Stock Exchange and it had a steady increase in the turnover
from the year 1990 to the year 2010. Currently, the company operates convenience stores and
large supermarkets. J Sainsbury Plc offers higher quality grocery compared to its other large
rivals and it runs several kinds of businesses.
During, the year 2006, the companys profits declined steadily due to stiff competition
from its rivals in the same industry and the profits started increasing steadily thereafter. Both
companies follow the laid down rules when preparing their annual financial reports. They both
face some challenges having a consolidated financial reports due to the complexity of their
business. The corporate social responsibility activity is also included in the financial reports in
each company.

Conclusion
Despite of the market conditions, the Tesco Plc and J Sainsbury have been performing well
as compared to their competitors in the same industry. Tesco Plc has been opening branches to
new markets targeting new customers and it was rated among the best companies in the industry
the ear 2013. Its financial reports reflect its true picture since it has all the elements apart from
the annual profits. However, both the Tesco Plc and J Sainsbury have some challenges when it
comes to financial reporting because sometimes the reports do not reflect the exact figures such
ads risks involved and the percentage involved in corporate social responsibility.

References
Dandy, J. (n.d.). Jonathan Dandy interviews Terry Wells, director of Customer Service, J.
Sainsbury plc. Managing Service Quality, 16-22.
(n.d.). Retrieved February 2, 2015, from http://annualreport2014.j-sainsbury.co.uk/
(n.d.). Retrieved February 2, 2015, from http://www.thefreelibrary.com/Research and Markets:
Tesco Plc - SWOT Framework Analysis Available...-a0178117155
El Nashrty (Hesham Amin Hanza) v J Sainsbury Plc. (2003). Arbitration Law Reports and
Review, 207-215.
J Sainsbury plc: UK anchor in a stable market. (2001). London: HSBC Bank.
Pumfrey, J. (2002). (1) LEVI STRAUSS & CO. (2) LEVI STRAUSS (UK) LTD v TESCO
STORES LIMITED (2) TESCO STORES PLC (3) COSTCO WHOLESALE UK
LIMITED. European Law Reports, 610-634.

Safeway plc and Asda Group Limited ... Wm Morrison Supermarkets PLC, J, Sainsbury plc and
Tesco plc: A report on the mergers in contemplation. (2003). London: Stationery Office.
Tesco plc and the Co-operative Group (CWS) Limited: A report on the acquisition of the Cooperative Group (CWS) Limited's store at the Uxbridge Road Slough, by Tesco plc.
(2007). London: TSO.
Woods, M. (n.d.). Linking risk management to strategic controls: A case study of Tesco plc.
International Journal of Risk Assessment and Management, 1074-1074.

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