Tesco - The leading Supermarket in Britain.

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Mahmut Dede                Tudor Spencer

Business Finance A                3BUS 0122

Student NoL 01012296                Courswork

Tesco – The leading Supermarket in Britain

Background

It all started in 1924, when a Sir Jack Cohen started selling groceries in London’s East End markets.  By the1950’s, this had grown and supermarkets were now in development.  Tesco opened its first and indeed the UK’s first superstore in 1967, and by the 1980’s had opened many cornerstores.

Tesco quickly overtook Sainsbury to become the largest food retailer in the UK, with 1,982 UK stores, consisting of 62 Extra stores, , 442 Superstores, 167 High street stores, 109 Express stores, with many accompanying a  Tesco petrol station, and 1,202 newly acquired T&S stores, which was a leading convenience retailer.

Tesco offers a wide variety of food products, in-store bakeries, household goods, clothes and toiletries.  Tesco has also adapted to the rapid technological changes, increasing its sales by 26% (£447m) from last year, on the on-line sales site – Tesco.com, alone.

Tesco has achieved this position as Britain’s number one food retailer by offering excellent  value and service to its customers.

Tesco’s reputation as the supermarket choice has grown in the last five years.  It now has a 53.93% (as at 21/11/03) Market share of the Food & Drug Retailers sector.

Group sales for the financial year end 23 February 2003 rose 11.5% to £28.613bn.  Tesco’s joint venture with the Royal Bank of Scotland, made a profit of £96m in the year, of which Tesco get £48m.

Composition of Fixed assets

The composition of the Fixed Assets accounts for 85.2% of the total assets.

It includes Intangible assets, Tangible assets, Investments, Investments in joint ventures – most recently being with the Royal Bank of Scotland, and investments in associates – being Grocery Works Holdings Inc, who are based in USA.

The composition of the Fixed Assets has stayed roughly the same from the previous year end, which was 84.9%.

However, Fixed Assets alone, there has been a 22.24% change.  This is mainly due to the goodwill in assets arising from investments in subsidiaries in the year.

Composition of Current Assets

The composition of Current Assets accounts for 14.8% of the total assets.

It includes Stocks, Debtors, Investment and Cash at Bank and in hand.

Current assets the previous year end 2002 accounted for 15.14% of the total assets.

There has been an 18.85% change in Current Assets between the year end 22nd Feb 2002 and 22nd Feb 2003.  This was down to more stock being held for resale.

Tangible fixed assets

Tangible fixed assets comes to £12.828bn, which makes up 91.2% of fixed assets.

This comprises of land and buildings, plant, equipment, fixtures & fittings and motor vehicles, and includes £62m in respect of interest capitalised relating to land & building assets.

This increased by 16.28%, which was mainly due to the acquisitions of T&S stores, which operated the One Stop C-store chain.

Tesco plans to convert most of these stores into Tesco Express stores.

Intangible Assets

Intangible assets take up 6.33% of fixed assets, an increase of 477.9% from last years tangible assets value.  This is down to goodwill arising from investments in subsidiaries in Europe and Asia.

Stock

Stock accounts for 46.72% of the total current assets.  This is an increase of 22.71% from the previous year.  The stocks consist of goods held for resale and properties held for development.  It is valued at the lower of cost and net realisable value.  The stocks that are in store are calculated at retail prices and reduced by suitable margins to the lower of cost and net realisable value. (source: Tesco’s published accounts)

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Debtors

Debtors account for 27.13% of current assets.  This has increased by  5.02%.

The debtors figure has increased 45.81% in between the financial years.  This is due to amounts owed by undertakings in which Tesco’s have a participating interest.

Company’s policy towards asset revaluation 

This policy is not stated in the annual reports, as it is confidential to Tesco.  However, in the annual reports, there is a small section which states that valuations are obtained from independent experts.

Company’s policy towards depreciation 

Depreciation is provided on a straight-line basis ...

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