Evaluation of Investment Opportunities focusing on Tesco and Sainsburys

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Evaluation of Investment Opportunities focusing on Tesco and Sainsburys.


Case scenario; You are employed as a financial analyst and your company has over the few years recovered from adverse trading conditions and has now geared itself towards expansion. As a member of an executive team, your objective is to evaluate investment opportunities in other UK plcs whose recent published reports are available.

This essay will financially analyse and discuss Tesco supermarkets performance over the last two accounting periods using appropriate accounting ratios including profitability, liquidity, gearing and investment potential. Also a comparative analysis of the financial performance, position and investment potential of J. Sainsbury's organisation with J. Sainsbury's supermarkets.

Tesco plc today owns, Tesco supermarkets across Europe and Asia. These stores are located in the UK, Republic of Ireland, France, Hungary, Poland, Czech Republic, Slovakia, South Korea and Thailand. Today Tesco plc is specialised in retailing, property investment, insurance, distribution, property development and purchasing. Also the group's joint ventures are: property investment, personal finance and mail order retail. Tesco supermarkets has 15.5% market share in retailing in the UK. "It is fifty years since Jack Cohen opened his first self-service shop, and we expect Tesco stores in fifty years' time to be as different from those we know today as our current stores are to the stores of fifty years ago". Says Terry Leahy the chief executive of Tesco plc. And Tesco supermarkets has 659 stores including 38 newly opened stores in the UK. Retail sales of Tesco supermarkets were up by 7.4% to £17,070 million to £18,331 million and operating profit were up 8.1% from £919 million to £993 million. Tesco supermarkets in the rest of Europe has 167 stores including 11 newly opened stores and the sales of the supermarkets rose by 18.8% to £1,527 million from £1,285 million and operating profits were up 6.3% to £51 million from £48 million. Tesco supermarkets has 19 stores in Asia these are located in Thailand and South Korea the sales of these stores rose by 192% to £497 million from £170 million and the operating profit was also up by 50% to (1) from (2) last year. And the company is considering opening new stores in Taiwan, Malaysia, china and Japan. Tesco plc's group sales (inclusive of VAT) was £20,358 million with an 9.8% increase in sales compare to 1999 of £18.546 million of sales. Tesco plc's operating profit was also increased to £1,043 million with and increase of 8.1% compare to the year before £965million. Tesco plc's per share price was 169 pence in February 2000 since than it has increased to 276 pence this is an increase of 63.3% per share also at the last fiscal year earnings per share was paid as 10.18 pence per share and the dividend is 4.48 pence.
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The reason why J. Sainsbury's plc was chosen for the comparison is because J. Sainsbury's are the second largest supermarket in the UK behind Tesco supermarkets and has 11.9% market share. J. Sainsbury's today owns Shaw's Supermarkets Inc. has been owned by J. Sainsbury's plc since 1983 Shaw's supermarkets has 168 in the six New England states of the USA and serves over 4 million customers a week. Homebase DIY stores, Homebase was founded in 1979 and opened its first store in 1981, since then the company bought Texas Homecare and converted to Homebase store format and acquired ...

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