Financial Analysis of Tesco Corporation
This paper seeks to prepare a financial analysis for Tesco Corporation.The paper includes understanding the company and the industry where it operates as well making a meaning out of the ratios generated from its financial statements.A valuation of the company’s stocks will also form part of the discussion to determine if making an evaluation of whether the company is a good investment option.
2. Analysis and Discussion 2. 1. General description of company Tesco is considered by observers as the leading retailer after it has overtaken its rival Sainsbury in 1995.
Home shopping service characterized one of its strategies, which has allowed shopping online. The company now continues to expand into convenience stores as well as international operations which include Malaysia, Poland, Taiwan, US, Taiwan and Ireland (Tesco, 2008). The company is based in Great Britain and engaged in international grocery and general merchandising retail chain. As stated earlier, it is now the largest British retailer by both global sales and domestic market share, and could be considered one of the world’s top three-largest within the group of Wal-Mart of the US and Carrefour of France (Bordon, 2008).
In the UK, Tesco controls about thirty percent (30 to 32%) of the grocery market which could be as big even if compared with combined sales of its closest rivals for 2007, which Asda and Sainsbury (Farmer Weekly Interactive, 2008). As to how the company has evolved over the years, it originally specialized in food until it eventually diversified into discount clothes, consumer electronics, consumer financial services as well as selling and renting DVD’s (Bordon, 2008). Its first brand came about in 1924 with the name derived after Jack Cohen who brought a tea shipment from T.
E. Stockwell, thus the start of the three letter of supplier’s name TES and adding the first letter of Jack’ surname to form the so called “Tesco” (Tesco, 2008). After opening a Tesco store in 1929 in Edgeware, Middlesex, the company floated its Tesco Store (Holdings) Limited in 1947 at the London Stock Exchange (Tesco, 2008). After the floating of its stocks in the stock exchange came the opening of its self service store in 1947 and its first supermarket in 1956 and subsequent organic growths and acquisitions until its number of stores had reached about more than 800.
There are other acquisitions made that have brought the company to its leadership position today in the United Kingdom (Tesco, 2008). 2. 2. Macroeconomic/industry analysis The retail industry is characterized by few players at the top where Tesco is the leader over its few competitors. The industry is also characterized by a high turnover of sales since the companies are engaged on selling everyday needs of people for grocery items which usually include food items.