An Over View Of The Sainsburys Company Marketing Essay

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Nowadays, it is important for organizations to know how to survive in the

competitive market, in which they are involved, markets that require managers who
understand and are aware of the internal and external factors that concerns to the
company. Therefore, it is vital to know the existence of different techniques of
measurement such as financial tools, which can give an idea on how the company's
financial situation is going to affect its performance in the marketplace.
One of these tools can be the used of financial ratios, which gives to managers the
information to set up strategies in order to make decisions in the future. However, it
is important to highlight that this ratios provide an overview of the business's
financial condition, but an analysis in depth is needed to know the reasons why
certain changes have occurred. Nevertheless, there are some limitations in the used
of financial ratios, for instance, the information is out of date so it does not reflect the
real situation of the company, hence it can lead to wrong decisions, also, the analysis
made from the financial statements gives symptoms of such situations but not the
causes of it.

The purpose of this report is to analyze Sainsbury's financial performance using the
analysis of ratios as a financial tool. This information will be taken from the annual
reports of 2008 and 2009. In addition, it will include external and relevant
information of the company which adds value to the analysis and thus to the
financial performance in the already mentioned period of time.
ABOUT SAINSBURY'S:
J Sainsbury plc was founded in 1869 and today comprises 502 supermarkets and 290
convenience stores. It jointly owns Sainsbury's Bank with Lloyds Banking Group and
has two property joint ventures with Land Securities Group PLC and The British
Land Company PLC.

The Sainsbury's brand is built upon a heritage of providing customers with healthy,
safe, fresh and tasty food. Quality and fair prices go hand-in-hand with a responsible
approach to business. Sainsbury's stores have a particular emphasis on fresh food
and we strive to innovate continuously and improve products in line with customer
needs.
THE COMPANY:
As an organization focused on consumer goods (supermarket retailer), Sainsbury's is
one of the successful one. It has conquered the minds of many customers and further
plans were in progress for attracting more number of customers. The services that
are being provided by the company driven me to choose the J Sainsbury's, let's have a
quick glance;
Food and drink
Home and garden
Technology
Appliances
Toys and games
Sports and leisure
Finance
Further the continuing growth in sales and tight cost control leading to further
improvements in profit, good progress in the challenging economic environment, the
ongoing development, quick adaptation to the rapidly changing environment, their
concern in customer's healthy diet, their values, their approach in delivering the
products to the customers, refunds for faulty items, strategy followed by them,
corporate governance, effective management are few other reasons.

SAINSBURY'S SUPERMARKET.
HISTORY:
1869 - Opened their first store in Dury Lane.

1882 - Started to sell their own brand products.

1898 - They started to receive meat and poultry from the supplier Lloyd Maunder.
1916 - Training their colleagues in their own training school.
1950's - Opened self service stores.
1961 - First food retailer to computerize distribution.
1970's - Introduced bakeries, fresh fish counters, petrol stations & coffee shops in the
stores.
1975 - Expanded their service to non-food products.
1989 - Introduced carrier bags made from recycled material.
1994 - Became the first supermarket in UK to sell fair-trade foods.
2008 - First retailer to launch their own brand 1% fat milk.
2009 - Became the largest retailer to completely remove battery farmed eggs.
SUMMARY:
The history on SAINSBURY'S can be summarized as follows:
Started their business of consumer goods (i.e., Supermarket store) in 1869, the first
store in Dury lane. In 1882, they started to sell their own brand products like tins
packed with the brand labels and in 1898, their longest established supplier Lloyd
Maunder started supplying them with meat and poultry. It is during this period
where the competitors of SAINSBURY'S started to focus the strategy that is followed
by the company.
In 1914, they started to recruit women to help with colleague shortage during the
First World War which paved the way for increased number of employees in the shop
thereby trying to fulfill the customer's needs. In 1916, they started to set up their own
training school in Blackfriars, to ensure their colleagues were well trained. The
training process mainly focuses on material handling effectively and ensuring
product's safety and satisfying customer expectation. They continued their business
with the labels on their products in 1944.

During 1950's SAINSBURY'S opened self service stores years before their
competitors do. It is from the beginning that their competitors are following the
strategy once they made it as a success. This led to the success of the company.
SAINSBURY'S became the first to computerize their distribution in1961. By doing so
the wastages in material handling which was done by humans earlier were reduced to
an extent. SAINSBURY'S own brands accounted for 50% of their turnover, which has
not seen in any company's records of its competitor in that period.
During 1970's they introduced first bakeries, fresh fish counters, petrol stations and
coffee shops in their stores. This approach of opening the refreshment centers in the
shop made the customers to move towards the supermarket. In 1975 SAINSBURY'S
opened first savacentres, thereby expanding their business to non food items. In
earlier days there was a common practice that if a supermarket focuses on the supply
og food items it should concentrate only on that process alone. It is SAINSBURY'S
who changed the scenario and introduced non food items in the supermarket.

Introduction of carriage bags made from recycled material by SAINSBURY'S

contributed much to the environment and their competitors were trying to follow
their strategies in 1989. This is done mainly focused on the environmental factors
and the pollution. As a part of helping the poor people in the country, they
encouraged their customers to reuse carrier bags through launching Penny Back
scheme for charity.
SAINSBURY'S became the first supermarket in the UK to sell fair-trade foods. They
launched TU fashion stores in 160 stores in 2004. A new program "try something
new today" marking the end of disappointment in their history and knowing what
their customers want. This approach done by the SAINSBURY'S created an impact
among the customers. No other companies asked for customer feedback or
suggestion at that time.
The strategy of reusing the carriage bags turned a big success in 2007. SAINSBURY'S
became the first retailer to launch their own brand 1% fat milk. SAINSBURY'S also
became the largest retailer to completely remove battery farmed eggs from its
shelves.
SAINSBURY'S is introducing new practices and strategies for the benefit and welfare
of customers and also customer satisfaction.

FINANCIAL RATIO'S:
RATIO 2009 2008 B/W
ROCE
9.5%
7.10%
B
MARGIN
3.6%
2.9%
B
ASSET T.O
2.7
2.4
B
COST OF SALES
94.5%
94.4%
W
SELLING & MARKETING
2.22%
2.8%
B

ADMIN
5.5%
5.6%
B
EMPLOYEE COSTS
10.6%
10.9%
B
SALES PER EMPLOYEE
194.4
184.6
B
F.A/TO
2.24
2.13
B
STOCK
14.07days
14.76days
B
TRADE DEBTORS
3.76 days

4.22 days
B
TRADE CREDITORS
50.8 days
49.43 days
W
CURRENT
1.2
1.7
W
GEARING
38.5%
34%
W
ROE
6.6%
6.6%
B
From the above table, the ratio analysis of the company in the two financial years
2008 and 2009 were compared. The results include;
ROCE:
The return on capital employed was increased from 7.10% to 9.5%. this shows that
the company is getting more return from the capital invested in 2009 than in 2008.

MARGIN:
Here the margin in considered as a common term irrespective of net margin and
profit margin. And it is found to be increased from 2.9% to 3.6%. this shows the
growth of the company.
ASSET TURN OVER RATIO:
Asset turnover ratio is the one which shows the utilization of the assets available.
Since it got increased from 2.4 times to 2.7 times, we can say that the company
utilized the available assets effectively.
COST OF SALES:
The cost incurred for the company to sell its products is given by this ratio. Since it
got increased it is considered as a drawback in the company's growth.
SELLING & MARKETING:
The ratios of selling and marketing were found to be increased which reveals the fact
that more sales took place in 2009 when compared with 2008.
ADMIN:
The administrative expenses were found to be decreased which is also considered as
the good condition for the company's growth.
EMPLOYEE COSTS:
The costs associated with the employees and the expenses made to them constitute
the employee costs. In 2008 it is found to be 10.9% and reduced to 10.6% in 2009.
This shows the company's cost reduction method. Due to the various strategies
followed by the company it is achieved.
SALES PER EMPLOYEE:
This shows the total amount of sales made by an employee. It is found to be 184.6
in 2008 and increased to 194.4 in 2009 which is a high income to the company.
Since sainsbury's is the leading supermarket, many customers purchase things from
there and the count has increased. This is due to the practices followed by the
company.

FIXED ASSET TURNOVER RATIO:

The fixed asset turnover ratio seems to be increased from 2.13 to 2.24. This is one of
the best methods in the improvement of the company in financial base.
STOCK:
Usually most of the products will remain in the shop as stock for few days. If the
period is more then we can say that there is no demand for that product among the
customers. In our case the period is reduced from 14.76 days to 14.07 days. This
shows the steps taken by the company in selling their product.
TRADE DEBTORS:
Trade debtors are those who help an organization in carrying out the operation. With
the time limit mentioned by them we can pay the debt. The time period for the
debtors reduced from 4.22 days to 3.76 days, so that the company can utilize the fund
in any other operation.

TRADE CREDITORS:
The time period given for trade creditors has increased from 49.4 days to 50.8 days.
The company which has the less credit period can get more return from the buyers.
CURRENT RATIO:
Current ratio of a company shows the financial condition in meeting the current
liabilities of the company. Since the current ratio has decreased from 1.7 to 1.2, it
shows that there is no enough current assets to meet the current liabilities of the
company.
GEARING RATIO:
The value of gearing ratio was increased from 34% to 38.5%. This shows the fund
being invested by the owners of the business and that by the outsiders were
fluctuating. Hence no decision can be taken due to this factor.
ROE:

Since the return on equity is being maintained the same in both the years, we arrive
at a conclusion that may be beneficial to the company. But the company should take
further necessary steps to increase the ROE.

FINANCE:
Finance can be defined as the art and science of managing money. Financial
performance is relevant and useful for a concern. The field of finance is broad and
dynamic it directly affects the lives of every person and every organization.
Financial analysis and planning is concerned with:
1. Monitoring the firm's financial condition.
2. Evaluating the need tier increased or reduced productive capacity and.
3. Determine what financing is required.
These functions encompass the entire balance sheet as well as the firm's income
statement and other financial statements.
Analysis and interpretation of financial statement with the help of 'ratios' is termed
as 'Ratio Analysis'. Ratio analysis involves the process of computing, determining
and presenting the relationships of items of financial statements. Ratio analysis was
pioneered by Alexander Wall who presented a system of ratio analysis in the year
1909.

Underlying operating profit

for the 52 weeks to 21 March 2009

2009

2008
Underlying operating profit (m)*

616
535
Year-on-year operating profit growth (%)

15.1
24.7
Underlying operating margin (%)**

3.26
3.00
* Underlying profit before tax from continuing operations before underlying net
finance costs and underlying share of post-tax results from joint ventures.
**Underlying operating profit divided by sales excluding VAT.
Underlying operating profit increased by 15.1 per cent to 616 million reflecting the
good sales performance.
A 26 basis point improvement in underlying operating margin to 3.26 per cent for
the year. The rate of improvement was consistent across the first half and the second
half. Sainsbury's has driven operational gearing from higher sales volumes and the
delivery of cost efficiency savings which have offset over 75 per cent.

Sales (including VAT, including fuel)

for the 52 weeks to 21 March 2009

2009
%
2008

Like-for-like sales (Easter-adjusted)

4.5
3.9
Removal of Easter adjustment*

(0.8)
0.4
Net new space (excluding extensions)

1.0
1.4

Total sales growth

4.7
5.7
*Like-for-like sales growth has been Easter-adjusted for comparative purposes. 2008
included two Good Friday trading weeks and one Easter Sunday trading week. 2009
included one Easter Sunday trading week only.
LFL sales were up 4.5 per cent, of which 0.5 per cent was contributed by extensions.
This LFL growth was slightly above Sainsbury's medium-term planning assumption
of between three and four per cent, and reflected continued improvement throughout
the year, with LFL growth of 3.4 per cent in quarter 1, 4.3 per cent in quarter 2, 4.5
per cent in quarter 3 (4.9 per cent VAT-adjusted), and 6.2 per cent in quarter 4 (7.0
per cent VAT-adjusted).

.
COMPARISON OF BALANCE SHEET.
SOURCES

USES
2009
2008
2009
2008

m
m
m
m
Equity
4376
4935
Fixed asset
8442
8393
Debt
2738
2528
Stock
689
681

Receivables
195
206
Others
707
835
Total CA

1591
1722
Trade payables
2488
2280
Borrowings
154
165
Others
277
207
Total CL

2919
2652

Capital employed

7114
7463
Total asset - C.L

7114
7463
COMPARISON OF ABSOLUTES

STATISTIC
2009
2008
'08 B/W '09
m
m
REVENUE
18911
17837
+6.02%
COST OF SALES
17875
16835

+6.2%
OPERATING PROFIT
673
530
+26.9%
PROFIT AFTER TAX
289
329
-12.15%
FIXED ASSETS
8442
8393
+0.58%
KEY FINANCIAL PERFORMANCE
INDICATORS:
Underlying Profit before Tax (m):

Underlying Operating Margin (%):

Operating Cash Flow (m):
IMPACT:
The revenue turned in a great output resulting in the profit for the company.
With the increased operating cash flow, more functions were carried out.

The cost of sales seems to be increased thereby enhancing the promotion of the
products as well.
Through the strategies adopted by the company, it can achieve much more benefits
in terms of profitability, increased customers, better maintaining the asset base,
properly allocating funds for the operations, etc..
FUTURE IDEAS:

Reaching more customers through additional

channels
Accelerated growth of convenience chain with 50 new stores planned in 2009/10 and
100 in 2010/11.
Online food home delivery service sales up by over 25 per cent year-on-year.
Online food business now annualizing at over 500 million.
Operates from 169 stores covering 88 per cent of UK households.
Non-food online launching in first half of 2009/10.
CONCLUSION:
Taking into consideration the ratio analysis applied to Sainsbury's, it can be said that
the company had some variation between 2008 and 2009. Whereas, most of the
profitability, efficiency and effectiveness, liquidity and investor ratios demonstrate
decline as well as increase, the gearing ratios demonstrate a fall due to the growth in
the long-term debts and the capital employed.
Understanding the ratio analysis and the relevant information gathered looks like
Sainsbury's has gone through some difficulties in their marketing management.
Although they have invested in a long-term project and are positive in a potential
growth in the coming years, to reach their aim they have to work hard and play in the
same field its competitors are doing, by having low prices and good quality food
always available in their shelf for all kind of consumers.
Sainsbury's still have a strong position in the retail sector in the UK.