Analysis of Financial Performance: Tesco UK plc Report

This report provides a detailed analysis of the financial performance of Tesco UK plc over several years. It examines key financial ratios, including gross profit margin, net profit, current ratio, debt-equity ratio, and inventory turnover, to assess the company's profitability, liquidity, and efficiency. The analysis highlights trends in revenue and profitability, interpreting the company's performance in the context of its competitive landscape. The report also critically reviews Tesco's growth and business strategies, including its international expansion, product development, competitive analysis, and acquisitions. The discussion covers strategic models, external perspectives, and internal perspectives that have influenced Tesco's market position. The report concludes with a review of Tesco's recent strategies, such as the acquisition of Booker and its focus on cost-cutting and new product launches, to provide a comprehensive overview of the company's financial health and strategic direction.

Financial Performance of
Tesco UK plc

TABLE OF CONTENTS
A. Discussion of financial performance of Tesco over the years...............................................1
B. Critically reviewing the growth and business strategy of corporate......................................2
REFERENCES................................................................................................................................4

A. Discussion of financial performance of Tesco over the years
Ratios
Particulars 2013 2014 2015 2016 2017 2018
Gross profit
margin (%) 6.3 6.3 -3.4 5.2 5.2 5.8
Net profit
margin (%) 0.19 1.53 -9.22 0.25 -0.07 2.1
Current ratio 0.69 0.73 0.6 0.75 0.79 0.71
Debt equity
ratio 0.6 0.63 1.51 1.24 1.47 0.68
Inventory
turnover
ratio 16.55 16.27 19.71 19.15 22.41 23.73
Interpretation- The above analysis shows that gross profit margin over the 3 years is
declining but after 2015 it shows an increasing trend which means that the performance of Tesco
has become better with passage of the years as its profits and sales value increases (Financial
performance of Tesco, 2018). Over the years net profit of the company decreases as well as
increases and sometimes negative results are also generated which reflects that profits and
revenue in the year 2015 and 2017 resulted as negative. However, currently the financial
performance of an entity is showing better results as compared to previous years. Main reason
behind decline or low profitability is that Tesco is facing huge competition from the rivals and
due to this reason charging less margin on profit. Further, practices like bulk purchase strategy
prove lose making tactic for the firm. Hence, top management need to prepare plan of cost
cutting in the business. The liquidity position is good and stable as current ratio of Tesco is
resulting an increasing trend which means that company is capable in meeting its short-term
obligations effectively. Stability in liquidity ratio in case of reduced profit or declined revenue is
strange and it means that now firm is not making big investment of cash in its business. Hence,
even profit decline reserve of previous year remains in the business which lead to high liquidity
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ratio. Leverage and efficiency performance of Tesco is also said to be better over the year in the
overall industry.
Trend analysis
Particul
ars 2013 2014
%
change 2015 2016
%
change 2017 2018
%
change
Revenue 64826 63557 -0.020 62284 54433 -0.13 55917 57491 0.028
Profits 124 974 6.85 -5741 138 -1.02 -40 1206 -31.15
Interpretation- From the above table it has been interpreted that in the year 2018 the
trend of profits and sales is increasing while in the previous years revenue and profitability of the
firm has been decreased which shows a poor performance in past years and better performance in
current years.
B. Critically reviewing the growth and business strategy of corporate
Over the years, Tesco pursued an international growth strategy regarding entering into
the new market by creating a joint venture like banking, gaining customer insight, large
proportion of the investment in the land and the property in the overall UK. During the period of
7 years, Tesco developed product strategy by developing a finest and value range in introducing
wide range of the food items (Business and growth strategy of Tesco, 2018). Strategic models
that are considers an external perspective and an internal perspective as the most useful in
defining the strategic approach and attaining leading position in market. Competitive analysis
was also been a major business strategy adopted by the firm where it had determined mainly five
fundamental forces that facilitates an insights into relationship and the dynamics of an industry.
Such an external perspective could be seen as ease of the substitution in retail grocery market
and the change in the consumer trends which demands more responsive approach in relation to
strategic growth of an enterprise in the future. Tesco as part of the business expansion acquired
Booker and in result two new members also added in its board of Directors list namely Charles
Wilson and Stewart Gilliland. Both have long years of experience of retail sector and addition of
them will assist Board members a lot in making business decisions (Serving shoppers a little
better every day., 2018). Booker was in wholesale business and its acquisition now enable Tesco
to obtain expertise in wholesale business and access new opportunity for growth. Tesco
management is expecting that after acquisition firm will be able to make available quality
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products at low price to the customers. Tesco now will be able to better serve faster growing out
of home food market in better way. Tesco is following a strategy under which it is trying to show
itself different then other retailers. In this regard, it is focusing on launching of new products in
its retail shop that are not available in other retail shops. Tesco now is analysing its operation
deeply and save £594 to £800 million in its business. Large amount is saved in logistic
operations. Thus, it can be said that Tesco is following multiple strategy in its business.
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REFERENCES
Online
Business and growth strategy of Tesco. 2018. [Online]. Available
through:<ftp://ftp.repec.org/opt/ReDIF/RePEc/ibf/rbfstu/rbfs-v6n3-2015/RBFS-V6N3-
2015-9.pdf>
Financial performance of Tesco. 2018. [Online]. Available
through:http://financials.morningstar.com/ratios/r.html?
t=TSCDY&region=usa&culture=en-US
Serving shoppers a little better every day., 2018. [PDF]. Available through:<
tescoplc.com/media/476557/tesco_2018_strategic_report.pdf>.
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