The report is divided into four parts. Firstly, using ratios as a tool will help in analyzing and evaluating the financial performance of the Sainsbury obtained from the 2008 and 2009 annual report. To show the pattern of Sainsbury’s financial performance for the year 2007 to 2008 a trend analysis will be prepared. Also, developments in the supermarket industry will be analyzed and evaluated for the year 2008 and 2009.

Moreover, a ‘What If’ analysis of the probable financial performance of Sainsbury’s, had the downturn not occurred.

Lastly, conclusion of the report will be discussed how Sainsbury’s handled the downturn situation to reduce the effect on its financial performance and disclose if the company was prepared.

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INTRODUCTION

The Food retailing Industry is a huge and fast growing industry in UK .It is a complex and is a diverse market dominated by various corporate giants such as Tesco, ASDA, J Sainsbury’s. Price and quality of goods are the two key elements which the companies keep in mind to increase their sales and defend their position in this competitive market. In the year 2009, food retailing recorded sales figures of GBP 297,478.9 million, along with providing employment to 11.6% of the workforce in UK (Euro monitor, 2010). It is forecasted, by the year 2014 the sales would cross GBP 350,000 million (Euro monitor, 2010).

This assignment focuses on the third largest food retailer store in UK, i.e. J Sainsbury.

Sainsbury is a super market which will operates its business in retail sector from the year1869.

Sainsbury is started by James and Mary Ann Sainsbury’s. Sainsbury today operates a total of 827 stores comprising 537 supermarkets and 335 convenience stores(J Sainsbury 2010) .With their presence in various other markets such as financial services and Property management, grocery retailing remains their core business. In an industry which employs over 3,335,000 people and with sales figure of GBP 137,590 million (Euro Monitor), Sainsbury enjoys a market share of 16% and serving 19 million customers weekly with a product offering of 30,000 ( J Sainsbury, 2010).

QUESTION 1- An analysis and evaluation of the data available in the organizations’ annual reports. 30%

SAINSBURY’S RATIOS ANALYSIS

According to Maclaney and Atrill (2002), ‘…ratios provide an overview of the

business’s financial condition’. Similarly, Wood (2002) stated, ‘Ratio analysis

is a first step in assessing an entity’. The effects of the downturn experienced

by Sainsbury are demonstrated by the following ratios below. A three year

trend analysis will focus on Sainsbury’s performance two years prior to the

downturn and the two years during the downturn.

PROFITABILITY RATIOS

Maclaney and Atrill (2002, p. 197) stated, ‘Profitability ratios provide an insight

to the degree of success in achieving the purpose of the business’.

RATIOS

2008 %

2009 %

2010 %

Gross Profit Margin

5.62

5.48

Net Profit Margin

1.84

1.52

2.9