Financial Performance of Retail Industry

Report on Financial Performance Of Retail Industry

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Retail industry is one of the largest industry in the UK. Currently, there is a huge competition in the retail industry of the UK. It is the competition due to which firms are earning very low amount of profit in the business. Current research report is focusing on analyzing the performance of the business firm and identifying impact of current industry condition on their performance (Zhu and, 2010). There are number of players in the UK retail industry like Tesco, Sainsbury and Morrison etc. In the current report performance of Tesco and Sainsbury will be evaluated. In past time period number of researches were carried out on the performance of the retail firms of the UK. In the researches it was identified that competition heavily increased in the UK and due to this reason performance of the firms declined heavily. Firms like Lidl and Aldi are giving tough competition to the Tesco in terms of earning of profit in the business. It can be said that competition to large extent affects the Tesco like large size retails. There are some purposes due to which present research study is conducted. Same are given below.

To evaluate the profit numbers of varied retail firms and comparing them in terms of percentage change for multiple years.
To identify the impact of competition on performance of retail chain.
To compare liquidity and efficiency of the business firms.

Data related to firms will be collected from the online database and by using financial statements ratios will be calculated to measure the firm’s performance.

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Literature Review

Financial performance in retail industry

According to Midrigan and Xu, (2014) analyzing economic tools is essential to present organization's monetary structure. In this regard, different components are identified such as balance sheet, income statement, cash flow/ fund flow statements and so on. However, on the basis of these identifications, innovative ideas are generated interlinked with economic stability as well improving monetary position of company. In addition to this, it is analyzed that retail sector's efficiency can be enhanced by providing healthy and secured goods and services to customers. In this process, creating innovations in product services of retail sector firms' contributes in country's economic growth at high level. Moreover, there are several kinds of organizations available in the list of retail sector who works for groceries and food products. For example; Tesco, Sainbury, Marks and Spencer and so on. Coordination and earning power of all these companies impact on nation's development in monetary and non-economic terms.

Segal, Shaliastovich and Yaron, (2015) expresses his views that improving in financial growth as well producing products affect productivity and profitability of firm. It is interlinked with organization's performance and potential for sustaining company's good reputation at large scale. In accordance to this, various tools and techniques are applied for economic growth of firm that is valuable for expansion of organization through establishing new branches in different countries. It influences good relationship with customers including retailers, agents and other business entities effectively. However, adequate resources and fund allocation can be gained through this process. Moreover, it is beneficial to enhance economic profile of organization that leads to achieve development in wide range. In accordance to this, retail sector effectiveness achieved effectively that is linked with other sectors growth as education, employment, tourism and so on. In this process, country's financial and non-monetary growth is obtained.

In opinion of Bartram, Brown and Waller, (2016) analyzing and potential of all retail sector companies in and comparing their performance encourages each other for competitive advantages. In this process, new innovations are created for better quality services and improving economic position of organization. Moreover, effectiveness of firm is achieved through making decisions and implementing strategies are impacted on profit earning capabilities. Apart from this, financial development of entity interrelated with other business operations.

On the contrary to this, Battiston and, (2016) argues that wrong interpretations on financial statement analyses is unable for effective business operations. Including this, do not following on all determined planing procedures is difficult due to uncertain changes occur at workplace. In this regard, it is required for manager of financial department to analyze all business operations and preparing strategies on the behalf of them. It is one of the great tool for expansion of organization as well improving profit earning capabilities at high level. Including this, comparison between Tesco and Sainsbury is comprised that affects reputation of organization in market. Along with this, business performances and product quality services are comprised that creates different ideas for financial development and enhancing efficiencies at high level.

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Research methodology


There are various types of research designs which might research can adopt such as case study, descriptive, analytical, and exploratory and others. Selecting appropriate research design is a key requisite for every research because it integrates all the components of the study in a logical and effective order and helpful for carrying out the study in highly suitable and effective manner (Danie and Sam, 2011). In the current study, it has been planned to examine the financial performance of two well-established British retailers, named Tesco and Sainsbury. Thus, case study research design will be proposed by the investigator wherein the entire focus of the research will be upon examining and analyzing each and every financial aspect such as profitability, solvency, liquidity and efficiency of two selected business organizations, Tesco and Sainsbury.

Data collection method

There are two methods which are widely employed by the researchers to gather sufficient quantum of information, primary versus secondary. First method generates data by carrying out a real and original investigation i.e. survey, questionnaire, observation, interview, focus group and others (Downey, Hamilton and Catterall, 2007). It helps to acquire and obtain highly realistic and very specific information focusing the target aim of the study however, the limitation of applying this data collection method is it is too time consuming and costlier approach. Unlike this, secondary method of data gathering uses sources which are readily available and scholar does not need to carry out a real investigation for the same (Žikić, 2016).

With the planned study, investigator will collect data by employing secondary sources, wherein data regarding the financial performance of the business will be gathered from the annual reports available at the official website and London Stock Exchange. Further, online resource, competitor’s financial statements, previous research studies also will be taken into account in order to investigate the internal as well as external financial performance evaluation. In this regards, internally, the financial position will be analyzed over the two accounting years whereas external analysis will be carried out through comparison between Tesco and Sainsbury’s profitability performance and financial health.

Data analysis

Ratio analysis, graphical presentation and other financial techniques will be applied for examining the performance of the business by computing different kind of ratios i.e. solvency, liquidity, profitability, investor’s performance and efficiency as well.

Ethical consideration

For giving value to the ethical aspects, researcher will first receive consent from the respective managerial authority of the Tesco and Sainsbury to obtain information regarding their profit performance and financial status. Moreover, privacy & confidentiality are the two main requirements for every research to maintain ethical aspects. Investigator will not disclose the private and confidential information of the companies to any other party or competitor which can leads to breach the principle of privacy & confidentiality (Harley and, 2015). For such purpose, data will be kept in highly secured manner by warehousing and storing it into a computerized database where it will be protected by password security. At the same time, data compliance legislations also will be followed and complied throughout the study.

Presentation of findings

Research results will reflect the performance of the business firm. It is observed in the past time period Tesco performance become poor in past years and its profitability declined sharply. Firms like Sainsbury perform better then Tesco which is number one retail player in the UK. In order to analyze the data ratio analysis will be done and under this profit and efficiency ratio will be computed and by doing so performance will be measured. In this way entire conclusion will be formed.
Implication and recommendation

Research results will have due implications as it will help one in understanding the impact that competition have on the firm performance. Apart from this one will also come to know about the impact the efficiency have on the profitability of the business firm. On the basis of ratios results and literature review recommendation section will be prepared in the report.

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Some of the research problems were faced when research was commenced. It was hard task to determine the grounds on which firms must be compared with each other. On analysis of facts it is find out that it will be better to compare firms on the basis of profitability and efficiency factors. By conducting analysis ratios conclusion section will be prepared in the report.


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