Supermarket giant Tesco pumped £1 billion into revitalising its business after conceding its UK stores were jaded and under-staffed after a 2012 business review.
Outgoing Chief executive Philip Clarke recently said that the retailer must raise its game unveiling plans to recruit an extra 8,000 staff, overhaul stores and put on more special offers.
Significantly, the chain will slow the pace of expansion as it focuses on “improving the shopping trip” for customers at its 2,800 stores.
The strategy follows a recent profits warning – its first in 20 years – and a sharp slump in its share price as the City worries that Tesco’s dominance seen over the last decade is about to end.
Shares rose slightly in 2012/13 but are still down 18 per cent since its grim post-Christmas 2012 update saw £5 billion wiped from its value in a single day.
Incoming Chief executive Dave Lewis has made sweeping changes to the composition of his top management team, and the changes made since his appointment has seen the share price steadily rising since Dec 2014.
Although Tesco’s share price hit an 18-year low in December 2015 as investors fretted over the pace of progress under Mr Lewis.
Analysts hope that stronger sales will translate into improved profitability, although there will be a worry that lower prices will eat into margins.
Philip Dorgan, a retail analyst at Panmure Gordon stockbrokers, said the plan looked coherent but warned that its success depended on Tesco “doing 1,000 things 1 per cent better”.
In January 2016, Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “With its competitors already having provided some pleasant surprises, Tesco has completed the supermarket sweep with an update which has highlighted a particularly strong Christmas trading period.
Below is a financial summary of Tesco’s financial performance from 2006 to 2012.
Compile more recent financial information yourselves and using all the financial data, critically review the financial performance of Tesco PLC.
Dave Lewis has recently been appointed Chief Executive – your essay will need to include an analysis of any new plans and strategies.
• Assess and review the financial summary above and the most recent financial performance of the group leading up to and including 2015. You are required to undertake additional research to determine the following:-
• What have been the underlying reasons for the financial performance? (identify and discuss significant strategic developments)
YearTurnover (£m)Profit before Tax (£m)Net Profit (£m)Earnings per share (p)2012645393835281436.642011609313535267132.942010569103176233629.192009543272954216627.312008472982803213026.61200742641265318993.542006394542235157619.79
• What significant trends/ developments have occurred since January 2010 in respect of the case study organisation and relevant business sector?
• What do you consider to be the major financial performance challenges and opportunities in the foreseeable future?
• Assess and review the corporate governance policies, have they been successful?
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