A report on J.

Sainsbury plc

By:

An assignment submitted in partial satisfaction of the requirements of the

study unit
ACC2112

Table of Content

Introduction……………………………….……………………………………………...………….……….… 3

Background to the company ……………………………………..……………….…………….…….……....4

Background to the Industry…….…..…………………………………………….………………….…….…..5

Trading Performance of Sainsbury’s PLC……………………………………….…………...………………6

Other Results………...…………………………………………………………………………………..….…10

Key Performance Indicators…………...………….…………….…………..………………………….…….11

Key Events and Achievements…………………………………………………………………….……..….15

Sainsbury’s current financial position and position in the market …….………………………..…….....20

Sainsbury’s Share Price History and Analysis……………………….…………………………….…..….21

Conclusion ………………………………………………………………………………………….……….. 24

Executive Summary ………………………………………………………………………………….……...25

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References …………………….……………………………………………………………………….…….26

Introduction

This assignment is concerning J Sainsbury PLC. The company manages three sectors which are
retailing, property investments, and financial services.

The company runs a number of supermarkets and convenience stores across the United Kingdom. It
is indeed a major food trader in the United Kingdom. Sainsbury's employ approximately over 189,000
people, which is up from prior years. The company owns 813 convenience stores and 598
supermarkets as of March 2021. Argos, Habitat, TU, Sainsbury Bank, and Nectar are the company's
subsidiaries.

Firstly, Argos stipulates general merchandise sellers which offer more than 60,000 goods across
stores and sites. Furthermore, Argos employs about 30,000 workers and its website draw more than a
billion visits a year and 90% of sales show up online. Secondly, Habitat, in the store one can find the
finest, affordable home products online and it has 3 outlets which are located in London, Brighton, and
Leeds. Then, Sainsbury’s Bank opened in 1997, it has more than 1370 ATMs. Sainsbury PLC is also
the parent company of Nectar. It specialises in loyalty schemes which it has more than 18m active
users.

However, Sainsbury's is also known for community and partnerships. Indeed, they supported 3945
charities during the pandemic. Besides, they launched a digital version of donations programs. Lastly,
their key achievement was that they raised 35m for good the previous year.

Subsequently, we plan to evaluate information concerning the Company’s Background, Industry

Background, results, and performance over 3 years, together with the Share price history analysis and
the financial position of the company.

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Background to the Company

The company dates to 1869 when John James Sainsbury and his wife Mary Ann opened their initial
store in Drury Lane, London. The company blossomed within the first years, its motto was “Quality
perfect, prices lower”. The corporation spread its branches and in 1922, it turned into a private
company.

During the period from 1970 till 1999, it recognised itself as a nationwide retailer, opening stores in
Yorkshire then expanding to Wales and Scotland. In the mid-1990s, they had their own branded
products that produced 66% of total sales. In 1995 Tesco shifted Sainsbury’s from its branch as the
uppermost grocery retailer in the UK, due to executive problems. Ultimately, in 2017 a trial took place
that consists of customers placing and paying an order and picking it up within 2017.

Industry position

To this present day, J Sainsbury PLC is the second-largest supermarket chain in the UK. Sainsbury’s
had the major share over the period under deliberation, holding 42.3% of the market as of May 2021.

The entity’s ambition to focus on the consumer’s convenience first is an agenda behind such a market
share. Schemes such as Same-Day Delivery to 40% of the UK society along with over 2,300 locations
of Click & Collect. As one of the market leaders in the UK, of such broad commerce, Sainsbury has
plenty of competitors, especially Tesco, Asda and Morrisons.

Despite significant food and Argos sales during the coronavirus outbreak, Sainsbury's has slumped to
a £261 million loss. Sainsbury's admitted to spending £485 on Covid-related expenses, as well as
paying coworkers who were needed to shield or self-isolate.

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The leading supermarkets additionally paid out restructuring charges, incorporating to close 170
standalone Argos stores. The company also obtained £617m of outstanding costs. This was led by
closing hundreds of Argos stores. With the pandemic being around, online sales rose for everyone.
Indeed, online sales jumped from 8% of grocery sales to 17% during the year.

In smaller towns, Sainsbury's plans to open more convenience stores and neighbourhood hub shops,
while also minimarkets.

Background to the Industry

J Sainsbury PLC and its subsidiaries primarily operate within the retail industry, of specific interest is
the supermarket industry, along with the financial services industry. The retail industry is one of the
largest trades in the UK, with its share price of 273.10 GBP.

One of the oldest businesses in this present day is in fact Sainsbury. During that time there was no
currency, thus they used barter systems in which goods, animals and cattle were used instead of
money. Additionally, the retail industry became more difficult with the manufacture of currency which
is money.

In 1940, the firm introduced the ‘Fair Shares’ scheme to ensure that every product, which was scarce
at the time, these being, meat pies, sausages and cake. Customers were allotted a number of points,
according to the number of rationed goods for which they were certified.

In the 1950s, development regularly aimed to improve existing stores and supermarkets as well as
create new ones. Because of its mechanised distribution structure, Sainsbury's became the largest
food store in the United Kingdom. Scanners displaced electric cash registers at the cash register in
the late 1980s.

Currently, most of the retail industry is reliant on e-commerce. This broadens produce and quality data
as well as convenience.

Recent development

In 2016, Sainsbury’s obtained Argos in a £1.4bn agreement intended to widen its reach into general
merchandise, boost its online and digital knowledge, and offer Argos a better attendance inside the

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grocer’s bigger stores. In conjunction with Argos, Sainsbury’s also holds the Tu clothing label – one of
the leading fashion brands in the UK by sales volume – but its fundamental grocery business endures
to account for the popularity of group sales.

In recent years, the deduction stores such as Lidl and Aldi have developed as contrasting to the
contraction skilled by the larger supermarkets.

It's worth noting that the shift in supermarkets from one large purchase to smaller, more frequent
purchases has reduced the demand for a larger creation assortment in stores. This diminution in such
a necessity is aided by online buying.

When the Sainsbury's retail administration team chooses how to complete their store process, they
always communicate with their employees. Before formally drawing any conclusions, the majority of
store directors conferred with their experienced staff and administrators and acquired information from
them. We can determine from this scenario that Sainsbury is maintaining democratic control in the
association..

Sainsbury's organised regular employee meetings with their associates to discuss structural
decisions. Sainsbury's management feels democratic leadership is the most effective style since it
involves all employees and boosts employee enthusiasm.J Sainsbury PLC also possesses
Sainsbury’s Bank.

Trading Performance of Sainsbury’s PLC

Three-Year Analysis of Financial Statements

In this report, an analysis of Sainsbury’s plc’ last three consecutive financial years will be undertaken,
which will take a look at the company’s financial statements, ratios and other results, Key
Performance Indicators (KPIs), and key events and achievements of the company throughout the last
three financial years.

The company’s financial year runs from 10th of March till 9th of March of every year but it also
publishes a bi-annual set of financial statements every 22nd of September.

Financial Statement Results

The following table includes the financial statement results for the periods 10th of March till the 9th of
March for the financial years 2018-2019, 2019-2020, and 2020-2021.
Sainsbury’s plc
Financial Statement results for the years ending 2019, 2020 and 2021

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 18-19 (£,millions) 19-20 (£, millions) 20-21(£, million

Three-Year Financial Trends of Sainsbury’s PLC

Trend Analysis 2018-2019

Below is a trend analysis graph of the 2018-2019 financial year. The trends for the stock price of
Sainsbury’s plc started at the price of £225.30 at the beginning of the financial year and has kept
rising till the 1st of May 2018 where it reached a peak of £314.50. This increase was due to the
merger of J Sainsbury plc and Walmart plc’s Asda Group Ltd, which allowed it to become one of the
UK’s leading grocery stores since it includes the merger of the many subsidiary companies of both
supermarket giants which have several stores across the UK.

As seen in the below trend analysis, the stock price of Sainsbury’s plc has continued to increase till it
reached a price of £341.50 on the 22nd of August 2018. This growth was mainly caused by online
grocery shopping, which received a 7% sales growth since the beginning of the year. Sainsbury’s
trends fluctuate over the beginning of their 3rd quarter which starts on the 22nd of September 2018.
Their stock price reached a low of £299.90 on the 17th of October 2018 due to increasing competition
in the market, mainly from their leading competitor Tesco, along with newly-emerging competition
from Lidl and Aldi. This led to a 0.5% decrease in Sainsbury’s market share.

Over the Christmas 2018 period till the end of their third quarter, Sainsbury’s stock prices have fallen
to £260.00. The chief executive of Sainsbury’s stated that this was caused due to the cautious

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spending of consumers and the lack of promotional efforts for Black Friday. He also stated that
although clothing sales performed well, like-for-like sales fell by 1.1% due to high competition.

The stock market saw a drastic overnight decline in the price of Sainsbury’s stock. The price sat
comfortably at £287.90 on the 19th of February and fell to £234.50 the following day. This is because
the chief executive of Sainsbury’s, Mike Coupe, who was also the face of the merger between
Sainsbury’s and Asda sold the merger as an opportunity to boost competition with benefits for
customers and staff. However, the UK Competition and Markets Authority stated that this merger
would result in increased prices for groceries and fuel, along with less product range and lower
product quality for shoppers. This had led to the 15% decrease in Sainsbury’s share prices.
Furthermore, the share price continues to decrease till the end of the financial year, due to the
resignation of David Tyler, who served as a chairman for the company for the last nine years. The
stock price stands at £223.80 at the end of the financial year.

Source: SAINSBURY (J) PLC SBRY Stock | London Stock Exchange

Trend Analysis 2019-2020

The stock prices of Sainsbury’s plc have remained constant throughout the beginning of the 2019-
2020 financial year, the price reaching a peak of £240.60 on the 3rd of April 2019. From this point till
the 15th of August 2019, the company sees a constant decline in the price of its shares. Reasons for
this are that Mike Coupe, the chief executive of the company, states that he had the full support of the
board to keep to his position despite the failure that was the merger of Sainsbury’s and Asda. Profits
before tax decreased by 41.6%, being that costs included those that were required to merge the
companies. This has caused investors to lose trust in the company’s performance and has led to a
decrease in price throughout this period, reaching the lowest price point for the financial year at
£177.10 on the 15th of August 2019.

The beginning of the third quarter saw a steady increase in the stock market due to the environmental
actions Sainsbury’s had adopted to halve the amount of plastic bags by 2025. They claimed that due
to the efforts they made, they have reduced plastic consumption by 1% (1200 tonnes from 120,000
tonnes each year) since September 2018. Seeing this opportunity of trust, investors have invested
more money that has led to a peak of £222.50. The growth of the company has increased over the
Christmas period, mainly due to heavy investments and promotional efforts on online channels to
provide more convenience for customers to shop, along with a 3-day delivery period. On the 23rd of
January 2020, the first Covid-19 case was found in the UK, which has caused the stock price to fall to

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£194.05 due to fears of the new virus. However, the end of the financial year saw a slight increase in
the share price due to the same fears that instigated the previous decline. People were becoming
more dependent on supermarkets to stock up on food and other necessities which gave Sainsbury’s a
temporary success.

Source: SAINSBURY (J) PLC SBRY Stock | London Stock Exchange

Trend Analysis 2020-2021

The beginning of the financial year saw the beginning of the Covid-19 pandemic along with the panic-
purchasing of customers across all UK supermarkets. Between the many restrictions implemented by
supermarkets and the panic-purchasing that drove sales up, the stock market saw many peaks and
troughs throughout the early stages of the pandemic. Mike Coupe, Sainsbury’s chief executive, said
that although they had enough supply coming in at the time, they still wanted to slow down sales to
ensure that everyone purchases what they want. Furthermore, they have invested thoroughly in
strengthening their online shopping platforms to ensure the safety of the elderly and the disabled. In
their third quarter, they outperformed their expectations for the Christmas period since many
customers had to spend Christmas at home with their families. Sales rose by 8.6% over the period till
2nd January 2021 regardless of the UK’s 2nd lockdown in November 2020. This caused the stock
market to increase its share prices by 3.7% till they reached a peak at £252.50 on the 27th January
2021. The stock market starts to decline till the year-end with a share price of £226.20.

Source: SAINSBURY (J) PLC SBRY Stock | London Stock Exchange

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Other Results
A company such as Sainsbury’s
could obtain results in other forms,
which are not necessarily presented
in numerical form. These talk about
four different perspectives of a
company in which the company
targets to improve. The grid to the
right indicates the objectives that a
company wishes to target in each
perspective, and is known as the
Balanced Scorecard Approach.

The areas Sainsbury’s wishes to target in the future regarding the financial perspective is to maintain
probability, reduce operating costs, minimize debt and make use of efficient billings. How they will try

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to maintain probability is to challenge the assumptions about the probability of default and the loss
given default with reference made to the industry and peer benchmarks. The firm will attempt to
reduce operating costs through the company’s values, which are ‘Living healthier lives, sourcing with
integrity, respect for our environment, making a positive difference to our community and a great
place to work1.’

From the customer perspective, the key objectives seen by the company are retaining loyal
customers, fulfilling customer needs, and maintaining a loyalty program. Sainsbury’s plc will attempt to
retain customers by fulfilling their needs. Recently, Sainsbury's plc established ‘Lettuce Know’, a
service available both online and in-store where customers can fill out a short survey to tell the
supermarket how satisfied they were with their purchase, or if they have any dissatisfactions that they
could express through the survey. This shows how Sainsbury’s plc always wants to satisfy their
clients and maintain their custom.

The internal perspective relates to issues within the operations of a business that the management
wishes to improve in the future. These include paperless initiatives, centralization of IT, filling empty
FTEs, and employee retention. The paperless initiatives Sainsbury’s wishes to pursue are providing
more recycling facilities to customers to sort waste appropriately. Ways in which the supermarket
wishes to improve employee retention are investing in great training for employees, attracting skilled
workers, keeping good relations, and rewarding employees fairly and adequately.

The final perspective is learning, where the company wishes to learn more about the markets it is
operating in. The key factors of this perspective are opening new regions, reducing operating costs,
recruiting new partners, and creating innovative new products. Sainsbury’s plc wishes to open many
new stores across the UK which are targeted to specific consumer lifestyles and trends, such as a
vegetarian market, beauty-oriented customers, or those who want more quick and convenient ways of
shopping such as the ‘Smart-shop self-scan. The supermarket giant also wishes to engage with new
partners to deliver more innovative products and attractive deals for customers. Its current partners
are Esso, EE Broadband, eBay, and Brakes.

Key Performance Indicators

A Key Performance Indicator is a quantifiable measure used to evaluate the success of an

organization, employee, etc. in meeting objectives for performance (Oxford Dictionary). KPIs are used
by organizations at different levels to evaluate success when reaching their targets. There are two
main levels of KPIs; which are high-level and low-level. High-level KPIs focus on the overall
performance of the business, while low-level KPIs focus on processes in departments such as sales,
marketing, HR and others. KPIs are a form of communication and like other forms of communication,
they provide relevant information to various users. Good plans use 5-7 KPIs to manage and track the
progress of their plan. The examination of a structured KPI includes:

1 Taken from Our business strategy – Sainsbury's (sainsburys.co.uk)

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The most important KPIs are the accounting ratios. According to Kennedy and Macmillan, the
relationship of one item to another expressed in simple mathematical form is known as a ratio. The
accounting ratios discussed below are: the operating margin, the pre-tax profit per share, the return
on capital employed, the dividend per share growth, the dividend cover and gearing.

These ratios are taken from:

https://www.londonstockexchange.com/stock/SBRY/sainsbury-j-plc/fundamentals

Operating Margin is the profit percentage on sales after allowing for variable costs of production. This
ratio is an indicator of how the company is being managed and its efficiency at generating profit from
sales. This ratio declined from 2018 to 2019 and then increased in 2020 to 2.24%. The increase in
2020 shows that the company improved its management and is working more efficiently from the year
before. In the pre-tax profit per share, one can see a huge decrease from 2018 to 2019 of nearly 8p.
Although it increased slightly in 2020, Sainsbury needs to be careful because its shareholders might
not be happy seeing this decrease and can go to their competitors with a better pre-tax profit per
share ratio. There was a decrease from 2018 to 2019 in the Return on Capital Employed. This
decrease does not send a good message to the shareholders as it shows that a lower percentage of
the company's value can ultimately be returned as profit to shareholders. The significant increase in
2020 helps to reinforce this ratio.

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The dividend per share growth increased significantly from 2018 to 2019 by 14.74% and increased
again in 2020 meaning that Sainsbury increased the dividends paid to shareholders which would
result in greater trust in the company. The dividend cover decreased from 2018 to 2019 and increased
in 2020. This ratio helps investors to know the level of risk associated with the receipt of dividends on
their investment. The increase in 2020 will continue to build trust in the shareholders. The gearing
ratio increased by almost 1% from 2018 to 2019 but then it decreased by half in 2020. The gearing
ratio is a measure of financial leverage that shows the degree to which a firm's operations are funded
by equity capital versus debt financing. Sainsbury has low gearing which means that it has more
equity share capital than debt.

Sainsbury uses ratios and other KPIs (such as those seen below) as indicators that are critical in
understanding and measuring financial health.

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13
Key Events and Achievements

The Covid-19 pandemic was one of the main events that affected Sainsbury’s operations in 2020 as it
affected everyone around the world. For Sainsbury, their colleagues are the key to supporting the
community especially during 2020. “Through our fundraising and volunteering programmes, our
colleagues have the opportunity to fundraise and volunteer their time to local good causes”. Over the
last year, Sainsbury’s key priority was to support the communities and the most vulnerable in society
during the pandemic. To ease the pressure off food banks, charities and community groups at the
start of the pandemic, Sainsbury made a £3 million commitment to FareShare. During this time,
Sainsbury funded and supported the distribution of over 24 million meals, via 3,945 unique charities.
Sainsbury also supported Comic Relief and Children in Need, with a total donation exceeding £4
million, split between the two charities, to support those severely affected by the pandemic. “We also
donated over 2,000 laptops for kids as part of the Computers for Kids initiative and donated 470,000
items of clothing with a retail value of around £5.2 million across a number of charities including
Comic Relief and Newlife”.

When it comes to sustainability, Sainsbury has always had a strong sense of social, environmental
and economic responsibility and an understanding that their success depends on society’s success.
“We want to help everyone eat better and through our sustainability agenda, we are helping to drive
lasting, positive change in the UK and internationally. We are proud to be the Principal Supermarket
Partner of COP26, the United Nations Climate Change Conference”

Sainsbury’s current financial position and position in the market

Competition in the UK is very high in the Supermarket industry. Sainsbury’s is the second-largest
supermarket chain in the UK, only behind Tesco. With over 600 supermarkets and 800 convenience
stores, Sainsbury’s is helped by its subsidiaries: Argos, Nectar, Habitat, Tu and Sainsbury’s Bank.

Figure 1

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Figure 1 shows the Consolidated Statement of Profit & Loss for the year ending 6 th March 2021. As
quite clearly evident, the revenue is very high at around £29 billion but the company also has a very
high Cost of Sales (£26.871bn), and very high administrative expenses (£1.4bn). It is also worth
noting that the Company follows a system of Non-Underlying Items, where items are deemed as
‘dubious to judgement’. The Statement of Profit & Loss is showing a profit of £251 million without
taking into consideration the non-underlying items. Therefore, it can quickly change from a profit of
£251m to a loss of £280m when taking everything into consideration. When compared to its previous
year, the firm has managed to make more revenue and the tax expense has decreased by a large
margin, but the Cost of Sales and Administrative Expenses increased significantly leading to a net
loss of £280m and when taking into consideration the comprehensive income/loss, the loss amounts
to £695m.

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 Figure 2

Figure 2 shows the balance sheet of Sainsbury’s for the years ending 7 th March 2020 and 6th March
2021. As seen evidently on the Balance Sheet, the total assets have decreased from last year. Simon
Roberts, Sainsbury’s Chief Executive Officer had stated that Covid-19 had left a big impact on
business as they know it and the shift to digital shopping was required, leaving the firm to close and
sell some of its outlets, a trend that is lasted to continue in the coming years as an increase in the
interest of digital shopping is noted. Argos, one of Sainsbury’s branches, recorded an increase of 78%
in those sales which were made online. However, it is worth noting that the biggest reason for a
decrease in assets is the huge decrease in amounts due from Financial Services customers.
Liabilities have remained constant and likewise, the biggest decrease from 2020 is noted in the
amount due to Financial Service Customers. The firm also had an increase of £3m in shares and a
large decrease in retained earnings.

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Figure 3

Figure 3 shows the statement of cash flows, continuance figures from the Statement of Profit & Loss
and the Statement of Financial Position which shows where the majority of cash is generated or
spent. As seen quite clearly in Figure 3, cash is mostly generated from operations and is mostly used
in financing activities. Once again it is important to notice the difference between 2020 and 2021 in
amounts due to/from Financial Service Customers. This could reflect on the high usage of Sainsbury’s
Bank on savings accounts due to coronavirus uncertainties.

Figure 4

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Figure 4 shows the Statement of Changes in Equity for the financial years ending 2020 and 2021. The
decrease in profits from 2020 to 2021, is heavily noted again, as it is listed as a loss, with high
reasons being the sudden impact of CoVid-19 on businesses. Comprehensive Income also turned
into Comprehensive Loss with a distance of around £500m between the two years. The company also
issued fewer dividends than it did in the year before and also had fewer shares purchased.

Numbers without context are irrelevant, this is why it is best to analyse ratios in accordance with the
firm’s competitors’ performance. In this case, we gathered some of the relevant ratios from the
London Stock Exchange in order to compare the financial year of Sainsbury’s, with that of the biggest
firm in the industry, and also its main rival, Tesco. It is also worth noting financial years ending 2021
are the first years to have a whole year of coronavirus implications on business, therefore a drop in
performance is expected from previous years.

Operating Margin is defined as profit percentage on sales after allowing for variable costs of
production, and here it is clearly shown that Sainsbury’s have a higher percentage of Operating
Margin than Tesco, this doesn’t disclose the fact that Sainsbury’s is more profitable, as interest and
tax are not included in this ratio but it shows how much a firm is able to generate profit through its
core operations. The Return on Capital Employed shows the profit return on capital and here we can
see how the capital of Tesco’s generates more profit than Sainsbury’s. Sainsbury’s is not in a current
good position as compared to Tesco due to a difference of 8%. If we were to analyse the Pre-Tax
Profit Per Share, however, Tesco is way in front of Sainsbury’s and shareholders enjoy around a 19p
difference in profits per share owned, showcasing that it is more ideal for shareholders to invest in
Tesco than Sainsbury’s.

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Dividend Per Share growth is a yearly comparison of how much the firm pays dividends to its
shareholders. As shown in the table above, Tesco increased the dividends paid to shareholders
significantly while Sainsbury’s decreased their payments by a slight amount, highlighting the fact that
Sainsbury’s is not able to generate more dividends to its shareholders. This is once again shown in
the Dividend Cover, the profit over the dividends paid, showing that Tesco has been able to pay
dividends from profit, while Sainsbury’s hasn’t been able to.

The Gearing Ratio of Sainsbury’s is negative, this means that it is embedded with debt as it has net
cash that exceeds debt. Tesco on the other hand enjoys a gearing ratio of 38.55%, meaning that it is
relatively close to neutral gearing but it still has an element of low debt compared to equity.

Sainsbury’s Share Price History and Analysis

Sainsbury's was founded in 1869 by John James and Mary Ann Sainsbury. They opened their first
small dairy shop at 173 Drury Lane in what was then one of the poorest parts of London, however first
went public in 1973, and it was the biggest flotation the stock market had seen till then. For decades,
Sainsbury's was Britain's largest and most profitable supermarket group. However, its management
seemed to become complacent and, in 1995, it was overtaken by Tesco.

A share price is the price of a single share of several saleable equity shares of a company. In
layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the
lowest amount that it can be bought for. A share is one of the equal parts into which a company's
capital is divided, entitling the holder to a proportion of the profits. The only businesses that can sell
shares are companies, however, only public limited companies can list their shares on the stock
exchange and sell shares to the public, whereas private limited companies can only sell their shares
to friends and family of the owners and not to the general public.

There are several suffer cause changes in the price of shares of companies. These include the
performance of the company, the performance of the industry, news releases on earnings and profits,
and future estimated earnings, the announcement of dividends, the introduction of a new product or a
product recall, securing a new large contract, employee layoffs, anticipated takeover or merger, a
change of management and accounting errors or scandals.

Over the last few years, the share price of Sainsbury’s has plummeted, however, this has recovered
over the last 7 months, reaching a high of £340p on the 23 rd of August 2021, reaching levels not seen
since February 2014, and currently comes in at £276.20p at the time of writing, still a heavy increase
from the £229.7p share price at the end of their 2020/2021 financial year. This was on the back of
expectations that private equity could bid for the company – likely at a premium to its current share
price.

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 A trend begins to appear when comparing the business’ annual performance, to the share price of
Sainsbury’s. From the available annual reports on Sainsbury’s website, which start from the financial
year ending 2010, we can see the profits decrease significantly over the last 12 financial years. The
same can be said for the share price which was also significantly lower at the end of the last financial
year (6th March 2021). In 2015 the company faced its first loss in a decade, of £166 million after-tax.
This was one major factor in the fall of the share price of Sainsbury’s. The share price at the end of
the financial year ending 15th March 2014 was £313.6p and the share price a year later after the loss
was recorded came in at £259.1p a significant decrease of 17.38%.

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An obvious major factor in not just the share price of Sainsbury’s but the stock exchange, in general,
is the covid-19 pandemic, and just like most others businesses, Sainsbury’s did severalsuffer,
recording a loss of £261 million before tax at the end of the last financial year. On 1st September 2020,
they had a 52-week low share price of £172.32p, down 18.37% from the share price at the end of the
2019/2020 financial year of £211.1p. However, it then recovered and increased by 24.71% to £229.7p
to end the financial year.

Dividend payments are the primary method by companies to share their profits with stockholders.
Numerous investors rely on dividends for their living expenses and construct a stock portfolio primarily
to maximize their dividend income. Dividend payments increase demand for a stock and consequently
result in a higher stock price. This could also be another factor that has led to the general decline in
the share price of Sainsbury’s in recent years as the dividend offered per share has decreased
significantly over the last 7 years. The dividends paid at the end of the 2020/2021 financial year was
at £10.6p per share, 38.73% lower than those paid at the end of the 2013/2014 financial year which
paid at £17.3p per share. By comparison, over the same period, the share price of the company
plummeted from £313.6p to £229.7p, a decrease of 26.75%.

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The same effect can be seen in the other direction from 2010 to 2013 when dividends increased from
14.2p per share to 16.7p per share, an increase of 17.6%, whereas the share price increased from
333.1p to 362.8p, an increase of 8.9%.

When comparing Sainsbury’s to its main competition in the supermarket industry in the UK i.e. Tesco,
the share price tends to be rather similar and as at the time of writing are very close to each other.
Sainsbury’s share price comes in at £276.2 and Tesco’s comes in at £287.9. However, as of 5 th June
2021, Tesco shares were trading at a price-to-earnings ratio (P/E) of 30.72 compared to the five-year
average of 50.35. Sainsbury was trading at a P/E ratio of 36.02 when compared to the historical
average of 30.69. Tesco was trading at a price-sales (P/S) ratio of 0.39 when compared to the five-
year average of 0.32. In comparison, Sainsbury was trading at a P/S ratio of 0.20 when compared to
its historical average of 0.21. From these statistics, it seems Tesco has a slight advantage and may
be worth investing in more than Sainsbury’s.

Conclusion
The supermarket industry is a highly competitive market thus making it extremely important for
Sainsbury Plc to stay competitive and relevant. They are doing this by seeing what their clientele’s
expectations and needs are. Because of Lidl and Aldi, Sainsbury Plc has an even larger competition
thus it is crucial for this company to stay relevant, if not it will be kicked out of the market. For
example, as stated before Sainsbury held a small survey for its customers to fill out to see what they
are satisfied with and what needs improvement. As a customer this shows them that Sainsbury pays
attention to their customers. Furthermore, making sure their products and service are one of quality is
pressing for customers to stay loyal to Sainsbury. Another way to stay competitive is to have a variety
of different products for different people such as vegan products, gluten free, lactose free products

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etc. In addition Sainsbury showed that it doesn’t only care about making profits but also showed
interest in making sure it decreased its plastic usage. In fact they decreased it by 1% since
September 2018 which helped peal the business’s share price.

Executive summary
Sainsbury Plc is a United Kingdom-based retailer company, it is the second largest supermarket. In
this essay one will be able to understand how this company operates due to the analysis of the
financial statements, statement of profit or loss, statement of financial position and statement of
changes in equity. In addition, it features the background of this company, share price history and its
achievements. Furthermore, discussed in the essay is what the company could have done to
generate more profits through the exploration of ratios and what was done to adapt to the pandemic.

23
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