chapter 4 profiles of indian and global...
TRANSCRIPT
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Use of Management Accounting Tools
for the Measurement and Comparison of Performance of
Organized Retailing Systems in India and at the Global Level
CHAPTER 4
PROFILES OF
INDIAN AND GLOBAL RETAILERS
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4.1 Introduction
The focus of this study is on the contemporary Performance Measurement
practices of Indian Retailers. It also aims at comparing these practices
with globally operational retailers. Before presenting the analysis of data
and survey results, it would be appropriate to look at the various leading
retailers in India and abroad. The companies were selected from two
groups, namely, the Indian retailers and the global retailers.
Recalling from section 3.2.2, the Indian retail companies that fulfilled the
following criteria as on 31st March 2002 were selected for research.
a) A company should follow the store based format of retailing
b) A company should run a chain of stores i.e. multiple stores
c) It should offer a fairly wide range of merchandise
d) It should be listed on the Stock Exchange
The retailers that fulfilled these criteria were
1. Pantaloon Retail India Limited
2. Shoppers Stop Limited
3. TRENT Limited
The first part of this chapter looks at these three Indian retailers.
The second section of the chapter covers the second group, i.e. Global
retailers. It would include the profiles of three global retailers that were
selected for the purpose of study. They are
1. Wal-Mart
2. Tesco PLC
3. Marks and Spencer
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The third section of this chapter presents a comparative analysis across all
companies on the basis of the available data. The information used in this
chapter has been entirely derived from published documents and
company websites. The source has been mentioned wherever the
information has been taken from sources other than the company itself. In
all other cases, where source has not been mentioned, the source is the
company website or annual report.
4.2 Profiles of Indian Retail companies
4.2.1 Shoppers Stop
History
Shoppers Stop Ltd (SSL) is a part of the K Raheja Group of companies. It
was founded on October 27, 1991. Shopper's Stop has progressed from
being a single brand shop to becoming a Fashion & Lifestyle store for the
family. It is India‟s leading large format department store company. It has
entered various retailing formats, such as Home, Food & Grocery. It was
the first one to set up a nation-wide chain of large format department
stores in India with a professional management. Shoppers Stop services
(India) Ltd., Crossword book stores, Spans Trading Ltd., and Shoppers
Stop.com (India) ltd. are its subsidiaries.
The timeline of major events for Shoppers Stop is as follows:
1991: Opening of the first store at Andheri, a suburb in Mumbai selling
only Menswear
1992 Ladies wear was introduced
1993 Added Children & non apparels
1994 Loyalty Program titled First Citizen was launched.
1995 Opened the second store in Bangalore
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1997 Launched a co-branded credit card for the loyalty members in
association with HSBC.
1999 Implemented JDA Retail ERP (a global leader in retail ERP
packages).
2000 Acquired Crossword – India‟s leading retail book chain
2002 Opened the tenth store in Kandivli, Mumbai
2005 Opened the twentieth store. Launched M.A.C & Homestop.
2006 Launched Mothercare in India, the F & B outlets Brio & Desi Café.
Bought 45% of Timezone India .
2007 Signed a 50:50 Joint Venture with the Nuance Group for Airport
Retailing Signed an MOU with the Home Retail Group of UK to
enter into a franchise arrangement for the Argos formats of
catalogue & internet retailing.
Performance
As on December 2008, SSL has 10 formats and the respective number of
stores is as follows.
Table 7: Shoppers Stop- Number of Stores
Format Number of stores as on December 2008
SSL dept Stores 26
MAC & Clinique 7
Home Stop 4
Mother Care 21(12)
F&B Outlet 27(14)
Airport Retail 3
Crossword 31(9)
Arcelia 2
Hypercity 3
Estee Lauder 1
Total 125
Note: Figures in brackets represent shop in shop Source: Company Website
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As can be seen from the table, Shoppers Stop departmental store,
Crossword, F&B and Mother Care top the list with more than 20 stores
each. As of 2008, Shoppers stop operated 10 formats with four of them
having double digit stores.
The following tables present the performance of SSL over the last 6
years.
Table 8: Performance of SSL: 2002-05
Particulars 2002-03 2003-04 2004-05
Sales (in mn) 2,949 3,953 5,001
Net Margin on Sales 846 1,142 1,465
Margin % 28.7% 28.9% 29.3%
NP/Sales 3.5% 3.0% 3.8%
GMROI 2.41 2.41 2.23
GMROF 1910 2000 2330
GMROL Rs per employee (Rs) 676509 636690 899045
Footfalls (in million) 7.1 12.2 14.6
Avg. Ticket size (Rs) 1280 1258 1278
Conversion Ratio % 34 26 27
Source: Annual Reports, company website, company publications.
As can be seen from the table, SSL sales grew by almost 70% in the two
years from 2002-03 to 2004-05. For the same time period, their margin
grew by more than 70%. GMROF and GMROL improved substantially
and they added two new formats and four more department stores.
Footfalls doubled in these two years but the conversion ratio declined
from 34 to 27. The GMROI dropped slightly, a sign of increasing
investment with a long term perspective.
The following table presents the performance of SSL for the next three
years.
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Table 9: Performance of SSL: 2005-08
Particulars 2005-06 2006-07 2007-08
Sales (in Rupees million) 6,660 8,850 11,325
Net Margin on Sales 2,025 2,779 3,669
Margin % 30.4% 31.4% 32.0%
NP/Sales 4.1% 3.0% 0.6%
GMROI 2.35 2.75 2.82
GMROF 2353 2520 2632
GMROL Rs per employee 1046768 1032609 1031557
Footfalls (in million) 18.3 19.9 25.5
Avg. Ticket size (Rs) 1366 1562 1721
Conversion Ratio % 27 27 25
Source: Annual Reports, company website, company publications.
Compared to the earlier time period, Sales rose by more than 70 percent
in the two year period of 2005-06 to 2007-08. Margins grew by more than
80%. Footfalls kept increasing, though at a lower rate. Conversion rate
did not improve much, but average ticket size, which was stagnant during
the last period picked up. GMROI improved, GMROL was steady at a
higher rate and GMROF grew steadily. They added five more formats
and four more department stores.
As on December 2008, the company operated 18,21,743 square feet of
store space. Shoppers Stop (SS) department stores recorded sales growth
of 6% while combined growth of all formats was higher at 9% in Q3
FY08. The sales per square feet of retail space were Rs 2,262 for SS
while across all formats it was Rs 2,258. Customer footfalls decreased by
20% in this period.
Private Label mix increased to 19% of the store merchandise while sales
of this category grew by 3%. Apparels constitute 58% of the sales while
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Non Apparels consisting of Home, Leather, Watches, Jewellery,
Electronics and Personal accessories constitute 42% of sales.
Shoppers Stop reported 0.60% shrinkage of total gross retail which is
well below the industry average. First Citizen Membership base increased
to 11,81,000, an increase of 14% over last year and their contribution to
sales increased to a whopping 72%.
Achievements
Shopper's Stop is the only retailer from India to become a member of the
prestigious Intercontinental Group of Departmental Stores (IGDS). The
IGDS consists of 30 experienced retailers from all over the world, which
include established stores like Selfridges (England), Karstadt (Germany),
Shanghai No.1 (China) , Manor (Switzerland), to name a few.
Shopper‟s Stop has won many awards over the years. The latest awards
include:
Images Fashion Forum - Jan 2009.
"Most admired Fashion Retail Destination of the Year" - Shoppers
Stop
Asia Retail Congress - Feb 2009.
"Retailer of the Year - Fashion & Lifestyle" - Shoppers Stop
"Retailer of the Year - Leisure" - Crossword
Star Retailer Awards - Nov 2008.
"Department Store of the Year" - Shoppers Stop.
"Debutant Retailer of the Year" Gourmet CITY
"Most admired Fashion Retail Destination of the Year" at the Images
Fashion Forum in January 08
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World Retail Congress Awards - Apr 2008.
"Emerging Market Retailer of the Year 2008" - Shoppers Stop Ltd.
Mr. B. S. Nagesh has been inducted into the World Retail hall of fame
and is the first Indian to be bestowed with this honour.
CMAI Apex Awards - July 2008.
Brand of the Year - Ladies Ethnic Wear – STOP.
Special Award to Mr. Nagesh for being the First Indian Retailer to be
inducted into the World Retail Hall of Fame.
CIO Awards 2008.
IDG India CIO magazine has recognized Shoppers Stop and
HyperCITY as a recipient of 2008 CIO 100 Award.
- Shoppers Stop also won the Storage Award 2008
Images Retail Forum - September 2008.
"Most Admired Retailer - Customer Relations Management”-
Shoppers Stop.
Overall, Shoppers stop is growing steadily. The emphasis is on systematic
and steady growth. It is a system driven company with a lot of emphasis
on processes. Performance is monitored systematically and reported
regularly.
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4.2.2 Pantaloon Retail (India) Limited
History
Future Group, led by its founder and Group CEO, Mr. Kishore Biyani, is
one of India‟s leading business houses with multiple businesses spanning
across the consumption space. Pantaloon Retail is the flagship company
of the group. While retail forms the core business activity of Future
Group, group subsidiaries are also present in consumer finance, capital,
insurance, leisure and entertainment, brand development, retail real
estate development, retail media and logistics.
Pantaloon Retail (India) Limited, is India‟s leading retailer that operates
multiple retail formats in both the value and lifestyle segment of the
Indian consumer market. Headquartered in Mumbai, the company
operates over 12 million square feet of retail space, has over 1000 stores
across 71 cities and towns and 65 rural locations across India and
employs over 30,000 people.1
The company‟s leading formats include Pantaloons, a chain of fashion
outlets, Big Bazaar, a hypermarket chain, Food Bazaar, a supermarket
chain, and Central, a chain of seamless destination malls. Some of its
other formats include, Depot, Shoe Factory, Brand Factory, Blue Sky,
Fashion Station, aLL, Top 10, mBazaar and Star and Sitara. The
company also operates an online portal, futurebazaar.com.
The first set of Big Bazaar stores opened in 2001 in Kolkata, Hyderabad
and Bangalore. In 2008, Big Bazaar opened its 100th store, marking the
fastest ever organic expansion of a hypermarket.
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Future Capital Holdings, the group‟s financial arm provides investment
advisory to assets worth over $1 billion that are being invested in
consumer brands and companies, real estate, hotels and logistics. It also
operates a consumer finance arm with branches in 150 locations.
Other group companies include, Future Generali, the group‟s insurance
venture in partnership with Italy‟s Generali Group, Future Brands, a
brand development and IPR company, Future Logistics, providing
logistics and distribution solutions to group companies and business
partners and Future Media, a retail media initiative.
Future Group‟s joint venture partners include, US-based stationery
products retailers, Staples, French women‟s wear retailer, Etam, Middle
East-based Axiom Communications and India-based Blue Foods, Liberty
Shoes, Talwalkars‟ and Asian Electronics.
Future Group believes in developing strong insights on Indian consumers
and building businesses based on Indian ideas, as espoused in the group‟s
core value of „Indianness.‟ The group‟s corporate credo is, „Rewrite rules,
Retain values.‟
Major Milestones in the journey of the company are as follows:
1987: Company incorporated as Manz Wear Private Limited.
Launch of Pantaloons trouser, India‟s first formal trouser brand.
1991: Launch of BARE, the Indian jeans brand.
1992: Initial public offer (IPO) was made in the month of May.
1994: The Pantaloon Shoppe – exclusive menswear store in franchisee
format launched across the nation. The company starts the
distribution of branded garments through multi-brand retail outlets
across the nation.
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1995: John Miller – Formal shirt brand launched.
1997: Company enters modern retail with the launch of the first 8000
square feet store, Pantaloons in Kolkata.
2001: Three Big Bazaar stores launched within a span of 22 days
in Kolkata, Bangalore and Hyderabad.
2002: Food Bazaar, the supermarket chain is launched.
2004: Central - India‟s first seamless mall is launched in
Bangalore.
2005: Group moves beyond retail, acquires stakes in Galaxy
Entertainment, Indus League Clothing and Planet Retail.
Sets up India‟s first real estate investment fund „Kshitij‟, to build a
chain of shopping malls.
2006: Future Capital Holdings starts operations; new formats like Home
Town, Ezone and Furniture Bazaar are launched. Launch of
Generali, joint ventures with ETAM Group and Staples.
2007: Future Group crosses $1 billion turnover mark.
Specialised companies in Retail Media, Logistics, IPR and Brand
Development and Retail-led Technology services become
operational.
2008: Future Capital Holdings becomes the second group company to
make a successful Initial Public Offering in the Indian capital
markets.
Big Bazaar crosses the 100-store mark.
Total operational retail space crosses 10 million square feet
mark.
Future Group acquires rural retail chain, Aadhar present in 65 rural
locations.
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Performance
Pantaloon Retail (India) Limited is the fastest expanding retailer in India.
The focus clearly is on growth and expansion. The trends can be clearly
seen from the following table.
Table 10 presents the performance of the company- top line as well as
bottom line- for the period of financial year 2003-04 to 2007-08.
Table 10: Performance of Pantaloon Retail (India) Limited
(2003-2008)
Particulars Jun 2008 Jun 2007 Jun 2006 Jun 2005 Jun 2004
Rs. in Millions
No of Months 12 12 12 12 12
Net Sales 52958.80 33927.90 19607.61 10837.33 6549.56
Other Income 309.30 965.30 72.65 86.08 17.74
Total Income 53268.10 34893.20 19680.26 10923.41 6596.30
Total Expenditure 48257.20 31632.20 18123.28 9935.30 5974.66
Operating Profit 5010.90 3261.00 1556.98 988.11 592.64
Profit Before Tax 1956.20 1810.10 918.97 531.21 244.12
Profits After Tax 1259.70 1199.90 641.58 385.51 197.79
Earnings Per Share 7.91 8.18 23.86 17.53 10.34
Book Value 111.95 74.42 195.99 99.21 49.37
Source: Indiainfoline.com, company website
As is evident from Table 10, the company has shown steady growth over
the last five years. Sales have gone up from Rs. 6583.1 million in 2003 to
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Rs 52958.80 million in 2008. The 2008 sales are thus eight times the
2004 sales. The operating income has gone up from 570.6 to 5010.9; 8.78
times the 2004 figure. And the Net Profit after tax has gone up from
197.7 to 1259.7; 6.37 times that of 2004. On the whole, it is an
impressive performance.
Table 11 looks at the various ratios for PRIL for the same time period.
Table 11: Performance Ratios PRIL (2003-2008)
Particulars Jun 2008 Jun 2007 Jun 2006 Jun 2005 Jun 2004
EBITDA Margin (%) 9.46 9.61 7.94 9.12 9.00
EBIT Margin (%) 7.89 8.53 6.88 7.89 7.67
Pre Tax Margin (%) 3.69 5.34 4.69 4.90 3.71
PAT Margin (%) 2.38 3.54 3.27 3.56 3.00
ROA (%) 3.12 5.02 5.69 7.59 5.98
ROE (%) 7.06 10.99 12.18 17.66 20.93
ROCE (%) 10.34 12.09 11.95 16.84 15.25
Asset Turnover(x) 0.61 0.52 0.42 0.39 0.50
Sales/Fixed Asset(x) 4.96 5.99 6.35 4.97 3.10
Inventory Days 79.80 74.93 72.87 72.99 75.40
Payable days 20.41 20.51 22.19 19.42 13.23
Net Sales Growth (%) 56.09 73.03 80.93 65.47 48.37
EBITDA Growth (%) 53.66 109.44 57.57 66.73 48.44
EBIT Growth (%) 44.41 114.44 57.80 69.36 52.75
PAT Growth (%) 4.98 87.02 66.42 94.91 73.39
Debt/Equity(x) 1.23 1.19 1.14 1.31 2.50
Current Ratio(x) 4.24 5.09 3.84 3.19 3.46
Quick Ratio(x) 1.93 2.52 1.64 1.02 1.10
Interest Cover(x) 1.88 2.67 3.14 2.64 1.94
Source: Indiainfoline.com, company website
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PIL has shown a strong appetite for growth, all growth ratios show a
strong positive trend, except for the year 07-08. The top line performance
in the said year was not affected so much, but the bottom line
performance has slowed down substantially. This could be the impact of
the recessionary conditions in the economy. This can be further
understood by looking at the quarterly results presented in the table
below.
Table 12: Performance of PRIL- Quarterly
(Un-audited data, amounts in Rs. Millions)
Source: Indiainfoline.com, Company Website
Table 12 shows trends in the performance of PIL in seven quarters ending
December 2008. Though the industry was affected by recessionary
trends, PIL has maintained steady growth in Revenue and profit. The Net
profit did come down in some quarters but the company bounced back
immediately. The fact that thy have reported profit throughout is an
indication of their strong presence in the Indian market.
Particulars Sep 09 Jun 09 Mar 09 Dec 08 Sep 08 Jun 08 Mar 08
Net Sales 17770.2 16627.2 16420.9 15256.8 15112.1 13813.8 13543.4
Other
Income
47.20 17.80 16.00 15.20 11.60 0.60 16.50
Total
Income
17817.4 16645.0 16436.9 15272.0 15123.7 13814.4 13559.9
Total
Expenditure
15869.0 14794.8 14690.8 13683.7 13563.3 12402.3 12402.0
Operating
Profit
1948.40 1850.20 1746.10 1588.30 1560.40 1412.10 1157.90
PBDT 1079.90 940.70 898.80 846.70 876.60 757.50 729.20
PBT 647.10 552.50 530.20 522.10 557.50 503.60 506.00
PAT 438.20 364.90 343.70 335.40 361.80 325.30 321.00
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The reasons for good performance even during the recession can be
traced to a number of reasons
1. Vision: the Leadership acted fast and took preventive steps. They
revisited and revised their growth plans and focused their attention
towards Cost effectiveness of overall operations.
2. Performance Measurement: The sustained good performance also
implies that they have performance checks and controls in place. In
other words, PIL has a good Management Control System in place.
3. Value Retail: Pantaloon retail runs many value retail stores and it is
a natural tendency of consumers to shift from lifestyle retail to
value retail during recession. The value retail thus performed well.
Achievements
Pantaloon Retail India Limited has won a number of awards and
recognition over the years. Their latest awards include:
Indian Retail Forum Awards 2008
Most Admired Retail Company of the year - Future Group
Retail Face of the Year - Kishore Biyani
Best Retailer of The Year (Hypermarket) - Big Bazaar
The INDIASTAR Award 2008
Food Bazaar: Best Packaging Innovation
(for its private label brand Fresh And Pure Chakki Atta)
Retail Asia Pacific 500 Top Awards 2008
Gold Winner -Top Retailer 2008 Asia Pacific
Coca-Cola Golden Spoon Awards 2008
Most Admired Food & Grocery Retail Visionary of the Year: Kishore
Biyani
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Most Admired Food & Grocery Retailer of the Year – Supermarkets:
Food Bazaar
Most Admired Food & Grocery Retailer of the Year - Hypermarkets:
Big Bazaar
Most Admired Retailer of the Year - Dynamic Growth in Network
Expansion across Food, Beverages & Grocery: Future Group
Most Admired Food & Grocery Retailer of the Year - Consumer's
Choice: Big Bazaar
The Reid & Taylor Awards For Retail Excellence 2008
Retail Leadership Award: Kishore Biyani
Retail Best Employer of the Year: Future Group
Retailer of the Year: Home Products and Office Improvements:
HomeTown
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4.2.3 Trent Limited
History
Established in 1998 as part of the Tata Group, Trent Ltd. is a retail
operations company that owns and manages a number of retail chains in
India. Established in 1998, Trent runs lifestyle chain Westside, one of
India‟s largest and fastest growing chains of lifestyle retail stores, Star
Bazaar, a hypermarket chain, Landmark, a books and music chain, and
Fashion Yatra, a complete family fashion store.
Areas of business
Westside: In1998, The Tatas acquired Littlewoods – a London
based retail chain. This acquisition was followed by the
establishment of Trent Ltd. Littlewoods was subsequently renamed
Westside. Westside offers clothes, footwear and accessories for
men, women and children, along with furnishings, artifacts and a
range of home accessories. The company has already established
39 Westside departmental stores (measuring 15,000 - 30,000
square feet each) in 20 Indian cities.
Star Bazaar: Trent ventured into the hypermarket business in 2004
with Star Bazaar, providing an ample assortment of products made
available at the lowest prices, aptly exemplifying its „Chota
Budget, Lambi Shopping‟ motto. The first store opened in
Ahmedabad in 2004. At present Star Bazaar has 4 stores in 3 cities
located in Ahmedabad, Mumbai and Bangalore. This store offers
customers a wide range of products that include staple foods,
beverages, health and beauty products, vegetables, fruits, dairy
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products, consumer electronics, household items and fashionable
in-house garments for men, women and children.
The stores stock goods according to regional customer
preferences, as customers in different regions favour different
essentials. For instance, in Gujarat, people tend to stock up on their
pulses whereas in northern India, basmati rice is a big item.
Landmark: Trent recently acquired a 76% stake in Landmark, one
of the largest books & music retail chains in the country. Landmark
began operations in 1987 with its first store in Chennai with a floor
space of 5500 sq. ft. At present, Landmark has 10 stores, varying in
size from 12,000 sq. ft. to 45,000 sq. ft. Landmark offers a range of
over 100,000 titles in books and music, and also stocks movies,
toys, gift items and stationery.
Fashion Yatra: The stores bring quality fashion at low prices to
value conscious customers in towns across India. The first store
was launched in Kalyan, on the outskirts of Mumbai2, which will
mainly target low-to-mid income groups in the country. Though
the company has not said how many stores it would open in the
coming months, Fashion Yatra is expected to come up in Tier-II,
III and IV cities in the country.
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Performance
Trent Ltd has followed a policy of steady growth. They have not added
too many stores too fast. The following tables show how the company has
performed over the last five years. Table 13 looks at the financial
performance of the company from 1003 to 1008
Table 13: Performance of Trent Ltd: 2003-2008 (Rs. millions)
Particulars Mar 2008 Mar 2007 Mar 2006 Mar 2005 Mar 2004
No of Months 12 12 12 12 12
Net Sales 5141.59 4519.96 3464.41 2343.18 1544.12
Other Income 322.71 204.20 111.49 116.15 112.61
Total Income 5464.29 4724.15 3575.90 2459.33 1656.73
Total Expenditure 4959.62 4195.41 3116.03 2154.88 1404.27
Operating Profit 504.67 528.74 459.87 304.45 252.46
Profit Before Tax 373.24 409.88 350.42 245.60 211.78
Profits After Tax 328.64 324.09 243.78 190.59 171.99
Earnings Per Share 16.82 20.56 17.42 14.53 13.65
Book Value 310.16 244.47 186.41 165.21 156.69
Source: Indiainfoline.com, company website
All financial parameters have shown substantial improvement from the
year 2004 to 2006. Growth seems to have slowed down by 2007 and 2008
has seen a drop in Operating profit as well as profit before tax. The top
line performance has been affected to a lesser extent as compared to the
bottom line performance. From 2007 to 2998, the Net Sales have grown
at a lower rate and the Net Profit is almost the same as last year. The
company seems to be working on thinner margins than before. The
picture becomes clearer when we look at table 14, the margin ratios are
lower than before and so are the performance ratios. The positive aspect
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is that the company‟s financial Stability ratios like the Current Ratio,
Debt Equity Ratio and the Interest Cover are still quite strong.
Table 14: Performance Ratios - Trent Ltd: 2003-2008
Particulars Mar 2008 Mar 2007 Mar 2006 Mar 2005 Mar 2004
EBITDA Margin (%) 9.82 11.70 13.27 12.98 16.27
EBIT Margin (%) 8.09 9.95 10.96 11.05 14.30
Pre Tax Margin (%) 7.26 9.07 10.11 10.47 13.65
ROA (%) 5.82 8.17 8.82 8.97 16.59
ROE (%) 6.63 9.91 10.04 9.03 16.74
ROCE (%) 7.37 11.33 13.75 12.20 21.40
Asset Turnover(x) 1.10 0.88 0.80 0.91 0.67
Sales/Fixed Asset(x) 5.87 6.50 5.53 4.32 6.25
Inventory Days 53.65 50.83 47.93 47.94 56.40
Payable days 100.10 87.07 92.41 88.30 117.44
Net Sales Growth (%) 13.75 30.47 47.85 51.75 0
EBITDA Growth (%) -4.55 14.98 51.05 20.59 0
EBIT Growth (%) -7.45 18.37 46.65 16.76 0
PAT Growth (%) 1.40 32.94 27.91 10.81 0
Debt/Equity (%) 10.83 17.04 24.44 0.12 0.14
Current Ratio (x) 2.14 2.40 1.80 2.25 2.90
Quick Ratio (x) 1.37 1.40 1.12 1.46 2.15
Interest Cover(x) 9.70 11.31 12.90 19.29 22.01
Source: Indiainfoline.com, company website
The performance ratios namely, ROA, ROE and ROCE have remained
strong for Trent from 2003 to 2008, but they have dropped in 2008. The
growth ratios do not look very impressive. Most of the top line and
bottom line growth ratios have declined over the last two years.
The following table, which looks at the last five quarters, will show the
latest trend in performance.
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Table 15: Performance of Trent Ltd: Quarterly
(Un-audited data, amounts in Rs. Millions)
Particulars Sep 09 Jun 09 Mar 09 Dec 08 Sep 08 Jun 08 Mar 08
Net Sales 1479.77 1222.98 1208.90 1261.93 1334.92 1334.25 1288.98
Other Income 47.92 66.23 62.29 73.19 77.25 113.25 155.33
Total Income 1527.69 1289.21 1271.19 1335.12 1412.17 1447.50 1444.31
Total
Expenditure 1423.8 1184.63 1187.47 1223.18 1341.90 1325.21 1358.07
Operating
Profit 103.89 104.58 83.72 111.94 70.27 122.29 86.24
PBT 61.36 77.54 66.44 78.24 41.83 96.25 56.13
PAT 52.61 51.13 91.26 58.73 35.32 82.25 57.30
Net Profit 52.61 51.13 91.26 58.73 35.32 82.25 57.30
EPS 2.69 2.62 0.00 3.01 0 4.21 2.93
Source: Indiainfoline.com, company website
One can see the impact of recession and recovery clearly from the sales
of the last four quarters. The Sales declined post June 2008, reached the
lowest point in March 2009 and bounced back after that. For the quarter
ending September 2009, a remarkable recovery can be seen in most of the
parameters. Sales have gone up remarkably and the operating profit has
gone up quite well. It appears that the company has managed to bounce
back after recession.
Achievements
Westside has won a number of accolades – some of them are as follows
NDTV Profit Business Leadership Awards 2006 - Retail Category
Most Admired Large Format Retail Chain of the Year - Lycra
Images Fashion Awards 2005
IFA Visionary of the Year Award, 2002 – Mrs. Simone N. Tata
Balanced Scorecard Hall of Fame
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4.3 Global Retailers
4.3.1 Wal-Mart
History
The Wal-Mart story began in 1962, when Sam Walton opened the
company‟s first discount store in Rogers, Arkansas. By 1967, there
were 24 Wal-Mart stores in Arkansas with about $12.6 million in
sales. The first stores outside of Arkansas were opened in 1968, in
Sikeston, Montana, and Claremore, Oklahoma. The company was
officially incorporated as Wal-Mart Stores Inc. on October 31, 1969.
The 1970s marked the beginning of significant growth for the
company. The first year of that decade saw the opening of the first
Wal-Mart distribution center, as well as the Wal-Mart Home Office, in
Bentonville. Arkansas. At that point, Wal-Mart employed 1,500
Associates working in 38 stores, with sales of $44.2 million.
By mid-seventies, Wal-Mart employed more than 7,500 associates in
125 stores with sales of $340.3 million.
Growth continued into 1980, the largest distribution center to date was
opened in Palestine, Texas.
By 1985, Wal-Mart employed 104,000 associates in 882 stores with
sales of $8.4 billion.
Wal-Mart marked its 25th anniversary in 1987, with 1,198 stores,
sales of $15.9 billion and 200,000 associates. The company also
completed the Wal-Mart Satellite Network, the largest private satellite
communication system in the United States, linking all operating units
of the company and the Home Office with two-way voice, data, and
one-way video communication.
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By 1988, 99 percent of Wal-Mart stores had bar-code scanning
capabilities, the first Supercenter opened in Washington, Montana.
Wal-Mart became the nation‟s No. 1 retailer in 1990
Branching out further in 1991, Wal-Mart stepped into the international
market with the opening of a retail unit in Mexico City.
On April 5, 1992, Sam Walton passed away at the age of 74.
By the end of 1994, Wal-Mart International operated 123 stores in
Canada and 86 in Mexico.
In 1995, the company entered its 50th state, Vermont, and built three
units in Argentina and five in Brazil. As of that year, Wal-Mart Stores
Inc. operated 1,995 stores, 239 Supercenters, 433 Sam‟s Clubs and
276 international stores with sales of $93.6 billion and 675,000
associates.
In 1996, Wal-Mart entered China through a joint-venture agreement.
By 1997, Wal-Mart became the largest private employer in the United
States with 680,000 associates, plus an additional 115,000
international associates. 1997 was also Wal-Mart‟s first $100 billion
sales year, with sales totaling $105 billion, and the company served 90
million customers per week worldwide. Wal-Mart also replaced
Woolworth on the Dow Jones Industrial Average.
In the last year of the 1990s, Wal-Mart became the largest private
employer in the world, with 1,140,000 total associates.
The 1999 Cone/Roper Report, an annual national survey on
philanthropy and corporate citizenship, ranked Wal-Mart the No. 1
Corporate Citizen in America. The company acquired 71 Interspar
units in Germany and acquired the ASDA Group plc in the United
Kingdom.
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In year 2000, Fortune magazine ranked the company fifth in its
"Global Most Admired All-Stars" list and named Wal-Mart the third
most admired company in America. The 2000 Cone/Roper Report
once again ranked Wal-Mart as the No. 1 Corporate Citizen in
America.
Fortune magazine also placed Wal-Mart in the top spot on its “Most
Admired Companies” list two years in a row, in 2003 and 2004. In
2004, Wal-Mart was also presented the "Corporate Patriotism Award,"
which is presented to a company that exhibits exceptional dedication
to supporting of U.S. service members and their families.
In August 2007, Wal-Mart and Bharti Enterprises announced an
agreement to establish Bharti Wal-Mart Private Limited, a joint
venture for wholesale cash-and-carry and back-end supply chain
management operations in India.
The 3000th international store was opened in November 2007.
Performance in recent years
A number of books have been written about Wal-Mart. A lot is discussed
about the Management Style of Wal-Mart. Positive and negative reports
about how the company runs the business and rules the business world
have been published. During the recent global meltdown, most of the
leading retail companied experienced a rough patch and their
performance deteriorated to a great extent. Wal-Mart was an exception to
the rule during the last year that was marked by global recession. It kept
growing strong even during the worst months. The following table
focuses on its performance in the financial year 2007-08.
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Table 16: Wal-Mart- Comparative Performance of various segments Financial year 2007-08
Wal-Mart
Stores U.S
Wal-Mart
International
Sam‟s Club
Sales $ 239.5 billion $ 90.6 billion $ 44.4 billion
Sales % 64 24.2 11.8
Sales Growth 5.8 % 17.5 % 6.7 %
Operating Income $ 17.5 billion $ 4.8 billion $ 1.6 billion
Growth in Operating Income 5.4% 11.8% 9.3%
Comparable Store sales
growth
1% 4.9%
Inventory growth 0.7% ---- < 0.4%
New stores 211 364 12
Source: Company website, Annual Report 2008
Wal-Mart reported an overall growth rate of 8.6% for the financial year
ended January 2008. As can be seen from the above table, Wal-Mart
international contributed substantially towards the growth. Operating
income grew at 5.4% for the US stores, whereas it grew at 11.8% in rest
of the world. United States remains the biggest market for Wal-Mart, but
it is surely looking at the emerging markets now. While it opened 211
new stores in USA, it opened 364 stores outside USA.
Wal-Mart‟s financial performance has been quite impressive all through
out. The following tables present the financial performance of Wal-Mart
in terms of some important financial measures and ratios.
Table 17 looks at the time period 2006 to 2008 and Table 18 looks at the
period 2003 to 2005.
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Table 17: WAL-MART Financial Review 2006-08
(Dollar amounts in millions)
Fiscal Year Ended January 31, 2008 2007 2006
Net sales $374,526 $344,992 $308,945
Net sales increase 8.6% 11.7% 9.8%
Comparable store sales increase in the
United States 2% 2% 3%
Cost of sales $286,515 $264,152 $237,649
Net income 12,731 11,284 11,231
Long-term debt 29,799 27,222 26,429
Shareholders‟ equity 64,608 61,573 53,171
Debt Equity Ratio 0.46 0.44 0.497
Current Ratio 0.8 0.9 0.9
ROA 8.4% 8.8% 9.3%
ROE 21.1% 22.0% 22.9%
ROCE/ROI 19.5% 19.9% -----
Source: Wal-Mart Annual Report 2008
The performance of the global leader has been very impressive. All
parameters have shown improvement. The financial stability parameters
have been stable through out. Return on Assets, Return on Equity and
Return on Capital Employed have been exemplary through out this
period. All the three ratios have shown a slight dip in the last year,
possibly pointing to a slight drop in margins and turnover. But if we
compare the results with other retail companies, they are far superior to
most of the companies worldwide.
Let us look at the next table. The period under consideration has shown a
higher sales growth and comparable store sales growth. This period is
also marked by excellent performance ratios, the ROA and the ROE.
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Table 18: WAL-MART Financial Review 2003-05 (Dollar amounts in millions, except per share data)
Source: Wal-Mart Annual Report 2008
It appears from the discussion so far that Wal-Mart has managed to
achieve growth and profitability both for all these years. Their
consistency in performance through international expansion and
economic uncertainties is highly remarkable. It is also an indication of
strong performance measurement and monitoring across formats and
continents.
The picture will become clearer if we look at the growth rates for the last
few years. The following table presents the sales and growth rate in sales
for the last two years, broken down sector wise
Fiscal Year Ended January 31, 2005 2004 2003
Net sales $281,488 $252,792 $226, 479
Net sales increase 11.4% 11.6% 12.6%
Comparable store sales increase in the
United States(1)
3% 4% 5%
Cost of sales $216,832 $195,922 $175,769
Net income 10,267 9,054 7,955
Long-term debt 20,087 17,088 16,545
Shareholders‟ equity 49,396 43,623 39,461
Debt Equity Ratio 0.41 0.39 0.42
Current ratio 0.9 0.9 0.9
ROA 9.8% 9.7% 9.6%
ROE 23.1% 22.4% 21.8%
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Table 19: Wal-Mart - Total Sales and Growth Rates- Two year comparison
Fiscal Year Ended January 31
Dollar
amounts in
millions
2008 2007
Net Sales Percent
of Total
Percent
Increase
Net Sales Percent
of Total
Percent
Increase
Wal-Mart
Stores
$239,529 64.0% 5.8% $226,294 65.6% 7.8%
Sam‟s Club 44,357 11.8% 6.7% 41,582 12.1% 4.5%
International 90,640 24.2% 17.5% 77,116 22.3% 30.2%
Total net
sales
$374,526 100.0% 8.6% $344,992 100.0% 11.7%
Source: Wal-Mart Annual Report 2008
Total net sales increased by 8.6% and 11.7% in fiscal 2008 and 2007
when compared to the previous fiscal year. Those increases resulted from
the global store expansion programs, comparable store sales increases and
acquisitions. The Growth rate of Sales within USA has gone down from
7.8% to 5.8%. There also has been a substantial dip in the International
growth rate from over 30% to below 18%.
Overall, Wal-Mart remains the world leader in retail. It is wy ahead of it‟s
closest competitors and the Indian companies have a lot to learn from it‟s
systems and processes. Its performance review makes it very clear that it
has done well on all fronts, except a slight dip in some parameters in
2008.
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4.1.2 Achievements
Wal-Mart has many bests and firsts to its credit. Some of its
achievements are listed below
At the end of fiscal year 2008, Wal-Mart employed about 2 million
associates worldwide and approximately 1.4 million in the United
States.
Wal-Mart has over 4,100 stores and clubs in the U.S., and a total of
nearly 7,300 units worldwide.
Wal-Mart serves more than 137 million customers weekly in the
U.S., and more than 175 million customers weekly worldwide.
Wal-Mart‟s average annual total revenue growth was slightly more
than 10 percent for the three years from the fiscal year ending 2006
to the fiscal year ending 2008.
Wal-Mart's discount stores in the United States average
approximately 107,000 square feet.
Wal-Mart's Supercenters in the United States average
approximately 187,000 square feet.
Wal-Mart's Neighborhood Markets in the United States average
approximately 42,000 square feet.
Sam's Clubs in the United States average nearly 132,000 square
feet.
Wal-Mart has more than 8,000 drivers – who drive 7,000 tractors
and 50,000 trailers to deliver merchandise to our many stores and
clubs.
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Some of the awards and recognitions Wal-Mart earned in 2008 include
Top 50 Companies for People with Disabilities – CAREERS and
the disabled magazine
Spirit of Excellence Award – American Bar Association
Corporate Diversity Honor Roll – Latin Business Magazine
Best 15 Companies for Diversity Marketing – Black Enterprise
Magazine
Top Companies for Multicultural Women – Working Mother
Magazine
Top 50 Companies for Latinas – Latina Style Magazine
Top Companies for Female Executives – National Association of
Female Executives
Top Companies for Asian Americans – Asian Enterprise Magazine
Top 50 Employers of Women Engineers – Woman Engineer
Magazine
Top 50 for Supplier Diversity – Hispanic Trends Magazine
Top Organizations for Multicultural Business –
DiversityBusiness.com
Corporate Partner of the Year – National Association of Women
Business Owners
Best Green Companies – Working Mother Media
Top 100 Employers for the Class of 2008 –The Black Collegian
50 Best Companies for Latinas – Latina Style
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Management Philosophy and Culture
The central goal of Wal-Mart is to keep retail prices low, and the
company has been very successful at this. Experts estimate that Wal-Mart
saves shoppers at least 15 percent on a typical cart of groceries.
Everything, including the technology and corporate culture, feeds into
that ultimate goal of delivering the lowest prices possible. It achieves cost
effectiveness through
1. frugal corporate culture
a. The company has been criticized for the relatively meager
wages and health care plans that it offers to its employees. It has
also been accused of demanding that hourly workers put in
overtime without pay. Store managers often work more than 70
hours per week. They are expected to pinch pennies wherever
they can, even on things like the heating and cooling of the
stores.
b. This culture is also present at the company's headquarters. Wal-
Mart is headquartered in Bentonville, Arkansas, instead of an
expensive city like New York. The building is described by
many as drab and dull. Executives don‟t move in limousines
and they work long hours, typically arriving at work before
6:30a.m. and working half-days on Saturdays. Executives fly
economy class and often share hotel rooms with colleagues.
2. Asking vendors to maintain inventory levels, managing space
Vendors have real time information about the stock levels at
various stores and they are responsible for maintaining appropriate
inventory levels. This saves resources for Wal-Mart and also
enhances transparency in operations.
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3. Tracking its inventory and keeping its supply chain trim.
Wal-Mart pushed the retail industry to establish the „universal bar
code‟, which forced manufacturers to adopt common labeling. The
bar allowed retailers to generate all kinds of information -- creating
a subtle shift of power from manufacturers to retailers. Wal-Mart
became especially good at exploiting the information behind the
bar code and is considered a pioneer in developing sophisticated
technology to track its inventory and cut the fat out of its supply
chain.
4. Asking the vendors to cut price or improve quality every year.
A 2003 Los Angeles Times article (part of a Pulitzer Prize-winning
series about Wal-Mart), tells stories of Wal-Mart buyers, who
demanded that each supplier either lower the price or increase the
quality every year on every item. This philosophy is known as
"plus one."
Overall, Wal-Mart is the world leader and it has maintained this position
for a long period of time now. The focus is maintaining prices low with
the help of the latest technology, advanced logistics and meticulously
designed Performance Measurement Systems.
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4.3.2 Tesco PLC
History
Jack Cohen founded Tesco in 1919, when he began to sell surplus
groceries from a stall in the East End of London. His first day‟s profit
was £1 and sales £4.
In 1924, the first own-brand product sold by Jack was Tesco Tea – before
the company was called Tesco. The name comes from the initials of TE
Stockwell, a partner in the firm of tea suppliers, and CO from Jack‟s
surname.
The timeline for the company can be presented as follows:
1929 Jack Cohen opens his first Tesco store in Burnt Oak,
Edgware, North London
1932 Tesco Stores Limited became a private limited company
1934 Jack Cohen built a new headquarters and warehouse. It was
the first modern food warehouse in the country and introduced new
ideas for central stock control
1947 Tesco Stores (Holdings) Ltd floats on the Stock Exchange
with a share price of 25p
1956 The first Tesco self-service supermarket opens in a converted
cinema in Maldon
1960 Tesco takes over a chain of 212 stores in the North of
England and adds another 144 stores in 1964 and 1965
1961 Tesco Leicester enters the Guinness Book of Records as the
largest store in Europe
1977 Tesco introduces a price–cutting campaign under the banner
„Checkout at Tesco‟
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1979 Annual sales reach £1 billion
1982 Annual sales exceed £2 billion
Computerised checkouts introduced into the first Tesco store
1983 Tesco Stores (Holdings) Ltd becomes Tesco PLC
1991 Tesco becomes Britain‟s biggest independent petrol retailer
1995 „Would I Buy It‟ initiative is launched to ensure that products
are always of the highest quality for customers
Tesco becomes the market-leading food retailer
1996 Tesco launches 24 hour trading
Tesco enters Northern Ireland, Poland, the Czech Republic and
Slovakia
Tesco introduces „Customer Assistants‟
1997 Tesco opens its first Extra store in Pitsea, Essex
Launch of Clubcard point per pound
Tesco Personal Finance (TPF) is launched
1998 Tesco enters Taiwan and Thailand
1999 Tesco enters South Korea
Tesco launches a new on-line bookstore and on-line banking
2000 Tesco.com is launched
2002 Tesco enters Malaysia
2003 Tesco enters Turkey and Japan
2004 Tesco enters China
2005 Tesco exits the Taiwanese market in an asset swap deal with
Carrefour involving stores and operations in the Czech Republic
Tesco announces annual profits of £2 billion
2006 Tesco Direct launched
2007 Tesco opens Fresh & Easy in the United States
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Performance
At the end of financial year 2008, the company had 3956 stores
worldwide. The following table presents an overview of the current
position of the company.
Table 20: Tesco PLC - Current position
Staff worldwide 4,40,000
Staff in the UK 2,80,000
Stores worldwide 3,956
Stores in the UK 2,184
By format
Extra 169
Homeplus 8
Superstore 444
Metro 172
Express 880
OneStop 511
Number of markets 14
Which markets China, Czech Republic, France, Hungary,
Japan, Malaysia, Poland, Republic of Ireland,
Slovakia, South Korea, Thailand, Turkey, UK,
USA
Source: www.tesco.com
Tesco Plc has a presence in 14 countries. It has signed an agreement with
Trent Ltd to enter the Cash and Carry segment in India and also to
provide technical support to the Trent stores in India.
The following table presents the financial performance of Tesco PLC in
the last two years
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Table 21: Tesco PLC - Financial performance (2007-08)
2007 2008 Growth
Group sales (£m) (including VAT) 46,611 51,773 11.1%
Group revenue (£m) 42,641 47,298 10.92%
Group PBT (£m) 2,653 2,803 5.7%
Diluted EPS (p) 23.31 26.61 14.2%
ROCE 12.6% 12.9%
Source: www.tesco.com/annualreport08
According to the annual report for the year 2008,
“Tesco has a well-established and consistent strategy for growth,
which has allowed us to strengthen our core UK business and drive
expansion into new markets. The rationale for the strategy is to
broaden the scope of the business to enable it to deliver strong
sustainable long-term growth by following the customer into large
expanding markets at home – such as financial services, non-food
and telecoms – and new markets abroad, initially in Central Europe
and Asia, and now also in the United States”.
In 2007-08, Tesco has performed well in spite of challenging economic
environment. They sustained good growth in the UK and recorded
excellent performance in their international operations.
Business Model
At the core of Tesco‟s business model is a focus on trying to improve
what they do for customers. The aim is to make the customers‟ shopping
experience as easy as possible, lower prices wherever possible to help the
customers spend less, give them more choice about how they shop – in
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small stores, large stores or online, and seek to bring simplicity and value
to the whole process of shopping. They also aim at being a good
neighbour in the communities they serve, be responsible, fair and honest
in their dealings and give customers the information and products they
need to make greener choices.
Tesco‟s growth has been mainly driven by strategy. The emphasis has
been on „understanding the customers‟. They have used their skills and
knowledge in understanding customers, property development, supply
chain management, new product development, store formatting and
localizing offers – to create strong business models. Wherever they did
not have all the required skills, they partnered with existing businesses –
and these relationships have formed the basis of some of their most
successful operations – for example with Samsung in South Korea and
with the Royal Bank of Scotland in Tesco Personal Finance.
Table 22: Tesco-Sales growth contribution by region (07-08)
Region Sales Growth Profit Growth
1. UK 46% 50%
2. Asia 25% 21%
3. Europe 29% 29%
Source: www.tesco.com/annualreport08
As can be seen from table 22, Asia has contributed to 25% of the Sales
growth and 21% to the Profit growth for the last financial year. UK
remains the strong hold of Tesco in terms of its contribution to Sales and
profit growth.
Tesco has a systematic performance Measurement system in place. Apart
from the standard financial measures, they also monitor various other
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performance parameters. Following parameters are monitored and
reported in their annual report. The parameters like Supplier view point,
employee retention and CO2 emissions demonstrate their commitment to
measuring and enhancing overall performance, well beyond the
traditional concepts of performance
Table 23: Unconventional Performance Parameters-Tesco
2008 2007
UK Market Share
Grocery market share 21.8% 21.0%
Non-food market share 8.5% 8.0%
Supplier View point measure
UK 92% 94%
Group 88% NA
Employee Retention 84% 84%
CO2 emissions 5.8% NA
Source: www.tesco.com/annualreport08
It can be noted that Tesco uses a number of No-financial performance
measures like market share, Supplier feedback, Employee satisfaction
(reflecting into the retention rate) and energy efficiency. And for the time
period under consideration, they have done extremely well on all the
parameters.
Special Features
Price Check Survey: Tesco conducts a Price Check survey, which
compares 10,000 prices against their leading competitors weekly.
Step-Change programme: Tesco has delivered efficiency savings of
well over £350m in the year, through our Step-Change programme.
Some examples of this project are as follows:
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Steeping up of investment in energy saving across the
business,
Savings in supply chain from further improvements in shelf-
ready merchandising, increased vehicle utilisation and more
productive work methods in depots and stores
Introduction of new checkout technology for stores, which is
faster, more accurate and easier for staff, has continued to
reduce costs and improve customer service.
Setting up of Hindustan Support Centre in Bangalore, India,
which provides IT and administrative support to the UK and
International operations – from software development to
management accounting and payroll. with nearly 3,000
employees
Ethical risks in the supply chain: Tesco is a founder member of the
Ethical Trading Initiative (ETI). There is, however, a risk that any
part of the supply chain might not adhere to these high standards.
To minimise this risk they only work with suppliers who can
demonstrate that they are committed to the ETI code and share the
same values. They use Supplier Ethical Data Exchange (SEDEX)
to carry out risk assessment of all their direct suppliers and all
medium and high-risk suppliers must undergo an extensive,
independent ethical audit.
IT systems and infrastructure: IT innovations improve the shopping
experience of the customers and make life easier for employees.
Tesco recognises that IT facilitates efficient operations and derives
commercial advantages. They have extensive controls in place to
maintain the integrity and efficiency of their IT infrastructure.
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4.3.3 M&S
History
In 1884, Michael Marks opened a stall at the Leeds Kirkgate market. All
items were sold for a penny each, including nails, screws, soap,
luggage labels etc.
In 1893, Michael Marks moved to Manchester and opened a shop on the
ground floor of his building.
By 1894, Michael Marks had opened 10 stores and was looking for a
partner. Thomas Spencer invested ₤300 to become a partner.
1901 Marks and Spencer built a warehouse at Derby Street,
Manchester. This later on became the company‟s first registered
address and headquarters.
1903: Marks and Spencer Ltd was registered as a firm with 30,000
shares of ₤ 1 each.
1926 Marks and Spencer adopted the policy of buying directly from the
manufactures.
1930: Opening of the flagship store at Marble Arch, London.
1948: First food self-service trial held in Wood Green store.
Food technology department was established
1953: New exchange and refund policy introduced.
1954: Operation Simplification, a project to streamline internal processes
was launched in order to save paper and cut down on unnecessary
administration
By 1956: All products were sold under the St. Michael label.
1959: became the first retailer to introduce the No Smoking rules in
stores
1961: Clean Food and Clean Stores campaign was launched, allowing
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customers to visit the food preparation areas on open days.
1970: „Sell By‟ Dates were printed on products for the first time
1971: Frozen food was introduced
1973: Wine sold for the first time.
Boil in the bag ready meals were sold for the first time
1974: Indian and Chinese food was introduced
1975: First store opened in Paris
1977: Fitting rooms were introduced.
1985: Christmas Hampers introduced in 30 stores
1988: First store opened in Hong Kong
1991: First reusable food carrier bag was introduced
1999: Online shopping was launched.
2003: the „&More‟ credit card and loyalty program was launched.
2007: Plan A – a 100 point five-year Eco-plan was launched.
2008: became the first retailer to remove all artificial colours and
flavouring from its entire food and soft drink range.
M&S has been a pioneer in a number of innovative practices that became
standard for the industry later on. Currently, M&S is emphasising a lot on
sustainable growth and the researcher feels that the industry will follow it
soon.
M&S describes itself as „one of the UK‟s leading retailers, with over 21
million people visiting their stores each week. It offers stylish, high
quality, great value clothing and home products, as well as outstanding
quality foods, responsibly sourced from around 2,000 suppliers globally.
M&S employs over 75,000 people in the UK and outside, and have over
600 UK stores, plus an expanding international business.
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The following tables shows the extent of global presence of M&S
Table 24: M&S Global Presence
Flagship stores 44
High street stores 219
Retail park stores 27
M&S outlets 33
Simply Food stores 167
Simply Food franchised stores 132
Total UK stores 622
Total International 278
M&S uses a number of performance parameters in addition to the
traditional measures. The following tables present a glimpse of their
performance over the last few years.
Table 25: M&S - Key Performance Indicators
2007/08 2006/07 2005/06 2004/05
Group Revenue £m
UK Retail 8,309.1 7,977.5 7,275.0 7,034.7
International Retail 712.9 610.6 522.7 455.8
Total 9,022.0 8,588.1 7,797.7 7,490.5
Group Operating Profit £m
UK Retail 972.9 956.5 790.1 588.4
International Retail 116.4 87.5 65.7 60.7
Total 1,089.3 1,044.0 855.8 649.1
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After the consistence performance through 2004 to 2008, M&S suffered a
big blow due to the global recession. The following table shows the
impact clearly.
Table 26: Recent Performance of M&S
Summary of Results 52 weeks ended
28 March
2009
£m
29 March
2008
£m
%
Change
Total revenue 9,062.1 9,022.0 + 0.4
UK 8,164.3 8,309.1 - 1.7
International 897.8 712.9 + 25.9
Operating profit 768.9 1,089.3 - 29.4
UK 652.8 972.9 - 32.9
International 116.1 116.4 - 0.3
Profit before tax 706.2 1,129.1 - 37.5
Adjusted EPS 28.0p 43.6p - 35.8
Dividend per share (declared) 17.8p 22.5p - 20.9
Table 26 clearly shows that 2008-09 has not been a very successful year
for M&S. International Revenues have shown robust growth. All other
parameters have shown an unsatisfactory trend.
Special Features
Value based management
M&S believes that their brand values – quality, value, service,
innovation and trust – are more important than ever in the current
difficult economic climate. They believe that it is their commitment to
154
these values that sets them apart from their competitors, and enables them
to offer their customers something truly special.
Mystery Shopping
Each of the M&S stores is anonymously visited once a month – twice in
the case of the larger flagship stores – by a mystery shopper who
evaluates service quality. In 2007-08 that was the equivalent of
approximately 6,240 visits to their stores. M&S teams achieved an
average score of 86%, which is a new record.
The mystery shopping programme was developed in partnership with a
customer panel to identify training needs of the store staff.
Plan A
M&S is known for its green credentials as a result of their five-year eco
plan, Plan A, which intends to make them carbon neutral and send no
waste to landfill by 2012.
They have reduced their carbon dioxide and equivalent emissions (CO2e)
produced by their UK and Republic of Ireland stores, offices,
warehouses, business travel and logistics. Emissions are down by 9%
from 517,000 tonnes in 2006/07 to 469,000 tonnes, despite a 5% increase
in sales-floor area
Technology Advancements
They switched to enhanced technology – thermal image cameras that are
more sensitive in picking up flow of individuals and separating groups of
people as they walk into the store.
M&S is also investing behind the scenes to improve their logistics and IT
infrastructure. This investment will allow them to efficiently run their
supply chain and IT systems so that stock is managed tightly and
transactions are processed effectively.
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Logistics
Majority of the M&S‟s physical infrastructure – the warehouses and
distribution centres – has remained unchanged since the 1970s. They are
now working on developing a world class infrastructure with their
strategic partner ProLogis. They plan to develop a modern and
streamlined logistics network that consists of new overseas warehouses,
as well as offshore stockholding and consolidation facilities.
M&S has achieved 10% fuel efficiency and 20% reduction in Co2
emission by introducing a new trailer, whose teardrop shape reduces
carbon footprint.
The Ethical Supply Chain
M&S claims that they use around one third of the world‟s Fair-trade
cotton. They claim that they follow ethical practices right from the
procurement of cotton to the final sale of garments in their store.
Use of Information Technology
M&S now has an integrated company-wide IT plan; a three-year
roadmap that sets out how their systems will deliver on every aspect of
their business plan, both within the UK and internationally. They have
been successfully experimenting with systems for stocktaking, self
serving tills and finance and back office operations. Early results have
shown improvement in efficiency and reduction in cost.
India Calling
In April 2008, M&S entered into a partnership with Reliance Retail,
subject to the approval of the Indian Government‟s Foreign Investment
Promotion Board and certain other conditions. M&S has a 51% stake in
the venture, and they plan to open 50 new stores in the next five years.
The new stores will sell a full range of clothing and home ware, and a
growing number of products sourced from local suppliers.
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Awards won
Town Centre Retailer of the Year Award and Green Award 2007 –
at the Retail and Leisure
Property Awards organised by Property Week.
Department Store Interior of the Year Award 2007
– for M&S Bluewater, against 550 other contenders, at the
10th Annual Retail Interior awards.
Convenience Chain of the Year for Simply Food
– Checkout Magazine.
Overall, M&S has been a pioneer in a number of retail procedures and
practices. Though it has suffered a blow recently due to the severe
economic conditions, it is likely to bounce back as it has an effective
Management Control System and a very positive and futuristic approach
to management.
4.4 Comparative Analysis
From the information available in public domain, the researcher would
like to present a comparative analysis of the performance of the six units
under study. Unfortunately data available is not easily comparable, but an
attempt has been made to compare some important parameters.
The following table presents the comparison of the three Indian retailers
on the basis of their performance in the last five quarters.
Table 28 shows the comparative performance over the last five years and
table 29 attempts to compare certain key parameters for all six units under
study.
157
Table 27: Overall Performance of the three units under study: Comparative Study for the last five quarters
(UnAudited Data)
Pantaloon Retail Trent Ltd Shoppers Stop Ltd
Sep 09 Jun 09 Mar 09 Dec 08 Sep 08 Sep 09 Jun 09 Mar 09 Dec 08 Sep 08 Sep 09 Jun 09 Mar 09 Dec 08 Sep 08
Net Sales 17770.2 16627.2 16420.9 15256.8 15112.1 1479.77 1222.98 1208.9 1261.93 1334.92 3714.99 2765.62 3148.83 3353.64 3388.59
Operating
Profit
1948.4 1850.2 1746.1 1588.3 1560.4 103.89 104.58 83.72 111.94 70.27 266.67 151.51 135.53 229.03 64.55
PBT 647.10 552.50 530.20 522.10 557.50 61.36 77.54 66.44 78.24 41.83 149.81 35.62 -141.51 -208.80 -127.05
PAT 438.20 364.90 343.70 335.40 361.80 52.61 51.13 91.26 58.73 35.32 120.61 25.24 -169.29 -204.56 -110.16
PBTM% 3.64 3.32 3.23 3.42 3.69 4.15 6.34 5.50 6.20 3.13 4.03 1.29 -4.49 -6.23 -3.75
PATM% 2.47 2.19 2.09 2.20 2.39 3.56 4.18 7.55 4.65 2.65 3.25 0.91 -5.38 -6.10 -3.25
158
Table 28: Ratios: A five year comparison
Pantaloon Retail Trent Ltd Shoppers Stop Ltd
Particulars Jun 08 Jun 07 Jun 06 Jun 05 Jun 04 Mar 09 Mar 08 Mar 07 Mar 06 Mar 05 Mar 09 Mar 08 Mar 07 Mar 06 Mar 05
EBIT Margin (%) 7.89 8.53 6.88 7.89 7.67 6.34 8.09 9.95 10.75 11.05 -2.77 2.13 5.90 6.29 4.86
ROA (%) 3.12 5.02 5.69 7.59 5.98 3.46 4.89 7.07 7.27 8.77 -14.45 1.48 6.42 8.25 10.45
ROE (%) 7.06 10.99 12.18 17.66 20.93 4.41 5.42 8.41 9.06 8.79 -27.46 2.36 8.90 10.07 20.27
ROCE (%) 10.34 12.09 11.95 16.84 15.25 4.22 6.20 9.81 11.10 11.92 -8.79 5.48 13.01 12.98 13.52
Asset Turnover(x) 0.61 0.52 0.42 0.39 0.50 1.40 1.10 0.88 0.80 0.91 0.33 0.36 0.41 0.38 0.32
Net Sales Growth (%) 56.09 73.03 80.93 65.47 48.37 -0.03 13.75 30.47 47.85 51.75 16.01 34.17 32.77 33.60 25.94
EBIT Growth (%) 44.41 114.44 57.80 69.36 52.75 -21.65 -7.45 20.75 43.75 20.56 -250.49 -51.52 24.55 73.19 44.67
PAT Growth (%) 4.98 87.02 66.42 94.91 73.39 -18.59 1.40 32.94 27.91 10.81 -1014.57 -73.40 -3.36 42.42 58.32
Debt/Equity (x) 1.23 1.19 1.14 1.31 2.50 0.27 0.11 0.17 0.24 0.00 0.90 0.58 0.38 0.22 0.93
Current Ratio(x) 4.24 5.09 3.84 3.19 3.46 4.51 2.14 2.40 1.80 2.25 1.33 1.77 2.66 3.26 2.03
Quick Ratio(x) 1.93 2.52 1.64 1.02 1.10 3.57 1.37 1.40 1.12 1.46 0.78 0.93 1.78 2.42 1.11
159
Table 27 shows that all the three organisations have recovered from the
recession shock and are well on their path for progress. Pantaloon Retail
and Shoppers Stop have recorded great improvement on top line as well
as bottom line results. Trent limited has also shown signs of recovery, its
top line parameters have improved, but its bottom line has not recovered.
Table 28 shows a mixed trend. Pantaloon Retail has more or less
maintained the performance even in 2008-09. Trent Ltd has seen a slight
drop, whereas Shoppers Stop has suffered a major blow in terms of most
of the productivity and performance ratios.
Now, let us look at some international comparisons.
Table 29: International Comparison
(All amounts in million)
PIL SSL Trent Wal-Mart Tesco M&S
Year of
Establishment
1997 1991 1998 1962 1929 1893
Number of
stores
>1000 125 39 7300 3956 900
Net Sales Rs.52958.80 Rs.11,325 Rs.5141.59 $374,526 £51,773 £9,022
Sales (approx. $) 1,177 252 114 3,74,526 85,943 14,977
Weekly Footfall ----- 25.5m ------ 175m ------ 21m
Employees 30,000 >3000 ------ 20,00,000 4,40,000 75,000
ROA (%) 3.12 1.48 4.89 8.4 ------ ------
ROE (%) 7.06 2.36 5.42 21.1 ------ ------
ROCE (%) 10.34 5.48 6.20 19.5 12.9 ------
Net Sales
Growth (%)
56.09 34.17 13.75 8.6 11.1 ------
Debt/Equity (x) 1.23 0.58 0.11 0.46 ------ ------
Current Ratio(x) 4.24 1.77 2.14 0.8 ------ ------
160
Comparison is made of the available data for a comparable period of
time, i.e. financial year 2007-08. But as different companies close their
accounts on different dates, the time periods do not match exactly. The
conversions are done on the basis of an approximate rate of exchange and
may not reflect the exact amount in dollars. The time period is just before
the recession. There are some observations:
1. Wal-Mart, the global leader has 7 times more stores as compared to
Pantaloon, which is the Indian leading player.
2. Wal-Mart recorded a sales revenue of $3,74,526 last year, which is
more than 300 times that of Pantaloons.
3. Wal-Mart employees 20,00,000 people worldwide as against 30000
employees of Pantaloon.
4. The Indian companies have recorded a substantially higher growth rate
of sales. This is understandable given the growth rate of the economy and
the novelty factor associated with modern retail.
5. Wal-Mart has a very high ROA, ROE and ROCE as compared to all
the Indian players. Return on Assets, Return on Equity and Return on
Capital Employed are very important performance ratios. They describe
how effectively an organisation manages its resources. It is evident from
the above comparison that Wal-Mart is way ahead of Indian companies in
terms of Performance and efficiency.
Tesco has also recorded a higher ROCE as compared to all the Indian
companies.
6. If we compare the Current Ratio, which is one of the indicators of
financial stability, we find that Wal-Mart operates on a very low Current
ratio as compared to the Indian organisations.
161
In India, the retail sector is at a nascent stage. Its performance seems
miniscule if compared to the global leaders. It would take few more years
for the sector to mature. But the global leaders would soon be posing a
great challenge to the Indian players. With a strong PMS, IT and logistic
support, the global leaders have an upper hand. The Indian players need
to consolidate, learn their lessons fast and work on their systems and
processes so as to successfully face the challenge.
Performance Measurement Systems do affect the Performance of an
organisation. It is however, very difficult to establish a link between the
two. The researcher believes that there is a great scope for research in this
area. Such research would require internal data for a reasonably long
period of time. It is therefore difficult for any outsider to undertake such
research.
The researcher tried to get more information about PMS during the
interviews. An attempt was made to identify issues and challenges in the
process of designing and implementing the PMS. The researcher also
tried to find out if any such research on effectiveness of PMS is
undertaken within the organisations. The findings of the survey are
presented in the next two chapters.
Chapter references:
1. http://www.pantaloon.com/companyinfo.asp
2. Business Standard, “Tata's Trent opens Fashion Yatra store”,
Mumbai October 22, 2008.
3. http://www.mywestside.com/about_trent.html
4. http://www.mywestside.com/about_westside.html