Background information on Sainsbury’s Plc

John James and Mary Ann Sainsbury founded Sainsbury’s in1869. They first opened a small dairy shop at 173 Drury Lane, London. Drury Lane was in one of London’s poorest areas and the Sainsburys’ shop became quickly very popular for offering high-quality products at very low prices. It was so successful that more branches were opened in other market streets in Stepney, Islington and Kentish Town. By 1882 John James Sainsbury already had four shops and had further plans to expand his business.

He later opened a depot in north-west London, to supply this growing chain as well as on the same site he built bacon kilns that produced the first Sainsbury branded product. In 1882 he also opened his first branch in the prosperous suburb of Croydon. This shop stocked a wide range of ‘high-class’ products and was more elaborately decorated than the earlier shops to target higher class customers. During war time there was great depression and hardship for many, even then it was a period of rapid expansion for Sainsbury’s.

New stores were opened in London’s expanding suburbs as well as in new trading areas outside of london such as Luton, Cambridge and St Albans. By 1936 they had expanded into the Midlands, through the acquisition of the Thoroughgood chain of stores. There were 244 Sainsbury’s shops by 1939, all of which received daily deliveries of fresh foods from the headquarters in Blackfriars. Refinements were made to the design of the shops and new products, particularly fresh meat and packaged own-brand groceries, were added to the range.

By the 1920s a typical new Sainsbury’s branch had six departments, offering a much larger product range than its competitors. Each shop offered home delivery throughout the surrounding district, an important service in the days before most people had motor cars. Sainsbury’s entered its second century still wholly owned by its founding family. By the early 1970s, however, it had reached a scale and stature that warranted public status.

The company’s public flotation in 1973 was at the time the largest ever flotation on the Stock Exchange, with a 45-fold oversubscription for shares. Preference was given to small shareholders in the allocation of shares. In the decade to 1994, the choice of products offered by Sainsbury’s more than doubled. These continued to reflect the company’s historic strength in fresh foods: exotic fruits, ready meals, speciality breads and reduced-fat milks were introduced in response to customers’ increasingly sophisticated tastes.

Other innovative products reflected consumers’ wider social and environmental concerns: Sainsbury’s led the way in offering own-brand phosphate-free detergents and recycled paper products and was the first British supermarket to sell Fairtrade marked products. The new millennium has seen a shift in customers’ requirements, with organic food, genetically modified ingredients, farming for biodiversity, healthier options and convenience foods all being topical. We have responded to customers’ needs and are proud of the initiatives we have in place.

All Sainsbury’s own-brand products have been GM free since 1999; in April 2004 Sainsbury’s won the Soil Association’s Organic Supermarket of the Year for the third successive year; and we have had a farming biodiversity action plan since 1997. Sainsbury’s Bank opened in 1997; it now provides a range of affordable services including life and health cover, personal loans, savings accounts, travel insurance and ISAs. In 2003 Sainsbury’s Bank was named the ‘Best Overall Provider’ in the Your Money Direct Awards.

Now we can analyse the data and information held in both of the companies annual financial report, this will aid us in calculating the Profitability, Solvency ; Liquidity, Activity and Financial ratios for both companies for the investors benefit. Furthermore, a SWOT analysis will be conducted in order to aid us in seeking out the strengths and weaknesses of the two selected companies and the available opportunities and any threats that may be faced by them.

The owners of a business will purchase assets with the funds that have been invested; these assets will then in turn be used to generate returns. In case of a limited liability company, it will be the owners’ equity (i. e. Ordinary share capital plus All reserves). This investment potential will be appraised by comparing the expected gains to the investment costs. This approach, however, is a refinement of the ROCE (Return on Capital Employed) as the ROSF measures the return on funds provided by the owners.