chapter 4 profiles of indian and global...

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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

http://india.retailmantra.com/2008/12/shoplifting-in-store-theft-is-india-at.html



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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


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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


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


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


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.

133

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.

136

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.

137

Table 18: WAL-MART Financial Review 2003-05 (Dollar amounts in millions, except per share data)


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%


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.

139

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


Wal-Mart's Neighborhood Markets in the United States average


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.

142

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.

143

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

147

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%


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

148

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


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:

149

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

151

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.

152

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.

155

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.

156

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

http://www.pantaloon.com/companyinfo.asp

http://www.mywestside.com/about_westside.html

chapter 4 profiles of indian and global...

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