Due to dual effects of remaining influence of economic recession since 2008 and rising inflation, the market has been full of challenge and uncertainty (David Tyler, Chairman’s Statement, Sainsbury’s 2013/2014 Annual Report). Nevertheless, consumers’ demand for food retailers is inelastic and robust (Mankiw, 2007). Sainsbury has steadily increased its sales in the recent 3 years in spite of the depressing market background. This achievement could be a result of Sainsbury’s continued development of multi-channel sales strategy that attracts customers to remain loyalty (Financial Reviews, Sainsbury’s 2013/2014 Annual Report).
Operating-profit success- 5.1% increase- indicates Sainsbury’s strong ability to deliver cost savings. Sainsbury has…show more content… Moreover, Sainsbury’s bank completes the acquisition, which means that ROCE is less influenced by the consolidation of Sainsbury’s bank than it was last year (Financial Reviews, Sainsbury 2014).
In contrast with Sainsbury, Morrisons seems to be going through a disappointing year. The company suffers from its unexpected loss for “too much too soon” (Financial Times, March 13, 2014). Downturn in both in-store sales excluding fuel and fuel sales leads to the 2.4% loss of total sales this year (Chief Executive’s business and strategy review, Morrisons 2014). Inspiringly, however, new store openings including new online food business for the first time contribute 2.9% in spite of the total loss (Financial Reviews, Morrisons 2013/2014 Annual Report).
Development costs are the cause, for the most part, of the poor operating performance. To be specific, costs incorporate trading loss of new business channels and loss associated with the new store in Kiddicare, an online baby & infant merchandising retailer acquired by Morrisons in 2011 (Chief Executive’s Reviews, Morrisons