Essay on Financial Statement Analysis

Submitted By junglejuice54
Words: 937
Pages: 4

1. Introduction.

Shopping in America began as small specialty shops that consumers would trek to individually but, today we have supercenter giants that carry 1000’s of products under one roof. Kroger and Safeway compete in the 80 year old phenomenon that we now know as the grocery retail industry. These two retail stores may be well known but, it may not mean that they are doing well. This report describes each company, their financial standing and a few key ratios.

2. Company Recap.

Kroger is a supermarket business with over 2400 stores; half of them include convenience and fuel shopping. They not only sell brand name foods but, they also manufacture and sell their own brand within their stores. Their natural and organic foods offer a wonderful alternative to the expensive organic on the shelves. Building a loyal customer base with personalized coupons and tracked consumer shopping to know what products are desired more than others is the main focus in these trying economic times.
Safeway hasn’t tried to expand its list of products; the focus has stayed on the basic health, wellness, and grocery needs of consumers. They distribute their own 4 brands as well as name brands throughout 1500 stores in the US and have subsidiaries in 4 other countries and online. Prepaid products, payment services and Property Development Centers have been added to the mix since the economic downturn to aid in generating revenue.
3. Company Status.

Kroger is one of the top most performing grocery/retail stores in the industry. Revenues from 2010 to January of 2012 have grown $14.2 billion and are expected to grow another $6 billion next year. Kroger didn’t have an EPS for 2010 and 2011 but, from 2006 to 2009 there was steady growth of .50 cents. Earnings per share so far this year has been $1.15.

Kroger seeks to have market share growth so that it will be able to spread fixed cost across the revenue base to achieve a higher return on assets. They have also made investments in transportation companies to ease the cost of transporting goods throughout the country and their carbon footprint. Technology and logistics are also being used to lower costs and maximize profits. Investments have been and will continue to be made to ensure timely and quality products.

Safeway is the 4th largest supermarket in the US and is the largest third party gift card seller. The company earned $41 billion in 2010, $43.6 billion in 2011 and $30.4 billion so far in 2012. January reporting has shown increases for the last two year; if this year does the same they will have earned a few million more than in 2011. Earnings per share stayed close between 2010 and 2011 with $1.56 and $1.53. Earnings to date are 1.25 and if they follow the .60 cent trend of the last two years they will have obviously grown 30 cents over the previous year.

Safeway has implemented more technology in their business to make shopping easier, more cost effective and faster for loyal customers by developing applications for smart phones and the just for U digital loyalty platform. They have also started bonus and benefit programs to entice employees on every level to perform above and beyond their general duties. Not only are they trying to benefit customers, employees and themselves but, also the planet. Participating in the Global Packaging Project is just the tip of the iceberg when it comes to recycling, using reusable plastic containers for shipping, reducing water and energy consumption and encouraging customers to do the same by using cloth shopping bags. 4. Ratio Analysis.
Safeway has marginally better ratios as explained below. The industry averages are higher than both companies and in most instances that isn’t desired. Safeway beats out Kroger in more ratios than not. Safeway has lower inventory turnover than Kroger but, other than that the ratio numbers portray Safeway as being the