BF143 Financial Analysis Validating Business Performance

Ability to formulate three research questions derived from the broader body of accounting and finance research

Ability to justify the research methodologies to be used in this study with reference to appropriate literature

Ability to review the relevant literature and explain how data will be collected and analysed with appropriate findings with respect  to the research questions

Overall presentation (format) in writing a research paper including keeping to Harvard Referencing system

Introducation:

Woolworth and Coles are giant rivals financially on the basis of the price tag war. Both Woolworth and Coles are retail organizations and, therefore, indicated shifts in their financial performance. This paper is structured in a research format to acknowledge and subsequently, discourse the distinction in the financial performance of Woolworth and its corresponding arch rival, Coles. The research aims at answering three principal questions that are captured in the entire study. The research uses a survey as the methodological approach in order to obtain and achieve the objective of the study. Innumerable aspects of the study methodology are been covered within the paper. The outcome obtained is the effectively discoursed in accordance with research findings guided by relevant analytical framework to allow effective interpretation of the data to make it a useful information for consumption by the stakeholders.

2.0 Literature Review

2.1 Woolworth and Coles’ Financial Performance Comparison

As a trading firm, Woolworths has unearthed an arrival in benefit for the six months as its market operation outmaneuvered significant opponent Coles without precedent for almost 8 years. The gained income for Woolworth, however, missed the mark as per the market determinants in the recent past (Boatwright et.al 2017). This level was arrived at via a determined plague at audit operations of the retail. The benefit repossession goes over and above the 2016’s heels that saw thorough inconveniences at Big W. thereby resulting to a lag on the welfares and further an irresistible demotion on the Woolworth’s performance relative to Coles.

Woolworth accumulated about 725.3 million dollars for the 6months to December 31^st as a profit from its entire sales. Such an amount stood somewhat lower than the preceding trading period whereby the gain from the whole sales stood at 972.7millon dollars. This indicated a abridged financial performance over the present financial year (Chavan 2009).  The amount stood lower when compared to the prognoses of the market in which Woolworth anticipated 819 million dollars from all the sales made during the financial year.

 Irrespective of the income realization unpredictability, as an organization, Woolworth trimmed its corresponding profit.  In so doing, Woolworth offered a 34c amid time payout to shareholders as vis-à-vis 44c that was availed to the shareholders at the lapse of the previous financial year. Such a move is indicative of an abridged performance relative to the opposition firm, Coles (Chavan 2009).  Numerous shareholders have subsequently been sloping a stronger payout of 45c per share at the lapse of trading period. Nevertheless, this went against the shareholders speculation because Woolworth recorded a lower than predicted performance.

The net benefits of Woolworth received from sales operations’ procession glided with 16.70 for per penny to 785.70 million dollars despite the range of 2.60 realized per penny climbing to $29.060 billion. On the basis of this lower performance, a great number of investors overlooked the news of the benefit ignoring to meet market prognoses ever-changing to a grander correlation with Coles, propelling shares in the vender up 2.40 a penny to $26.110 billion likened to that of Woolworth that stood at  0.20 higher a penny (Cole and Shastry 2010). Financial experts remained anxious to ascertain whether Woolworth had at the lapse of the day shut the disparity on Coles afterwards a considerable value venture. With Woolworths’ discovery that in the 2^nd quarter it had finally outdid its rival on similar store transactions led to unimportant upsurge in the performance (Dos et.al 2013).

Coles recorded similar transactions investment of solely one per penny for the final quarter culminating in a condensed performance. Woolworths, on the other hand, currently recorded an enthusiastic 3.10 per penny alteration resulting in an increased performance. Following this, Woolworth remains the first run through in the thirty quarters that it had trodden Coles on such a measure (Jones 2015). In spite of such an enhanced performance, scholars remained expectant of the adjustment in fortunes from the organization provided that Woolworths had established noteworthy venture on condensing costs and Coles engaged in solid correlation cycling from the preceding financial year whereby they indicated extreme shares for the corresponding shareholders.

The analysis from a survey performed in 2016 put Coles at 4.90 for every penny investments that was a growth as relative to Woolworths with a non-positive value of 1.20 for each penny scrutinizing making it the leading opportunity for the Coles outstrip its main contender, Woolworth with healthier performance (Walsh, Craig and Clarke 2011).  Such a conjecture had weighed on the gain via the first half as the nourishment segment recorded pre-charge gain slide of 13.90 per penny to 811.60 million dollars irrespective of a 2.80 for each penny transaction increase. A large share of the unit recorded a pre-charge loss of 27.2 million dollars, weighed by an additional 35.30 million dollars debilitation. The feeble numbers were emphasized by a 6.30 for per price drop in almost identical transactions for the segment, which pulled basic pre-charge gain downwards from 88.90 for each penny to 8.1 million dollars (Walsh, Craig and Clarke 2011).

Woolworths commenced another improvement arrangement that could take 3-5 years upon Ms. Macdonald's planning in 2016 to hit the Coles’ performance. Surprisingly, Woolworths is currently adopting plan B that is in progress. In this arrangement, the income from the output showed a 3.1 for every penny increase in income imposed in advance to 302.3 million dollars at its products like drinks, a 2.40 for each penny increase in advanced charge profit to 154.9 million dollars at its New Zealand wing and a 3.10 a penny growth in its pre-determined gain to 139.30 million for its accommodations and lodging sector (Walters 2006).

Whereas Woolworths pursues for a replacement for Grant O’Brien who is set to resign and struggles to recover its corresponding basic supply business in leading rigging, Coles is busy developing the fundamental elements that shall be propelling Wesfarmers retail sector higher to a healthier performance (Rainbird 20014). Similar store operations Wesfarmers nutrition along with alcohol business increased 3.90 per penny in the 2015 financial year. Coles on the other hand, besides penetrating domain of Woolies of newfangled nourishment, its transactions are developing at twofold digit rates extenuating their undisputed high performance (Walsh, Craig and Clarke 2011). Coles effectively determined how to increase its edges from 4.70 a penny to 4.90 per penny that is particularly healthier provided it is decisions to reduce costs, as the highlights from Wesfarmers’ financial expert brief below indicates. Unbelievably, Coles has now determined how to cut down costs of nourishment and alcohol in genuine footings on a lasting basis. Coles managed to keep its expansion below the inflation rate the last time costs escalated in 2009 culminating in the performance improvement (Walsh, Craig and Clarke 2011).

Coles currently has augmented more deals as well as customers, hence a better performance based on finance already created by such a rational move. The cuts on cost over a scope of Coles’ markets drove up nutrition and alcohol sales by 4.7 per penny to 7.6 billion dollars between the first quarters of the 2016 trading period. Identical nutrition along with alcohol deals surged 3.6 per penny in the 3-months to the lapse of September. Nevertheless, the developmental pace is never as sound as witnessed in 2016.

The development of the business fueled by Coles slicing nutrition and alcohol costs by 1.3 per penny to extent. The highest quarterly decrease in 2 years as the grocery store massive investment up its game against extensive refunds at Woolworths. The CFO of Wesfarmers' Organization, Terry Bowen commented that in light of the organization's individual measurable examination, the piece of the pie of Coles has steadily increasing (Luiz, Bowen and Beswick 2011). Coles had a 33.50 per penny cut of the market sector whereas Woolworths showed 40.2 per penny according to an IBIS World report published recently. The accomplishment of Coles' in picking up piece of the whole industry in an unrestrainedly-oriented market shall increase the weight that Woolworths will be feeling since Woolworth has been fighting with sluggish deals alongside dwindling profits (Luiz, Bowen and Beswick 2011).

Gareth James, Morningstar investigator commented that Cole’s identical deals development remains a key measure of prosperity of an organization's, stood sound provided the wars of price tag. Woolworths on the other end has engaged in effective attempt to win back a share of the entire industry. In a nutshell, this is increasingly compelling on costs thereby making Coles to do sensibly well based on financial performance (Jones 2015). Based on diverse scholar and studies, Coles is not only holding its ground, but it has also expanded its share of the pie in the upper quarter which is a strange consequence in the predominant belligerent marketing condition (Jones 2015). Tentatively, Wesfarmers' organization modification as well as office supplies division and Office work sector logged a 10.80 per penny increase in deals amidst the quarter which remains a brilliant financial performance. Coles Express deals, in any case, as well as fuel, dropped 7.80 per penny to an inordinate degree based on oil costs decline due to lower oil costs globally.

3.0 Thesis Statement

There is an insignificant dissimilarity in the financial performances amid the Woolworth and Coles firms on the basis of the employed marketing strategies by each company.

 4.0 Research Question

• What is the difference in the financial performance between the Woolworth and Coles?
• What is the impact of price tag war between Coles and Woolworth on their financial performance in the recent past?
• Which variables culminate in the financial performance difference between Coles and Woolworths?

5.0 Methodology

 5.1 Research method

The study assumed survey as the main methodology of the review in to gather the essential data and flawless results on the variance in the financial performance between Woolworth and Coles. 

 5.2 Data Sampling

This study is entrenched on the purposive sampling technique.  This technique stood as the best sampling strategy anchored on the restricted financial resources and time limitation for the study. On the basis of the above two reasons, the probability sampling technique remained unsuitable in this study. The e-mail and telephone communication allowed for the effective interaction and contact between the researcher and numerous respondents telephone thought the research survey. The study involved a minimum of 30 respondents who will be required to give their consent by filling the informed consent form before recruited to participate. A great proportion of the participants must be financial professionals, top employees of Woolworth and Coles together with asset management organization of the Woolworth and Coles. Samples’ selection was anchored on the financial experience and knowledge.

5.3 Measurement procedure

The three main steps that will guide measurement procedure will be as follows:

Step one:  Will involve construction and organization of numerous statements that are reflective of a dimensional constructs in to cover the foremost objective of the study.  This phase further comprises categorization of questions as the study is designed to obtain answers in groups.

Step two:  Will involves the administration of the constructs to a small group of respondents.

Step three:  Will entail the examination and evaluation of the responses got by assigning weight to responses. The measurement in this case will be based on the positivity as well as negativity whereby positive statement shall be assigned promising measurements while negative statements shall be assigned unfavorable score. The scores will range from 5 that is the highest score and 1 that will denote the lowest score.

 5.4 Data collection

 The data gotten from the investigations as responses will be stored in a computer’s Microsoft excel organization. The duration of gathering data ranged between three and four days whereby data were recorded as they were being received from the field. The concluding data in the excel spreadsheets would be organized in rows alongside columns. The scores will be recorded on a numerical value for effortless analysis.

 5.5 Data analysis

The data analysis method assumed the utilization of both qualitative and quantitative analytical methods. The Microsoft excel enabled the analysis of quantitative data and transferred to additional software. A graph illustrating the financial growth was drawn as shown in literature.

6. Findinds, Analysis and Discussion 

The survey performed established that Woolworths' suppliers trust that the firm is one of the Australia’s leading retailers that has uplifted its game on fresh food marketing. Despite Woolworth Company showing better financial performance relative to other retailers, Woolworth faces elevated staff turnover along with poor strategies implementation which has endured to weigh on CEO Brad Banducci's turnaround strategy for marketing (Cole and Shastry 2010). According to the study conducted in 58 Australian food alongside grocery suppliers by a group of brokers dubbed “UBS”, it was discovered that afterwards a comparison of performance between Woolworths and its corresponding arch competitor Coles to be stabilizing. It was also discovered that the Woolworth’s performance had depreciated compared to Coles referring its overall financial performance somewhat rearward. UBS analyst, Ben Gilbert survey discovered the Woolworth’s management need to be too positive to revert to to the same financial performance level alongside similar store sales growth in supermarkets in the year 2017. It was apparent that for the development to occur, the compromise earnings predictions have to be demoted again.

It is believed that the lengthened duration it takes for Woolworths to revert back to its initial level of performance, a higher and a full-sized price war amid the two firms will probably be witnessed (Rainbird 2014). The survey recognized that the likelihood of a price war amid the two retailers in case Cole’s performance residues in a better position likened to Woolworth will be over 35 percent that is the existing price war likelihood proportion.  Coles has been making steps towards a healthier financial stability alongside performance over the recent past. This has in turn occasioned Woolworths coherent investments in price alongside service.  Despite Woolworth having made such rational investment, the review established that   these are yet to translate or manifest into enhancements which are noticeable in the financial performance of the Company (Rainbird 2014). Additional risk of abridged performance was established as Woolworths makes extra unreasonable investments to propel impetus.  Furthermore, it is obvious that the more the illogical investments by Woolworth to dog-tie its challenger, the more Coles always steps up its investments to uphold its sales as well as financial performance enhancements (Rainbird 2014).

The review associates to alternative examination steered in year 2007 screening 77% correlation between Coles alongside Woolworth’s financial performance. The present study exposes some of the influences which have given rise to reduced financial performance of Woolworth thereby making Coles triumph. It was affirmed that there is a high staff turnover that makes it increasingly difficult to for Woolworth to implement sales alongside marketing strategies to advance its performance (Luiz, Bowen and Beswick 2011).  It was observed from the Woolworth company management that it is yet to implement novel strategy that lay stress on the need for organizational culture- shake-up at Woolworth to allow for the improvement on-shelf obtainability and stores service levels

Based on the examination steered, it was exposed from the suppliers together with innumerable providers that Woolworth is disproportionately positioned on edges juxtaposed to Coles’ retailers that is more aligned about driving transactions and afterwards, investment. This is one of the influences backing up the reason Coles has been performing healthy financially liken to Woolworth retailers during the historical few years (Jones 2015). Furthermore, it was acknowledged that Coles has been performing healthier likened Woolworth based on the high consumers level of turnover who contemplate that Woolworths has settled on 2^nd rate spreading choices relative to Coles, that is positioned around propelling top-line growth. The financial performance of a particular organization hinges on of the consumer loyalty and perception. Consequently, with undesirable perception among consumers about the company or the trading organization, it is probable to perform below par.

The abridged performance of Woolworths relative to Coles is likewise based on the staff confidence that has been exposed to have remained poor over the latest past, provoking pulling out of customers together with suppliers. This way, Woolworth has lost investments besides reduced performance. Woolworths is similarly abandoning to raise its esteem message to customer of diverse retails (Dos et.al 2013). Coles today has about 2700 retails dealing on regular low esteem generating up thirty percent income rate   over one year  ago, whereas Woolworths is gauged to have merely 1500 retails on ordinary low esteem leading to low performance as likened to Coles.

The two retailers employ similar strategy, thus, showcasing a minor rate in their performance.  For example, both Coles and Woolworths reduced the cost of chicken to 8 dollars from 11 dollars in the early couple of months of 2016 (Chavan 2009). Whereas Coles' dish chicken deals have bourgeoned, Woolworths ran nervous of stock and unkempt to escalate a comparable transactions increment, even in the wake of deflating Coles by 10¢ at 7.90 dollars. From an all-purpose standpoint, suppliers tend to endure believing that Coles has the enhanced recorded system with an advanced medium share period.

The above belief has resulted in increasing rate of performance compared to that of the Woolworth that endure on plummeting two steps rearward from a solitary step made onward. The balancing out assessment scores recommend that things might not have been increasingly terrible for Woolworths over June quarter, though, that there is never a considerable waterproof of strategies to enhance the company performance (Boatwright et.al 2017). The small margin of between the performances of the two trading businesses arise from the strategies assumed by each participant in the industry. Despite Coles showing slightly greater performance than Woolworth, with improved strategies, Woolworth can bounce back and decrease the price wars. The performance of both firms is never better off anchored on the price wars going on in the sector. Similar performance level, thus, could be an appropriate mechanism to hold the price wars under control.

Limitations

For any flawless study methodology, there has to be satisfactory resources. The foremost objective of an exploration survey is the data sampling. As declared earlier, one of the foremost precincts of the entire research was the inadequacy of the resources.  It was likewise difficult as solitary a few of the management members of the Woolworth together with Coles were able to entirely contribute to the whole survey process (Hart and Wet 2008). A survey-oriented research likewise needs the investigator to have a private relationship with the partakers who in this study were top Executives of Woolworth and Coles, thus, it was so trying getting their corresponding trust.   Maximum number of participants were likewise had a selfsame frantic timetable anchored on their job type and specialization.

Little information was available because many of the participants never provided full information as predictable, therefore, fewer decisions to make generalization. It was difficult accessing numerous businesses financial information hinged on the close-fitting and unbending competition inside the industry thus petite information gathered (Hart and Wet 2008).  Additionally, biasness existed from both the side hinged on the enduring rivalry on who to control the industry that likewise occasioned low information. This is because most of the information remained being painstakingly confidential and, hence, required authority of stakeholders but the limited timeframe would never permit the entire process of authorization. A greater proportion of the acquired information remained orally communicated, therefore, gathering and subsequent analysis remained a hectic task.

References:

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Chavan, M., 2009. The balanced scorecard: a new challenge. Journal of management development, 28(5), pp.393-406.

Cole, S. and Shastry, G.K., 2010. Is high school the right time to teach savings behavior? The effect of financial education and mathematics courses on savings. Harvard Business School/Wellesley College December.

de Hart, F.J. and de Wet, J., 2008. EVA and Innovations in Decision-Making and Financial Management.

Dos Santos, M.A., Svensson, G. and Padin, C., 2013. Indicators of sustainable business practices: Woolworths in South Africa. Supply Chain Management: An International Journal, 18(1), pp.104-108.

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Walsh, P., Craig, R. and Clarke, F., 2011. ‘Big bath accounting’using extraordinary items adjustments: Australian empirical evidence. Journal of Business Finance & Accounting, 18(2), pp.173-189.

Walters, D., 2006. Effectiveness and efficiency: the role of demand chain management. The International Journal of Logistics Management, 17(1), pp.75-94.