We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Safeway Financial Analysis Essay Sample

essay
The whole doc is available only for registered users OPEN DOC
  • Pages:
  • Word count: 1083
  • Category: food

Get Full Essay

Get access to this section to get all help you need with your essay and educational issues.

Get Access

Safeway Financial Analysis Essay Sample

In today’s economy consumers are concerned about making every dollar count, especially when it comes to purchasing groceries for their families. Although there are many grocery stores available to consumers, each person (or family) tend to gravitate to those that offer savings and products that are reasonably priced. This paper will discuss the financial health of a popular grocery store chain – Safeway. Financial ratios will be used to determine if Safeway is performing well in comparison to one of its competitors or if they need to make some changes to its business practices.

Introduction
In today’s market, it is essential to have at least a minimal understanding of financial information and its impact on us as consumers and investors. Each person is surrounded by financial information each day with his or her own finances. In this paper, I have chosen to do a financial analysis on the company Safeway. It is a grocery store chain I have frequented for many years including during my childhood. I value the quality products and their bonus card program and truly believe you get what you pay for. The company operated 1,694 stores in the Western, Southwestern, Rocky Mountain, Midwestern and Mid-Atlantic regions of the United States and in western Canada (Safeway 2010 Annual Report). The varieties of products are endless and in the past five years, the variety allergy free products have increased.

I know this because my daughter has five food allergies and it if challenging to shop at one store and find items that do not include the allergies she has. Safeway, in my opinion, has done an outstanding job of recognizing the need and made significant efforts to make those products available for purchase. With all of this success, I have witnessed, I will take a closer look into their financial statement for 2010 and determine if their success is also in the numbers. The following ratios will be analyzed in an attempt to make a sound judgment regarding the financial health of Safeway in 2010: current ratio, acid test ratio, debt to net worth, coverage, cost of goods to sales, profit to assets, and sales to assets. Below is an overview of the financial ratios of Safeway compared to Whole Foods Market.

Current ratio: This ratio gives an overall idea of a company’s capability to pay back its short-term debt and payables with its short-term cash, inventory, and receivables. Since Whole Foods has a higher the current ratio, they appear to be more capable of paying its obligations versus Safeway. This does not necessarily mean that Safeway would not be able to fulfill its obligations if they had to do so. Safeway may be able to improve this ratio by ensuring they collect their receivables within 30-60 days and ensure the inventory turnover is efficient. Acid test ratio: Since Whole Foods ratio is 1.12, they appear to be more reliable than Safeway. However, Safeway is not too far behind. Safeway can improve their ration by eliminating some of its inventory by marking down the inventory that does not move expeditiously and consider eliminating it altogether. Since this ratio subtracts the inventory from the assets, it provides a true picture of Safeway’s financial reliability more than the current ratio does.

Debt to net worth: The data shows that Whole Foods is significantly riskier to invest in versus Safeway. Whole Foods may have higher financial obligations because of them having more organic products than Safeway. Organic food products are usually higher in price because they cost more to produce and manage. Safeway appears to be effectively managing their debt by ensuring timely payments are being made. Coverage: Safeway’s coverage ratio is worse than whole Foods. In order to improve their coverage, the company should review their operating expenses and revenue sources. The operating expenses increase slightly by $100 thousand and the sales increased by $200.7 thousand. Safeway should consult with the marketing and operating managers to increase sales and find efficient ways to eliminate unnecessary operating expenses. Profit to assets: Safeway is slightly worse by appearing to not have as much cash available as Whole Foods. Safeway can improve in this area by ensuring they are pricing their products accordingly.

If their products are underpriced, they may be losing revenue although their sales increased in 2010. Safeway should have their sales managers review the products prices to ensure they are being priced effectively. Sales to assets: Safeway is exceling in its earning power over Whole Foods. Safeway is effectively managing it assets in relation to the revenue they are generating. Even though the products may not be priced adequately, the sales managers are performing well and ensuring sales goals are being met which ultimately enhance the profitability of the company overall. Although Safeway has some improvements to make regarding price points and operations expenses, they are performing well overall. Based on the chairman’s letter to Safeway shareholders, the company focused on improving the shipping experience for its customers. The company continued to offer outstanding service along with lower prices. In 2010, the total sales for the company were $41.1 billion versus $40.9 billion in 2009.

The company noticed the spending habits of the consumers decreased in food products but remained steady in the purchase of fuel. Without the fuel purchases, the sales decreased by 2%. The net income for Safeway in 2010 was $589.9 million which equated to $1.55 per diluted share. In 2009, the net income was $1,097.5 million with a diluted share of $2.66. Although this appears to be a significant decrease in share price, the amount for 2009 includes the goodwill impairment charge of 1,818.2 million. Without this, the diluted share would have been $1.74 in 2009 (2010 Safeway financial report). The chairman, Steven Burd, seemed to reassure the shareholders that although the share amounts decreased since last year, the company still continued to push through the difficult economic times. The company donated over $200 million to various charities and improved programs for its employees’ health and well-being. The company truly seems to value not only the consumers but also the employees. The company enhanced the employee incentive based health plan through a Safeway Health subsidiary. Safeway continues to improve its ability to be profitable by ensuring it maintains is quality and sound customer service. With some minor financial improvements, Safeway will continue to be profitable and ensure they maintain their quality image and profitability.

References

Safeway
http://ohioline.osu.edu/cd-fact/1154.html
http://pages.nxtbook.com/nxtbooks/cc/safeway_2010annualreport/src/docs/safeway2010ar.pdf http://phx.corporate-ir.net/phoenix.zhtml?c=64607&p=irol-reportsannual

Whole Foods
http://www.wholefoodsmarket.com/company/pdfs/ar10.pdf

We can write a custom essay

According to Your Specific Requirements

Order an essay

You May Also Find These Documents Helpful

Digestive System Lab Report

The digestive system is made up of the gastrointestinal (GI) tract—also called the digestive tract—and the liver, pancreas, and gallbladder. The GI tract is a series of hollow organs, joined in a long, twisting tube from the mouth to the anus. The hollow organs that make up the GI tract are the mouth, esophagus, stomach, small intestine, large intestine— which includes the rectum—and anus. "food enters the mouth and passes...

The five main food groups of balanced...

Healthy eating means having the right amount of nutrients and minerals which help to give us energy and keep us healthy. In order to get nutrients, we need to have a balanced diet which contains the adequate amount of nutrients from different food groups. These nutrients include protein, carbohydrates, fat, water, vitamins, and minerals etc. The five main food groups of balanced diet are 1....

Food and wine pairing

For this assignment the wine region Baden in southern Germany is chosen (see attached picture). Baden is one of the most popular wine regions in Germany due to (apart from its beautiful wines) the great weather and beautiful landscapes. This results in a perfect atmosphere for comfortable wine trips and other vacations. Baden is known for its great variety in soils, grapes and wines, especially...

Fresh food vs canned food

Food is main thing in our lives. Eating is an activity that we as humans do at least two times a day. We live in a world where it is important to eat, and we have a multitude of choices of food to choose from every day. We are responsible for what we eat. Too much of food will only lead to disease that our...

Physicochemical properties of honey

Honey is defined as the natural sweet substance produced by Apis mellifera bees from the nectar of plants or from secretions of living parts of plants or excretions of plant-sucking insects on the living parts of plants, which the bees collect, transform by combining with specific substances of their own, deposit, dehydrate, store and leave in honeycombs to ripen and mature. Honey is a sweet,...

Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Couldn't Find What You Looking For?

Get access to our huge knowledge base which is continuously updated

Next Update Will Be About:
14 : 59 : 59
Become a Member