Case | HBS Case Collection | November 2012

Ahold versus Tesco—Analyzing Performance

by Suraj Srinivasan and Penelope Rossano


The case relates to understanding and comparing the performance of two leading retail companies—Ahold and Tesco. The case introduces the tools of Dupont and Modified Dupont Decomposition. While performance as measured by return on equity has been similar for the two companies, Ahold has had significantly better stock market performance compared to Tesco. Ahold also has a significant amount of cash on its balance sheet leading to low levels of net debt. The case requires students to analyze performance using Modified Dupont Decomposition techniques to assess if firm performance is resulting from operating profitability or from financial leverage and then suggest strategies to improve performance. To perform the modified Dupont Decomposition, students learn how to reformat and condense the balance sheet and income statement to separately measure profitability arising from operating activities and financing activities. Students also see how excess cash holdings can depress profitability and what factors should drive the appropriate level of leverage for a company.

Keywords: Performance Evaluation; Retail Industry;


Srinivasan, Suraj, and Penelope Rossano. "Ahold versus Tesco—Analyzing Performance." Harvard Business School Case 113-040, November 2012.