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Global Powers of Retailing Geographical Analysis

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For purposes of geographical analysis, companies are assigned to a region based on their headquarters location, which may not always coincide with where they derive the majority of their sales. Although many companies derive sales from outside their region, 100 percent of each company’s sales are accounted for within that company’s region.

Europe’s share falls with euro
As a region, European retailers demonstrated superior sales growth in 2009. Nevertheless, the number of European companies in the Top 250 slipped from 96 in 2008 to 92 in 2009, and they accounted for a smaller share of total Top 250 retail sales. With the exception of France, where composite sales declined 2.4 percent, this outcome is primarily due to the U.S. dollar’s stronger average exchange rate in 2009 relative to the euro and pound. The U.K. companies enjoyed relatively strong composite growth -- at 7.1 percent, it was the highest of all regions and countries analyzed -- and also generated the highest level of net profitability (3.5 percent).

The Asia/Pacific region gained as a share of the Top 250 in 2009. While China and India experienced a slowdown, they were able to avoid the recession that engulfed the world’s other major economies. The region’s statistical gains had mostly to do with Japan, and the continued resurgence of Japanese retailers was strictly the result of a stronger yen rather than real sales growth. As a group, Japanese retailers experienced declining sales in 2009 and a composite net profit margin of just 1.3 percent.

The performance of the Asia/Pacific region was negatively impacted by the Japanese companies. Excluding Japan, composite sales grew 4.8 percent for the other Asia/Pacific retailers, who posted a composite net profit margin of 4.1 percent.

U.S. retailers’ share of total Top 250 sales ticked up slightly to 42.1 percent on the stronger dollar. However, sales were essentially stagnant owing to the persistent climate of consumer uncertainty. Because the United States accounts for such a large portion of the Top 250, the country’s anemic 0.5 percent sales growth acted as a severe drag on the group as a whole. Despite lackluster sales, profitability for the U.S. retailers was above par, with a composite net profit margin of 3.4 percent.

Retailers in the Africa/Middle East region continued to post strong growth and solid profitability. Six of the eight Top 250 companies from this region enjoyed double-digit gains. Latin America, the fastest-growing region in 2008, experienced significantly weaker growth in 2009. The pace of growth slowed for nine of the 10 Latin American companies. Only Pão de Açúcar saw growth accelerate, the result of recent acquisitions.

Japanese and German retailers are the most asset intensive as measured by their low 1.5 percent return on assets. But the German companies used their assets much more efficiently to generate sales, with an asset turnover ratio of 2x. Retailers in the Africa/Middle East and North America regions had the highest return on assets, as well as above average asset turnover.

European retailers most global
For the first time since Deloitte began tracking the level of globalization among the Top 250 in 2005, foreign operations as a share of Top 250 retail sales declined. While the change was small -- dropping from 22.9 percent in 2008 to 22.2 percent in 2009 -- it may signal that finding the right avenues for global expansion is still a tricky business. (For more about this issue, see Lessons of Globalization.)

European retailers are, by far, the most international, with more than one-third of their 2009 sales from operations outside their home country. For Top 250 retailers based in Germany and France, foreign operations generated more than 40 percent of overall sales. This helps to explain the significantly larger average size of the German and French retailers compared with their counterparts elsewhere around the globe. Only about 20 percent of the European retailers were single-country operators in 2009, compared with more than 40 percent for the Top 250 overall. All of the French retailers and all but one of the German retailers operate internationally.

In contrast, 55 percent of North American retailers (52 of 94) in the Top 250 were single-country operators in 2009, and foreign operations accounted for only 13.3 percent of overall sales for the North American region. That is starting to change, however, especially among fashion specialty retailers like The Gap, Limited Brands and Foot Locker, as these companies establish partnerships around the globe to operate franchised or licensed locations.

Nearly 60 percent of Top 250 retailers in the Asia/Pacific region had yet to expand beyond their home country in 2009. Japanese retailers generated the smallest share of sales from foreign operations: More than two-thirds did business only in Japan. Although retailers in Africa and the Middle East have expanded well outside their home countries, the vast majority of their sales still came from domestic operations in 2009.

Latin American retailers had the smallest global presence in terms of the average number of countries in which they operated (1.9), and six of the 10 Top 250 companies from this region had only domestic operations. However, foreign operations accounted for 12 percent of the region’s combined sales, primarily the result of a number of regional acquisitions made by Chilean supermarket operator Cencosud.

It should be noted that the average number of countries with retail operations in 2009 is not strictly comparable with that reported in the Global Powers of Retailing in previous years. In an effort to better track the globalization of retailing, the 2009 numbers include the location of franchised, licensed and joint venture operations in addition to corporate-owned channels of distribution. Where information was available, the number of countries reflects non-store sales channels like consumer-oriented e-commerce sites and catalogs.

As a result of this change, there has been an increase in the average number of countries with retail operations across all five regions. For the Top 250 as a whole, retailers operated in an average of 7.7 countries in 2009. (This figure does not include Dell, which is truly global in scope, doing business with consumers in 177 countries.)

European retailers averaged 13 countries, the most of any region, with France leading the way at 29 countries. This is due, in part, to the large and growing number of franchised and licensed stores being opened around the world by top European fashion and luxury goods retailers like LVMH, Richemont, H&M, Inditex, Groupe Vivarte, PPR and Next.

Top 10 retailers by region
Europe's top 10 retailers are dominated by France and Germany. All of the changes to this region's top 10 list in 2009 took place in the bottom half. Edeka rose two places to take over the No.7 spot, surpassing Auchan and Leclerc. Edeka's robust 9.9 percent sales increase was mainly due to the integration of the 2,339 Plus discount stores it acquired from Tengelmann in January 2009. Ahold replaced ITM (Intermarche) in 10th place.

In North America, the names remained the same, but the collapse of the U.S. housing market shuffled the deck a bit. The Home Depot and Lowe's both fell in the ranking as home improvement sales continued their downward slide in 2009. As a result, Costco climbed to third place and Best Buy rose to eighth.

For the first time, a Chinese retailer, Bailian Group, made the list of the top 10 Asia/Pacific retailers, entering the list at number eight. The company was created in 2004 through a merger of the parent companies of several of China's largest retailers, and it now operates multiple formats throughout China. Shinsegae fell out of the region's top 10, a victim of the weak South Korean won.

Trading places describes the 10 Latin American retailers on the Top 250 list in 2009. Several companies changed places, including the top two -- Brazil's Grupo Pao de Acucar overtook Chile's Cencosud -- as well as the next two -- Casas Bahia surpassed Soriana. In 2010, Pao de Acucar and its Brazilian rival Casas Bahia agreed to merge, setting the stage for another shake-up. In addition, Lojas Americanas, the other Brazilian Top 250 retailer, jumped two places ahead of Mexico's Comercial Mexicana and FEMSA Comercio, propelled by 11 percent same store sales growth in 2009. Top 250 newcomer Comercial Chedraui, another Mexican retailer, displaced Distribucion y Servicio (D&S), which was acquired by Wal-Mart.

In 2009, two South African companies joined the list of Top 250 retailers in the Africa/Middle East region: Metcash and Woolworths. Metcash, a former Top 250 retailer, temporarily fell off the Top 250 list due to the collapse of the South African rand in 2008. Woolworths joined the ranks of the Top 250 Global Powers for the first time in 2009. Migros Ticaret became the 4th-largest retailer in the region by opening 432 new stores in 2009, boosting the company ahead of SPAR group.