Global Powers of Retailing Top 250 Highlights
This issue marks the 14th year that Deloitte Touche Tohmatsu Limited (“Deloitte”), in conjunction with STORES Magazine, has presented the Global Powers of Retailing. This annual report identifies the 250 largest retailers around the world based on publicly available data for fiscal 2009 (encompassing companies’ fiscal years ended through June 2010). The report also provides an outlook for the global economy, lessons of retail globalization and an analysis of market capitalization in the retail industry.
Retail industry stuck in doldrums in 2009
In 2009, retailers continued to endure the consequences of the recession. More than one-third of the Top 250 Global Powers of Retailing (91 companies) suffered declining sales, up from about one-quarter (61 retailers) in 2008. For the entire group, sales-weighted, currency-adjusted retail sales rose a meager 1.2 percent as deleveraging by consumers and slow growth of credit continued to plague the industry.
On the other hand, profitability showed a marked improvement in 2009 as retailers tightened their belts in anticipation of slowing sales. To push earnings up, many companies cut costs substantially and adjusted their inventory levels in response to a reluctant consumer. As a result of these efforts, the Top 250 composite net profit margin rose to 3.1 percent in 2009 from 2.4 percent in 2008.
Of the 188 companies that reported their bottom-line results, only 13 operated at a loss -- less than half the number of unprofitable companies in 2008. About one-third (67) of reporting companies saw their net profit margin decline in 2009, compared with two-thirds in 2008.
Based on 179 companies for which both net income and total assets figures were available, composite return on assets in 2009 was 4.9 percent, up from 4 percent in 2008 for these same companies. Asset turnover (the ratio of net sales to total assets) was 1.6x, meaning that the Top 250 retailers produced $1.60 in sales for every $1.00 invested in assets. This was unchanged from 2008. Despite measures to reduce inventories in line with weak sales, this ratio indicates a fairly inefficient use of assets by many companies.
Combined retail sales of the Top 250 totaled $3.76 trillion in 2009, down slightly from nearly $3.82 trillion recorded by 2008’s Top 250. The decline in aggregate sales reflects, in part, the changing composition of the Top 250 group from year to year. However, it is mostly due to the exchange rate effects of a weaker euro, British pound, Mexican peso and other major currencies against the U.S. dollar during the fiscal 2009 period. The major exceptions were a stronger Japanese yen and Chinese renminbi.
Top 10 not immune to economic gloom
The world’s 10 largest retailers saw their share of total Top 250 sales slip in 2009, and their composite sales growth was stagnant at just 0.2 percent. Nevertheless, these retailers still garnered a whopping 30 percent of the Top 250’s combined sales (down slightly from 30.2 percent in 2008).
Sales declined for four Top 10 retailers -- Carrefour, Metro, Costco and The Home Depot; three others had sales growth of 1 percent or less. Tesco and hard discounters Schwarz and Aldi were the only Top 10 companies whose sales growth outpaced the Top 250’s 1.2 percent composite growth rate. Top 10 profitability also lagged the group as a whole: Of the eight companies that disclosed their bottom-lines, they generated a composite net profit margin of 2.6 percent, compared with 3.1 percent for the Top 250 as a whole.
The makeup of the Top 10 remained the same in 2009 as in 2007 and 2008, with Wal-Mart as the undisputed leader. The movement of Costco and Aldi (up one place each), displacing The Home Depot (which dropped two places to finish ninth), reflect the only changes within the Top 10.
Although sales were flat and profitability lagged, the retail leaders were more productive than their smaller competitors, with return on assets of 5.3 percent and an asset turnover of 2x.