STORES Global Powers of Retailing 2009 - (Page 5) 2009 global powers of retailing Feeling the squeeze Deloitte Touche Tohmatsu (“Deloitte”), in conjunction with STORES Magazine, is pleased to present the 12th annual Global Powers of Retailing. This report identifies the 250 largest retailers around the world based on publicly available data for the companies’ fiscal year 2007 (encompasses fiscal years ended through June 2008). The report also provides an outlook for the global economy; an analysis of market capitalization in the retail industry; and a discussion of 10 major trends affecting retailers. Global powers of retailing top 250 highlights Retail industry still riding high in 2007, but trouble brewing During the 2007 fiscal period, there was a shift underway in the U.S. economy. It went from relatively strong growth, to deceleration, to a modest recession by early 2008. The proximate cause of this slowdown was the peak and then collapse of the U.S. housing market. Housing prices started to fall in late 2006. By the summer of 2007, the number of defaults and foreclosures on sub-prime mortgages had reached the point where they were having an impact on the value of mortgage-backed securities. The result was the beginning of the credit crunch in August 2007. The slowdown in housing market activity, followed by slower growth of consumer spending, led employment to stop growing by January 2008. On a global level, the economy was still growing nicely in 2007. Only in early 2008 did the U.S. financial crisis begin to spill over into Western Europe. The impact was not felt in the Asia/Pacific region until mid-2008. As a result, consumer spending remained fairly robust in most of the world throughout fiscal 2007, the financial period covered in this report. Total retail sales for the Top 250 Global Powers of Retailing climbed to $3.62 trillion in 2007, up 11.4 percent from the prior year’s Top 250 total of $3.25 trillion. Much of the increase reflected nominal sales growth. But part of the gain in the aggregate U.S. dollar-denominated sales figure reflected the impact of a weaker dollar against many major currencies during 2007. And part is simply due to a change in the composition of the Top 250 group itself. Looking only at this year’s list of companies and factoring out currency movement, retail sales still increased at a healthy composite rate of 7.6 percent in 2007. Note: This is the first year that the Global Powers of Retailing has used sales-weighted, currency-adjusted composite growth rates rather than simple arithmetic averages as the primary measure for understanding group results. (See methodology in box on page G36.) However, arithmetic averages also have been presented in some cases to facilitate comparisons with prior year results. In 2007, for example, the average increase in nominal retail sales for the Top 250 was 10.7 percent. This compares favorably with 9.2 percent in 2006 and 10.1 percent in 2005. But not every retailer enjoyed strong growth. While 36 of the Top 250 retailers saw sales drop in 2006, 44 experienced declining sales in 2007—a likely harbinger of things to come. In some cases, sales declines correlated to those companies that successfully divested parts of their business in order to focus on core operations. However, a disproportionate share included companies in the department store, apparel/footwear, and consumer electronics sectors. A wave of privatization in the retailing industry continued in 2007. As a result, net income/loss figures were available for only 178 of the Top 250 companies. Fourteen of those companies reported a net loss in 2007, double the number of unprofitable companies on the 2006 Top 250 list. Nevertheless, the composite net profit margin for all reporting companies was a healthy 3.7%, while the average for the group was an even more robust 4.0%. This reflects a trend of continuing improvement in retail profitability in recent years from an average 3.6% in 2006, 3.5% in 2005, and 2.7% in 2004. The average Top 250 company generated $14.5 billion in retail sales in 2007, up from $13 billion for the 2006 group. To become a member of this elite list required fiscal 2007 retail sales of approximately $3 billion, up from $2.7 billion in 2006. Competition to be among the Top 250 is keen at the bottom of the list as most retailers are not mega-sized companies. Of the 250 largest, nearly two-thirds, or 163 companies, had retail sales of less than $10 billion in 2007. More than one-third (93 companies) had sales of less than $5 billion. Only 40 companies, or about one in six, had retail sales of $20 billion or greater. www.deloitte.com/consumerbusiness STORES / January 2009 G http://www.deloitte.com/consumerbusiness
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