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Global Powers of Retailing Top 250 Highlights (2012)

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Retail industry rebounds in 2010 as global economy stages fragile comeback
2010 started off on a positive note, but as it progressed the global economy began to face headwinds. In the United States, the end of fiscal stimulus, combined with continuing problems in the housing and credit markets, caused a deceleration in growth that led to fears of a double-dip recession. Europe saw the start of the Eurozone crisis when Greece required a massive bailout to avoid default on its sovereign debts.

In emerging markets, on the other hand, growth in fiscal 2010 was unusually strong, resulting in accelerating inflation. Governments in such disparate places as China, India and Brazil responded by tightening monetary policy. Rising interest rates led to severe upward pressure on currency values. Consumer spending in emerging markets rose at a healthy rate, although the monetary tightening in some countries caused deceleration.

Nevertheless, the global retail industry rebounded in 2010. Sales-weighted, currency-adjusted retail sales rose a solid 5.3 percent for the world’s Top 250 retailers, up from anemic 1.2 percent growth for 2009’s Top 250. As consumers emerged from the doldrums, more than 80 percent of the Top 250 retailers (205 companies) saw their 2010 retail sales increase, compared with less than two-thirds (159 companies) in 2009.

Profitability continued to improve as well. The Top 250 composite net profit margin rose to 3.8 percent in 2010, up from 3.1 percent in 2009 and 2.4 percent in 2008. Nearly all of the companies that disclosed their bottom-line results (183 of 195) operated at a profit in 2010, and more than two-thirds of the reporting companies saw an improvement in their net profit margin.

Stronger profitability also led to an improvement in return on assets. Composite ROA increased to 5.8 percent in 2010. While this is up from 4.9 percent in 2009, asset turnover declined slightly to 1.5 times from 1.6 times the prior year. This suggests that retailers may have increased their inventories and invested in new property and equipment in 2010 in anticipation of an economic recovery.

Walgreen joins Top 10 leader board
The share of total Top 250 retail sales accounted for by the Top 10 retailers slipped again in 2010 to 29.4 percent, down from 30 percent in 2009 and a high of 30.2 percent in fiscal 2008. The Top 10’s 5 percent composite year-over-year sales growth, while a significant improvement over 2009’s meager 0.2 percent increase, lagged the 5.3 percent sales gain for the Top 250 as a whole.

The leader group’s top-line performance in 2010 was dragged down by Wal-Mart’s 3.4 percent sales increase. Despite strong growth in international sales, stagnant sales in the U.S. division, which accounted for more than 60 percent of Wal-Mart’s total sales, led to overall inferior growth.

All 10 companies on the leader board saw an increase in retail sales in 2010, led by Schwarz and Costco. Tesco, Walgreen and Kroger also outpaced the Top 250’s composite growth rate.

The makeup of the Top 10 changed slightly for the first time since 2007. Walgreen continued its steady climb up the Top 250 ranking to become one of the world’s 10 largest retailers in 2010, displacing Target, which fell to 11th place. A weaker euro against the U.S. dollar had an impact on the European retailers, causing some to drop in the dollar-denominated rankings despite solid growth.

Profitability for the world’s Top 10 retailers also underperformed the Top 250 group as a whole. The eight Top 10 companies that disclosed their bottom-line profits generated a composite net profit margin of 3 percent, compared with 3.8 percent for the Top 250. Although Top 10 sales growth and profitability lagged the larger group, the retail leaders were more productive than the group as a whole, as reflected by the Top 10’s superior return on assets and asset turnover ratio.