GLOBAL: Profits slide for global retailers - Deloitte

The world's largest 250 retailers saw their profits suffer through the economic crisis despite rising sales, according to the latest figures from Deloitte Touche Tohmatsu.

Deloitte Touche Tohmatsu's 2010 Global Powers of Retailing report, launched yesterday (10 January), showed sales among the 'Top 250' rose 5.5% to exceed US$3.8tn in fiscal 2008, which took in financial years ending June 2009.

However, the downturn slowed sales. On a sales-weighted, currency-adjusted basis, retail sales among the top 250 rose 6.3% over the 12-month period - compared to 7.6% a year earlier.

Earnings worsened, thanks, Deloitte said, to "heavy" promotions. The composite net profit margin fell to 2.4% from 3.7% a year earlier, bringing an end to improving retail profits in recent years.

Wal-Mart retained its spot as the world's largest retailer although Tesco slipped to fourth place from third, overtaken by Metro Group.

"Of the 184 companies that disclosed their bottom line results, 30 operated at a loss - more than double the 14 unprofitable companies in 2007," said Deloitte research director of consumer business Dr Ira Kalish. "Perhaps more telling, 123 companies, or fully two-thirds of all reporting companies, saw their net profit margin decline in 2008."

Retailers of food and other fast moving consumer goods (FMCG) continue to dominate the Top 250, with four more companies on the list.

Supermarkets also staged a comeback after several years on the wane. Of 24 newcomers to 2008's list, 14 operated supermarkets, including nine where it was the dominant format. Newcomers include FDB (Coop Danmark) at number 121, KF Gruppen at number 154 and Coop Norge at number 172.

Kalish added: "The global economic crisis of 2008-09 exposed the fault lines of the imbalanced global economy. This crisis is ending and the recovery is clearly underway, but the global pattern of consumer spending of the past decade will not return so soon."

Kalish believes that, for global retailers and their suppliers, the next decade will bring "a very different business environment".

"Not only will the growth of consumer spending shift geographically, but the nature of consumer spending will shift. In places like the US and the UK, retail spending growth will not only be slower, it will be focused on the needs of a value-oriented consumer and the recent shift in market share toward discount formats may very well be sustained during the recovery. On the other hand, countries like China that ran large surpluses will experience faster consumer spending growth."