New York, January 17, 2006 — In spite of a difficult business environment defined by prickly consumers, intense price competition, and an increasingly complex global supply chain, retailers enjoyed robust growth in both sales and profits for the 2004 fiscal year, according to Deloitte Touche Tohmatsu's (DTT) "2006 Global Powers of Retailing," its ninth annual study.

The study, completed in conjunction with Stores magazine, covers the largest 250 global retailers. It was released January 17 at the 95th annual National Retail Federation Convention and Expo in New York. 

The Top 250 retailers in the world generally saw sales and profits improve on 2003’s results in fiscal 2004. However, while U.S.-based retailers represent 36.0 percent of Top 250 retailers and 44.3 percent of Top 250 retail sales volume, the U.S. share of both measures is down from previous years due, in part, to currency appreciation against the U.S. dollar. In 2004, the dollar fell against the euro and the British pound, as well as other currencies, leading to increased dollar-based sales and thus higher rankings for European retailers. The international reach of European retailers has also played a role in their relative increases versus the US-only strategy of many U.S. retailers.

"It's increasingly clear that not going global is becoming a risky proposition, as is demonstrated by the success of many European retailers and their strong international strategies," observes Gilles Goldenberg of Deloitte  France and Consumer Business leader for DTT's European firms. "And it's quite likely that a number of countries, China in particular, will increase their presence on the Top 250 list."

As a group, retail sales totaled US$2.84 trillion in fiscal 2004, an 8.9 percent increase over the Top 250's prior-year sales. The healthy growth is largely due to the buoyant global economy in many parts of the world, although economic stagnation in Continental Europe weakened the performance of retailers headquartered there.   In particular, big increases in home prices in some markets boosted consumers' perception of wealth and stimulated retail spending. The largest retailers continued to increase their market share, albeit more modestly than in prior years. The top 10 generated combined sales of US$817 billion, or 28.8 percent of the Top 250's total sales. Last year, the top 10 accounted for 28.4 percent of total sales.

Wal-Mart, which alone accounted for 10 percent of the Top 250's combined sales, maintains its place as the world’s largest retailer. In fact, Wal-Mart's US$285 billion in sales is more than three times the size of the second-largest retailer, France's Carrefour.

Main conclusions of the "2006 Global Powers of Retailing" report:

• The increasing size and market penetration of the largest retailers is having a significant macro-economic impact: Intensifying competition among these major players is driving prices down and giving value-seeking consumers unprecedented power.
• Mergers and acquisitions activity produced considerable movement in the ranks beyond the top 10 retailers. For example, Canadian drug store retailer Jean Coutu Group benefited from the acquisition of the 1,549-store Eckerd chain from J.C. Penney in August 2004. U.K. supermarket retailer Wm. Morrison more than doubled in size from its March 2004 acquisition of Safeway PLC. However, in both of these examples, as well as many others, sales growth came at a price.  Earnings were hit hard by integration and conversion costs, and the companies have struggled to extract maximum value from their acquisitions. This year's report does not reflect the merger of Sears and Kmart, which was finalized in March 2005, but the combined companies will appear next year as Sears Holdings Corp.
• Food-related stores still far outnumber other types of retailers. Nearly 60 percent of the Top 250, and nine of the top 10 retailers, sell food, with most operating a variety of formats including supermarkets, hypermarkets/supercenters, hard discount stores, cash & carry/warehouse clubs and convenience stores.
• Not surprisingly, most of the 50 fastest-growing retailers can be found in the lower half of the Top 250, as it is easier to post rapid growth from a smaller base. Only 15 are among the top 100 largest retailers, with Schwarz Group (Lidl), at #11, the only one whose entry into the top 10 appears imminent—illustrating the growing importance of hard discounters in the global retail arena. The fastest growing retailer was U.S. supermarket chain Roundy's Inc., which generated a five-year compound annual growth rate of 56.7 percent as a result of several acquisitions in 2003 (#202 in total sales). On average, the 50 fastest-growing retailers saw sales increase at a compound annual rate of 23.8 percent from 1999 to 2004, compared with 8.4 percent for the Top 250 as a whole. Compared to the Top 250 as a whole, these fast-growing companies tend to be more focused, often operating only a single retail format such as drug stores, supermarkets, convenience stores or specialty stores.

In addition to store rankings, the report contains a global economic overview for 2006, a discussion of the top seven risks facing global retailers, and a section on driving shareholder value in the current business environment.

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