Global Powers of Retailing Product Sector Analysis

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Food is focus for most Top 250 retailers Retailers of food and other fast-moving consumer goods continue to dominate the Top 250, gaining four spots on the list. In the aggregate, the 134 FMCG retailers accounted for more than half of Top 250 companies and more than two-thirds of Top 250 sales. In addition to being the most numerous, these retailers are also the largest, with average fiscal 2008 retail sales of $19.3 billion. Retailers in this sector are the least geographically dispersed, however, concentrating their efforts in an average of 4.5 countries. Nevertheless, foreign operations generated a relatively large 21.7 percent of FMCG retailers’ overall sales.

Despite the tough economy, people need to eat. And in difficult economic times, more consumers switched from eating out to eating at home. As a result, the fast-moving consumer goods sector enjoyed far higher composite year-over-year sales growth (8.6 percent) than the other product groups, though profitability suffered along with the rest of the retail industry as thrifty consumers looked for bargains. The sector’s composite net profit margin dropped from 3 percent in fiscal 2007 to 2.2 percent in 2008.

The collapse of a housing market that had boosted demand for homegoods in recent years took a toll on the hardlines & leisure goods sector in 2008. The 56 retailers comprising this group saw sales growth shrink by more than half (from 6.8 percent to 3.1 percent) in fiscal 2008, and the composite net profit margin dropped from 4 percent to 2.7 percent. Six of 10 electronics specialty retailers had negative earnings. Global expansion has become an important growth strategy for many retailers of hardlines & leisure goods. In fiscal 2008, the companies in this sector operated in an average of 9.1 countries, and as a group generated nearly a quarter of total sales from foreign operations.

Fashion retailers have suffered the most in the economic downturn. In fiscal 2008, composite retail sales were negative (-0.6 percent) and profitability (4.1 percent) was sliced nearly in half to 4.1 percent. The historically high-margin fashion sector’s composite net profit margin was still the highest of all the product groups, however.

With 38 companies, the fashion sector accounted for 15.2 percent of Top 250 membership but just 8 percent of Top 250 sales. Although they remain the smallest companies (average sales of $8 billion), they have increased in stature over the years, benefiting from continued global expansion. Retailers in this group operated in an average of 12.6 countries in fiscal 2008, the most of any sector and a significant increase from 10.1 countries in 2007. They also posted the highest share of sales from operations outside their home countries.

Diversified retailers sell a broad product offering and often operate a range of formats. This group was represented by 22 companies in 2008. German retailers Metro and Tengelmann were both reclassified in 2008 from the FMCG sector to the Diversified sector. Metro sold its Extra supermarket chain to Rewe, while Tengelmann diluted its stake in the A&P supermarket chain in the United States. In both cases, fast-moving consumer goods no longer comprised the majority of these retailers’ sales. The addition of these companies to the diversified group helped to boost its average retail sales to over $16 billion; sales growth, however, was an anemic 1.8 percent, and the group’s composite net profit margin (2.1 percent) also was subpar.