Headline News

2006 Global Powers of Retailing
Cinco Días - January 10, 2006

El Corte Inglés, Inditex, Mercadona, Eroski y Caprabo, among the top 250 largest global retailers.

Five Spanish companies, with El Corte Inglés in the lead, have found themselves in the select club of the global giant retailers. Aside from the large department store led by Isodoro Alvarez, Mercadona, Inditex, Eroski and Caprabo have also climbed this year’s listing, developed by Deloitte and the magazine, “STORES”. The ranking will be officially presented in New York next week during the annual retailers’ conference.

In the report titled 2006 Global Powers of Retailing, many Spanish groups appear among those that have experienced the fastest rate of growth. In this ninth edition of the listing, Mercadona, Inditex y Caprabo placed among the 30 companies with the highest average growth throughout the last five years.

Specifically, Mercadona, with a yearly growth of 26.4% landed 13th in the growth ranking. Inditex is number 20 in those that experienced the most growth, at 23.2%, and Caprabo is number 30, with a yearly average of 18.4% during the last five years.

In the general sales classification, the group that led the Spanish companies by a large margin is El Corte Inglés, which climbed to number 42. This ranking would have been much higher if the study had taken into account all of the company’s financial figures; some of the figures do not pertain to the business’s retail activity.

Department Stores Lose Ground

El Corte Inglés came ahead in the listing, although other department stores lost ground as the result of the success of alternative retailing structures. The French company Galeries Lafayette, the German Kardstadtquelle and the British Marks & Spencer are some of the traditional rivals of El Corte Inglés, all of whom lost ground in the ranking and saw a decline in sales over the last five years.

The company led by Isidoro Álvarez, on the other hand, not only remained strong with its traditional retail structure, but was able to diversify its offering and try different retail structures with a larger potential for growth. Álvarez has also faced the challenge of internationalization, and has used the opportunity to continue growing. He has taken the first steps to introduce the company in Portugal and is researching the possibility of expanding into Italy and other countries.

In terms of internationalization, no company is able to beat Inditex. This group, created by Amancio Ortega, with the success of Zara, is the most global company of the top 250 retailers in the world. The company is present in 56 countries, ahead of Carrefour (35) and IKEA (33).

More Globalization

The study by Deloitte concludes that globalization is accelerating, in spite of the fact that 104 of the 250 in the ranking operate exclusively in their own country and another 39 in only two countries. On the other hand, 44 of the companies ranked have a presence in more than 10 countries. The average is 5.5 countries.

The study not only distinguishes Inditex for its internationalization, but for appearing as the only one of the Spanish companies listed on the Stock Exchange. According to the study, it is 16th in market value among the 250 companies listed. In addition, it was listed fourth as having the greatest dividends in relation to stock value, which can be interpreted as proof of its prospectus and the value of its liquid assets.

The textile firm has been ranked in this listing as the Spanish company with the highest profits. In sales, it ranked number 102. In this year’s edition, Inditex still has looks up to its greatest European rival, Swiss H&M. However, Inditex’s income for the current fiscal year is so far surpassing that of H&M.

Among the Spanish companies, Mercadona, the world’s fastest growing food distribution company, also ahead of Inditex. The company, led by Juan Roig, occupies number 66 in the listing and is also looking into expanding abroad. Eroski, with a lower rate of growth, also made gains in the ranking, to number 109. Caprabo, which entered the listing for the first time last year, has also made a jump in 54 places to number 187. These five companies have improved their position consistently over the past few years.

In this global ranking, the indisputable leader is Wal-Mart. The company’s $286,222 million by far triples the sales of Carrefour ($89.568 million). Home Depot currently maintains the bronze medal with $73,094 million.

The top 10 companies represent 28.8% of the total $2,840 billion total retail sales of the 250 companies. These distribution giants take turns in leading the retail sales for the entire world. Those companies making it into this year’s listing exceed $2,330 million in sales.

Only 17 of the 250 listed published losses in the 2004 or 2004/2005 fiscal year. The median profit over sales among those earning profits is 3.6%, according to Deloitte. The country with most companies in the listing is the United States, with 90, second is Japan with 40, third, UK with 24, Germany with 18 and France with 12.

The large companies listed predominantly have some a relation with distributing food (in any of its diverse forms). Approximately 60% of the 250 companies and nine of the top 10 sell food. Most operate in a variety of structures including supermarkets, hypermarkets/supercenters, hard discount stores, cash & carry/warehouse clubs, and convenience stores.

The companies showing the most growth are those that have concentrated one or two successful retail structures. Of course, the companies that are working from a smaller size have an easier time to grow at a faster pace. For this reason, there are very few companies that are ranked simultaneously in the top 100 for sales and the top 50 for growth. Mercadona is one of these companies. The study specifically highlights the rapid jump experienced by Schwarz Group (Lidl), and forecasts that the company will quickly enter the "top 10 club".

For more information about the 2006 Global Powers of Retailing, visit www.deloitte.com.