Worldwide Retail Industry

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Worldwide Retail Industry

• Amira Bennani
• Anne-Kathrin Florian
• Catalina Isaza
• Carolina Mansilla
• Mireia Ribas

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Agenda

1. Industry overview
2. Analysed Companies
3. Qualitative Information
4. Quantitative Information
5. Conclusions

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Key trends and development in global retailing
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Global retailing sales reach US 9.4 trillion in
2006
1. Industry Overview
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US and emerging markets, major sources of growth
1. Industry Overview
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2. Analysed Companies
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Tesco vs Wal-Mart

• Wal-Mart is the largest food retailer in the USA
• Tesco is the largest food retailer in the UK
• Wal-Mart
• The largest retailer in the world
• Successful growth during the last years
• Website for investors with all information
  needed

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Wal-Mart

• More than 176 million consumers in 13 countries
• Revenue 2007 374.5 billion? 8.6 over 2006
• Net profit 2007 12.7 billion ?12.8 over 2006
• 2.1 million employees
• More than 7600 facilities

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EDEKA vs REWE

• German retailer EDEKA
• German-based food trade group REWE
• Rewe
• Although both companies annual reports are
  fulfilling most of the criteria, Rewe provides
  more information for potential investors.
• Edekas report is not available in English.

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REWE

• International food trade and tourism company
• Turnover of 32.7 billion in 2007
• More than 270,000 employees
• Present in 14 European countries
• Headquarters Köln in Germany
• In European food trade, Rewe Group is the No. 3

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Éxito vs Publix

• Almacenes Éxito S.A (Colombia)
• Publix Super Market (United States)
• Both supermarkets have enough qualitative
  information.
• Éxito
• Its information is more friendly and easy to find
• Informative web site

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Exito

• The leading retail company in Colombia
• Represents 40 of the sales in the Colombian
  retail market
• Has different retail formats Supermarkets,
  hypermarkets and discount retails
• 257 retail outlets in 47 Colombian cities
• Casino Group (French) is the biggest shareholder

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Carrefour vs Auchan

• Auchan is a French retail chain
• Carrefour is a French multinational
• Carrefour
• Carrefour is the second largest retailer in the
  world and it provides a lot of information for
  investors.

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Carrefour

• The worlds second-largest retailer and the
  largest in Europe
• 102.442 billion in sales
• Presence in 30 countries
• Has over 15,000 stores, either company-operated
  or franchises

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Mercadona vs Caprabo

• Mercadona (Spanish)
• Caprabo (Spanish)
• Mercadona
• Specific information about Mercadona is easier to
  find than for Caprabo.
• Caprabo was bought by Eroski (group Mondragon)
  and its information is more global.

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Mercadona

• Familiar capital.
• Juan Roig, CEO main shareholder (80)
• 1,137 district stores
• 60,000 workers
• Market quota on total alimentation/food area in
  Spain of 12.1
• Reach more than 3.7 million homes annually

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Smiley Chart
Criteria Rewe Carrefour WalMart Almacenes Exito S.A. Mercadona
Clarity
Timeliness
Transparency
Corporate Social Responsibility
Qualitative comparison
Effectiveness of management
Auditor Independence
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Smiley Chart (2)
Criteria Rewe Carrefour WalMart Almacenes Exito S.A. Merca dona
Clarity of business strategy
Corporate governance
Human Resources and Relationships
Attitude towards risk and risk management
Availability of historical information
Shareholder friendly information (key ratio analysis)
Investment analysts report
Clear cross-referencing between financial statements
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3. Qualitative Information

• What is the most extraordinary qualitative
  information we found in the annual reports of the
  companies?

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Wal-Mart

• Multiple Retail concept
• Wal-Mart discount stores, Supercenters,
  neighborhood Markets, and Sams Club
• Wide merchandise concept
• house wares, consumer electronics, sporting
  goods, lawn and garden items, health and beauty
  aids, apparel home fashions, paint, bed and bath
  goods, hardware, jewelry, automotive repair and
  maintenance, toys and games, and groceries
• Corporate Social Responsibility
• In 2005, Walmart donated 245 million in cash to
  support charities and organizations throughout
  the U.S.

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REWE

• Corporate Social Responsibility
• Rewe is one of the first supermarkets that now
  uses green electricity in 6000 of its stores
• Human Resources and Relationships
• Cofounder and sponsor of the 5 a day
  initiative, encouraging people to eat more
  healthy.
• It is sponsoring the initiative Class in
  Sports to promote physical fitness in schools

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Exito
Business Strategy

• Social Responsability
• Has its own foundation called Fundación Éxito,
  which improves the proper development of poor
  children. In 2007 they invested 11,099 millions
  (3,8 millions) for more than 250.000 people.
• Historical Information
• In the web page we, the annual report and CEO
  report since 2004 can be found.

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Carrefour

• Corporate Social Responsability
• Carrefour ensures that its products are
  environmentally friendly
• They put emphasis on reducing greenhouse gas
  emission
• Clarity of business strategy.
• To be among the three leading players in each of
  the markets where it is present.

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Mercadona

• Corporate Social Responsibility
• Social productivity
• Natural Resources
• Ecodesign
• Saved 40 million litres of water and 92 million
  of kwh in 2007
• Dialogue with the Society
• Human Resource and Relationships
• 72 million investment in formation
• All workers with fixed contract and 67 women
• Conciliation family-work
• 900 promoted workers

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4. Quantitative Information

• Cash ratio Liquidity
• Gross Profit Margin Profitability
• Days of inventory
• Sales/square meter Efficiency
• Dividend Yield Shareholder

Ratios
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Cash Ratio

• Rewe has the lowest liquidity
• Mercadona has the highest liquidity
• The Average did not change between 2006 and 2007
• Éxito and Rewe showed relevant increase

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Gross Profit Margin

• The Average was 25 in 2006 and 2007
• Rewe has the highest margin and increased it
• Carrefour and Walmart have lower margin vs the
  average

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Days of Inventory

• Éxito has a slow inventory rotation
• Mercadona is managing their inventories
  effectively
• The average in this industry is 41 days

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Sales/Square meter

• The average decreased to 4130/sm in 2007
• Walmart has the lowest ratio although it is the
  biggest retailer in the world!
• Mercadona is performing best, twice the average
  ratio

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Dividend Yield

• Its not easy to find this information.
• In this industry dividend is a good source of
  profit for shareholders, it is over 1.

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5. Conclusions

• The industry
• Very attractive, as supermarkets achieve the
  highest sales of the Retail Industry
• US and the emerging countries are playing the
  major role in this growth
• Qualitative Analysis
• Carrefour and Walmart are best in terms of
  providing information in a shareholder-friendly
  way
• Here, Mercadona has a lot of weak points

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5. Conclusions

• Ratio Analysis
• Mercadona is attractive in terms of liquidity, it
  manages inventories efficiently and it has the
  highest sales per square meter
• Rewe therefore is very profitable but is rather
  weak in the other ratios
• Carrefour has the most attractive dividend yield

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Any question?Thank you.