Fiscal 2019 was a good year for retail. All but one of the top 25 publicly traded global retailers reported year-over-year revenue growth, with seven seeing double-digit growth, reveals GlobalData. The data and analytics firm analyzed the year-on-year (YoY) change and compound annual growth rate (CAGR) of publicly traded retailers in terms of revenue, operating profit, and net profit over the past five years.
e-tailers, CVS win revenue growth
“In terms of revenue growth, the list was dominated by major e-retailers, including Alibaba, JD.com and Amazon, which clocked over 20% YoY revenue growth. E-commerce sales grew by 51%, 23% and 18% respectively, due to a significant rise in annual active customers on their retail marketplaces, and faster fulfilment and delivery services,” says Keshav Kumar Jha, Business Fundamentals Analyst at GlobalData.
Apart from e-commerce players, CVS Health was the only company that saw over 20% YoY revenue growth. The acquisition of Aetna helped CVS Health to strengthen its top line. Higher volume and brand inflation also contributed to the increase in the U.S. pharmacy’s revenue streams. For Alimentation Couche-Tard, acquisitions, rebranding, and product offerings’ initiatives helped drive traffic in stores and increase same-store merchandise revenue across the network.
In GlobalData’s ranking, Carrefour was the only player reporting flat YoY revenue growth and over 1% of negative revenue growth over the last five years. Its sales declined in Europe, including France, which was partially offset by higher revenue growth in Latin America and Asia regions.
Kroger, Tesco among operating profit winners
JD.com, CVS Health, Kroger, and Tesco reported over 40% operating profit growth. Impressive revenue growth negated the impact of the rise in operating expenses for JD.com and CVS Health. JD.com’s fulfillment expenses increased by 15.5% on a YoY basis, whereas fulfillment expenses as a percentage of net revenues decreased 0.5 percentage point to 6.4% in 2019.
The Restock Kroger cost savings initiative allowed Kroger to reduce its operating, general, and administrative expenses last year, whereas Tesco’s continued focus on cost-reduction and simplification of business operations allowed it to curb operational expenses.
Rallye and Lowe’s had over 30% YoY decline in operating profit. Rallye’s operational expenses increased over 85% on a YoY basis. Lowe’s incurred pre-tax operating expenses of US$35 million related to exit and closure of its retail business in Mexico.
Half enjoy double-digit net income growth
“Over 50% of companies in the top 25 reported double-digit YoY growth in their net income with six retailers recording over 50% growth,” Jha says. “CVS Health and JD.com reported rises in net earnings due to higher revenue, improving operational performance, and favorable other income and expenses. Kroger and Carrefour’s cost-optimization initiatives helped improve their net earnings.”
NIKE and Woolworths recorded over 50% YoY net profit growth. An increase in revenue, an improving operational performance, and lower-than-expected tax implications led to the rise in NIKE’s net earnings. Woolworths’ robust revenue stream and usage of technology to drive process improvements resulted in a significant rise in net earnings.
Rallye, George Weston, and J Sainsbury recorded 40% or more decline in their YoY net profit. An increase in operational expenses resulted in a significant reduction in net earnings for Rallye, whereas an increase in interest expenses led to the decrease in net profit for George Weston. The costs associated with the closure of several stores had a toll on Sainsbury’s profits.
“The impact of the COVID-19 pandemic on the retail sector is difficult to assess, as there is no clear end to this health crisis in sight,” Jha syas. “In the new normal, retailers will experience a rise in their operational costs due to mandatory steps to keep employees and customers safe. Many retailers will also delay their investments in improving store operations or opening new stores. A slowdown in economies worldwide may lower the cash flow and customers could curtail their spending on non-essential goods, which would adversely impact retailers’ business.”