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Retailers Created Profits by Shaving Inventories: Deloitte Study

retail sales
Steven Puetzer | Getty Images
retail sales

Even though consumers slowed down on purchases during the period between June 2009 and June 2010, profits increased, according to a report from Deloitte Touche Tohmatsu Limited and STORES Media released on Sunday.

“These figures demonstrate the efforts of retailers around the world to manage the bottom line. Just a year ago we reported falling profits for retailers as consumers cut back, and bloated inventories led to deep discounting,” said Ira Kalish, director of consumer business for Deloitte Research, part of Deloitte Services LP in the United States.

“Retailers have acted quickly to identify where savings were possible and are reaping the benefits. It will be harder for retailers to continue to boost profits through these measures, and instead they will be hoping economic recovery can put sales growth back on track.”

The study “reveals that the efforts of many companies to cut costs and adjust their inventory levels have paid off, with net profit across the top 250 retailers increasing from 2.4 percent in 2008 to 3.1 percent in 2009.”

The study is called the 2011 Global Powers of Retailing.

While more than one third of the world’s largest retailers between June 2009 and June 2010 suffered dropped sales, fewer companies reported that they’re in the red. According to the study, profitability improved markedly in every sector. Sales during that period dropped for four of the top 10 retailers, which include Carrefour S.A., Metro AG, Costco Wholesale Corporation and the Home Depot .

Whereas about one-third of the 188 retailers that revealed their bottom-line realized a net decline in 2009, the report’s findings show a big change compared with 2008, when two-thirds had falling profits.

For the first time, the report focused on globalization. Operations as a share of top 250 retail sales went down, although it was a small drop—from 2.9 percent in 2008 to 22.2 percent in 2009. This information coincides with the year in which 38 retailers began operations in a new country, with a combined total of 57 new market entries in 42 countries.

Tune in to Target: Inside The Bull's-Eye at 9pm, ET, on Thursday, Jan. 13.

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