Given the turmoil in the retail trade, it can be useful to take a City view of the key players via the value placed on their shares…
In other words, whilst most of us merely buy and sell in the retail environment and are mainly concerned with being paid, shareholders have the experience to weigh up all factors in evaluating the real worth of a retail business and are prepared to back that evaluation by investing their (and our) money in the business….
The latest market capitalisation thus represents the market’s best guess as to the value of the business. However, as NAMs are in the comparison business, at least in terms of allocating trade investment funds, it can be useful to compare the major customers on this metric.
Relating the market capitalisation to the retailer’s sales then gives a relative measure of the stock market’s opinion of the company i.e. the greater the Mkt. Cap/sales % the more attractive the company.
For instance, re. the above slide, it can be seen with one exception,at 52.3%, Walmart (and by implication Asda), is head of the table, given its high ROCE and Net Margin performance. At 38.2%, Tesco, despite its current troubles, is still rated No. 2 globally, way ahead of Sainsbury's and Morrisons.
But take a look at Amazon, for a view of the real future...
NB. For UK NAMs: Obviously Waitose/JLP is not a public company so NAMs need a best-guess on how its market cap would compare if it were on the stockmarket (my money is on 38%+). Likewise, the Co-op is not listed, so think south of 25%....
Where next?
Your job is to help the customer increase its market cap by improving its ROCE, in turn driven by net margin and capital rotation...
Application to the day-job? the buyer is a shareholder...
All else is detail...
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