“There are some rays of light for retailers, who are feeling less pessimistic than last year” said Doug Hart, Partner in the Retail and Consumer Product Practice at BDO USA, LLP. “Comparable store sales rose approximately 3% in August despite significant back-to-school discounting. However, consumer confidence fell to its lowest level since February so we could see a pull-back in September sales. In fact, retailers have modest expectations regarding comparable store sales for the remainder of 2010, projecting a 1.9 percent increase.”
These findings are from the most recent edition of the BDO USA, LLP Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country, with revenues ranging from $100 million to $100 billion. The survey was conducted in August and September of 2010.
Some of the major findings of the BDO USA, LLP Retail Compass Survey of CFOs include:
- Retailers Bank on Consumers to Start Shopping, Predict Comparable Store Sales to Rise. CFOs expect their comparable store sales for the second half of 2010 to increase by 1.9 percent, up from the 4 percent decrease predicted in 2009. Forty-four percent of CFOs say their comparable store sales for the second half of 2010 will increase compared to the second half of 2009. Only 18 percent of CFOs say comparable store sales will decrease when comparing the second halves of 2010 and 2009. This is down from 50 percent who cited a decrease last year when comparing the second half of 2009 to 2008.
- Brighter Outlook for Total Sales. Forty-four percent of CFOs expect their total sales revenue to increase in the second half of 2010 compared to the second half of 2009. Only 22 percent of CFOs say revenue will decrease when comparing the second halves of 2010 and 2009, which is down significantly from 2009 (49%) and 2008 (29%). Overall, 47 percent of CFOs expect their total sales revenues for all of 2010 to increase over 2009, up from just 19 percent who cited an increase last year.
- CFOs Split Over Inventory Prediction. CFOs are split over whether too much inventory (53%) or insufficient inventory (47%) presents a greater threat to their holiday sales. A delicate balance seems to be the key to success this holiday season as retailers prefer to repeat their lean inventory levels of 2009 rather than the excess holiday inventories and markdowns of 2008. This is likely why the majority (58%) of CFOs are focusing on strict inventory management and selective merchandising this year to keep costs down.
- Store Operating Costs Greatest Threat to Margins. For the remainder of 2010, retail CFOs cite store operating and administrative costs (38%) as the greatest threat to their margins, followed by inventory levels and markdowns (29%), and costs of products and sourcing (28%). Despite operating cost concerns, few see delayed expansion (22%), layoffs (11%), lease renegotiations (7%) or store closings (1%) as a top priority to reduce expenses. These results reflect retailers’ concerns over their ability to maintain their low cost structures that they developed during the recession.
- E-Commerce Expected to Grow. For the 53 percent retailers with an online store, the popularity of comparison shopping seems to be creating a boon for online sales. A whopping 83 percent of CFOs anticipate their online sales channel will grow in 2010 compared to 2009. Many CFOs (38%) point towards an expected growth of 5 to 10 percent, and a more optimistic growth projection of more than 10 percent (34%).
