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Survey: Retail CFOs more optimistic about industry and economy

Norwalk, Conn. -- The CFOs of U.S. middle-market retailers are more optimistic about the current state of their own industry and the U.S. economy, although they are significantly more pessimistic about the global economy, according to the latest GE Capital U.S. Mid-Market Survey.

Fifty-one percent of retail CFOs say their industry will grow over the next 12 months — an increase of 25% over the previous wave of this survey, which was conducted in the third quarter of 2011.

In fact, retail CFOs are the second-most optimistic of those surveyed, just behind executives of metals and mining companies (54%).

“Consumers are slowly returning to the market and we’re seeing this shift reflected in an increase in CFO optimism about the current state of the U.S. economy and the outlook for the retail industry,” said Jim Hogan, senior managing director, GE Capital, Corporate Retail Finance. “Although still cautious, we are seeing an increase in retailers who are moving out of survival mode and seeking finance to reinvest in and grow their businesses.”

Not surprisingly, retail CFOs believe labor costs and energy costs, including oil and gas, will have the most significant impact on their business this year. At the same time, they’re investing in their businesses; retail CFOs expect to spend more on equipment and general capital expenditures this year.

Additional retail industry survey findings include:

Revenues: Seventy-four percent expect their company’s revenues to increase this year — a 16% increase over the previous wave of this survey, which was conducted in third quarter 2011.

Profitability: Thirty-eight percent predict profit margins will increase this year, up from 30%, while 44% expect profit margins will stay about the same this year.

 Capital expenditures: Fifty-four percent said their capital expenditures will be about the same this year as last year — a 16 percentage point increase from third-quarter 2011.

Pricing: Fewer retail CFOs plan to increase the price of their products or services this year (48% compared to 58% in the third quarter of 2011).

Growth areas: Seventy-two percent of retailers expect the discount category to be the biggest area of consumer spending this year, unchanged from the previous survey. Twelve percent of retail CFOs chose the aspirational category (up from 6%) and the luxury category (down from 20%) to be the biggest area of consumer spending.

Inventory: Sixty-two percent expect inventory levels to remain the same this year, while 26% said they would increase. The average expected inventory increase through the remainder of the year is 10%, unchanged from third-quarter 2011.

Hiring: Seventy-two percent expect to hire in the next 12 months and anticipate increasing their workforce by 4%.