Fitch: Reallocation of market share remains key retail ratings driver in 2013
New York — Market share defensibility remains a key challenge for many traditional U.S. retailers, against a backdrop of minimal growth and heavy competition, according to a Fitch Ratings report. (Fitch views trends in market share as a key indicator of a company’s long-term financial outlook.)
In view of the strong growth in online sales and other alternative formats, traditional retailers that are willing and capable of investing in a multi-channel strategy will continue to drive market share gains at the expense of retailers that struggle to maintain relevance in a mature but dynamic sector, the report said. In addition, retailers that in general lack a sound strategy and financial resources to fend off competition are more susceptible to the negative rating pressure.
While Fitch’s overall credit outlook for the U.S. retail industry is generally stable for 2013, there will continue to be a modest negative tilt to rating activity.
Fitch expects 3% to 4% total retail sales growth in 2013, similar to 2012 levels, driven mainly by 2% to 3% in same-store sales and modest square-foot expansion. Fitch expects slow improvement in employment levels and flat to lower wages, which could be further affected by food inflation next year, will translate into uneven comps performance among retailers.
Fitch also expects holiday retail sales to grow at 2% to 4% a decline from 5.6% in 2011. The lower end of the range reflects Fitch’s expectation that the aftermath of Hurricane Sandy could dampen consumer spending through the holiday season, particularly in the Northeast and Mid-Atlantic states, and a potential modest effects from the uncertainty surrounding the impending fiscal cliff.
White House reports says fiscal cliff could take bite out of retail spending
Washington — Consumer spending could drop by almost $200 billion next year while depressing real consumer-spending growth by 1.7% if middle-class taxes rise in response to the fiscal cliff, according to a report released Monday by a White House economic team.
The report, “The Middle-Class Tax Cuts’ Impact on Consumer Spending & Retailers,” by the President’s Council of Economic Advisers, found that the reduction in consumer spending would be about four times the total amount spent by $226 million on Black Friday last year and would likely spread across all areas of consumer spending.
The report noted that a typical family making $50,000 per year has received tax cuts totaling $3,600 over the past four years, and more if it was putting a child through college. President Barack Obama and congressional Democrats want tax cuts for families making $250,000 or more per year to expire while keeping in place those for families making less than that, while congressional Republicans want to keep the upper-bracket tax cuts in place.
In response to the report, the National Retail Federation called for steps to avoid the fiscal cliff — the set of tax increases and spending cuts scheduled to kick in automatically at the beginning of 2013 if Congress and the president fail to reach a deal on spending — but also for reforms of the tax code that would help reinvigorate the economy and address the nation’s deficit.
“It is encouraging to see the administration acknowledge that retailers and their customers will be among the hardest hit if our elected officials fail to address ongoing economic uncertainty,” NRF president and CEO Matthew Shay said. “However, just kicking the can down the road by cherry-picking reforms only serves to reinforce the well-placed fears of American consumers and retailers that the status quo will once again rule the day. If brinkmanship overtakes bipartisanship, we will continue to see less capital investment by retailers large and small, stifled job creation and dampened consumer confidence, which will ultimately lead to lower retail sales and potentially another recession.”
Starbucks opens 100th store in Beijing
Beijing — Starbucks Coffee Co. advanced its growth plans in China with the opening of its 100th store in Beijing. The company also announced the launch of Starbucks China University, its talent development program.
Starbucks has announced that China will be its second largest market by 2014 and will have 1,500 stores by 2015 across more than 70 cities. It currently operates 700 locations throughout Mainland China.”
The Beijing store is staffed by Starbucks “Coffee Masters,” baristas who have completed a rigorous certification process and have earned the right to wear the distinguished Black Apron after intensive coffee skills and knowledge training, the company said.
Starbucks China University will also offer training curriculums that encompass a broad range of areas and functions of the Starbucks China business, including coffee knowledge and culture training, and provide tailor-designed curriculums on retail and related functional training as well as leadership competency.