Retail CFOs expect 3% increase in total 2011 sales
Chicago — Amid economic uncertainty and low consumer confidence levels, retail CFOs are expecting a 3% increase in total 2011 sales, according to a recent survey by BDO USA, LLP. While the number reflects the study’s most optimistic sales forecast since 2007, it is down from the 4.7% sales increase reported by the Commerce Department in 2010.
The vast majority of CFOs surveyed in the fifth-annual BDO Retail Compass Survey of CFOs expect to see a continuation of stagnant economic conditions. Just 11% expect to see an economic turnaround in the next year, up slightly from 2010 (9%). Thirty-eight percent of CFOs say improved consumer confidence will be most important factor for economic recovery, and another 36% cite lower unemployment as the linchpin.
“Retailers may not anticipate a full recovery in the near future, but we’re not seeing gloom and doom in sales expectations,” said Doug Hart, partner in the retail and consumer product practice at BDO USA. “Despite low confidence levels, macroeconomic conditions are not weighing on the consumer’s wallet as much as expected, and CFOs anticipate moderate spending levels to continue through the holiday season.”
In other survey findings:
- Retailers are moderately optimistic for sales in the second half of 2011. A majority (51%) expect sales to increase during this period, up from 44% in 2010. Overall, retailers project a 3.5t% increase in comparable-store sales for the second half of 2011. For all of 2011, retail CFOs forecast a 2.3% increase in comparable-store sales.
- The appetite for M&A deals is on the rise. Nearly all (96%) of retail CFOs expect such activity to increase or remain steady in the next year. Most CFOs (66%) expect M&A activity to take place primarily in the United States, followed by the Asia-Pacific region (18%) and Europe (16%). However, the CFOs in the Top 100 largest retailers who were included in the sample have greater expectations for the international market. Seventy-five percent of CFOs in the Top 100 expect Europe to see the majority of M&A activity.
- Although private equity deals have dominated acquisition activity, CFOs are predicting an increase in strategic buyouts this year. The CFOs are split on whether upcoming M&A activity will be primarily driven by strategic buyers (52%) or financial buyers (48%). On average, CFOs say they would expect to see an EBITDA (earnings before income and tax, depreciation and amortization) multiple of 6.5 for an acquisition in the retail and consumer product space.
The BDO survey examined the opinions of 100 CFOs at leading retailers located throughout the country. The retailers were among the largest in the country, including 10% of the Top 100 based on annual sales revenue. The survey was conducted in August and September 2011.
Report: Borders intellectual property sale delayed by privacy questions
New York City — A late Thursday report by Bloomberg revealed that Border Group’s planned sale of its intellectual property to Barnes & Noble was delayed due to questions regarding customer privacy.
U.S. Bankruptcy Judge Martin Glenn, Manhattan, asked that privacy rights for 48 million customers be clarified. He adjourned the Thursday sale-approval hearing in order to explore a privacy expert’s claims that how Barnes & Noble used the acquired rights could violate customer privacy.
Barnes & Noble won the auction to buy most of the trademarks and intellectual property of Borders for $13.9 million. Other trademark assets also were sold, making the sale worth $15.8 million to Borders’ creditors.
“Does Borders have the ability to e-mail blast to all customers in its database, essentially giving them the right to opt out of any sale or transfer?” Glenn asked lawyers for Borders in court on Thursday.
Border’s lawyers said they hadn’t considered the option. The hearing to approve the sale has been rescheduled for Sept. 26.
Privacy expert Michael St. Patrick Baxter filed a report with the court, saying that the Federal Trade Commission’s Bureau of Consumer Protection and New York Attorney General’s office, on behalf of the attorneys general of 25 states, expressed concern about the way the sale would transfer personal information. Baxter recommended that Barnes & Noble adhere to certain standards, including honoring an “opt-out” request from consumers who previously opted out of receiving marketing messages from Borders.
Finish Line Q2 profit rises 24%
Indianapolis — The Finish Line reported Thursday that net income for the quarter ended Aug. 27 rose 24% to $20.9 million, compared with $16.8 million in the year-ago period.
Sales rose 10% to $331.5 million, beating Wall Street’s expectations of $321.9 million, and same-store sales surged 11%.
On Sept. 1, Finish Line acquired an 18-store chain of specialty running shops for $8.5 million. The stores operate in eight states under banners such as Greater Boston Running Co., Texas Running Co., Georgetown Running Co., Princeton Running Co., New York Running Co. and others.
"Our recent acquisition within specialty running represents the first step in our strategy to expand outside of our existing business," CEO Glenn Lyon said. "We believe the long-range opportunities for growth in specialty running are substantial."