FINANCE

Study: Retail CFOs forecast 4.5% increase in total 2012 sales

BY Katherine Boccaccio

Chicago — A study released on Tuesday by BDO USA found that retailers are generally confident that year-end sales will top last year’s. According to the sixth-annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 leading retail CFOs nationwide, retailers are expecting a 4.5% increase in total 2012 sales.

While the forecast shows improving confidence when compared with sales projections for 2011 (+3%) and 2010 (+2%), retailers have been relatively guarded in year-end expectations. In 2011, total retail sales exceeded expectations and increased 7.3%.

The survey found that retail CFOs are also growing more confident in the overall economic picture. While a majority (57%) expect to see a continuation of stagnant economic conditions in the near future, the number of CFOs forecasting an ongoing economic turnaround nearly tripled this year (32%, up from 11% in 2011).

“Consumers proved resilient through back-to-school season, and that is fueling greater optimism for holiday sales results,” said Doug Hart, partner in the Retail and Consumer Product Practice at BDO USA. “But retailers aren’t counting their dollars just yet. Forecasts are cautious as retailers closely watch unemployment, election results and inventory levels – any of which could throw a wrench in holiday results.”

Other major findings of the survey include:

  • Forty eight percent of CFOs forecast an increase in same-store sales for the second half of 2012, which includes holiday results.
  • In total, CFOs forecast a 3.6% increase in same-store sales for the second half of 2012, which is consistent with 2011 projections (3.5%). For all of 2012, retailers forecast a 4.1% increase.
  • Retailers plan to keep inventory levels in check, as 55% of CFOs said they have maintained their inventory levels for the 2012 holiday season. While one-in-four say they increased their inventory, overall, CFOs project a flat increase of 1.1% over 2011 levels.
  • Inventory levels, however, are not the greatest threat to margins for most retailers in the remainder of 2012. Instead, the cost of products tops the list, with 40% of retail CFOs noting it as the primary threat. CFOs also cite logistics and transportation (18%) and store operating costs (17%) in addition to inventory levels and markdowns (17%). Among CFOs at the 100 largest retailers, however, 36% say inventory levels and markdowns are the top threat to margins, up from 25% in 2011.
  • Sixty percent of CFOs say unemployment is the economic challenge that has had the greatest impact on consumer confidence so far this year, and 41% said that unemployment will have the most impact on consumer confidence during the remainder of 2012.
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FINANCE

Deloitte: Consumer Spending Index drops for second consecutive month

BY Katherine Boccaccio

New York — The Deloitte Consumer Spending Index, released Tuesday, showed a drop in spending for the second month in a row.

The Index tracks consumer cash flow as an indicator of future consumer spending.

“After a rebound during the first half of the year, the Index continued downward in August, primarily due to a drop in the price of new homes and a slight decline in the tax rate,” said Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index. “Looking ahead, rising energy prices may further strain the Index heading into fall, as rising gas prices are already beginning to crimp spending.”

The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — fell to 3.13 from a downwardly revised reading of 3.22 the previous month.

“Retailers rode a steady wave of consumer spending this summer, but shopper enthusiasm could start to wane in the coming months especially as prices at the pump increase,” said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader. “To get consumers’ attention now and hold their interest and loyalty through the upcoming holiday season, retailers should highlight their blend of physical and virtual shopping experiences. By providing interactive, digital signage inside stores, mobile applications, and mobile point-of-sale functionality, retailers can make a strong impression on shoppers and encourage them to return whenever, wherever and however they wish.”

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FINANCE

Walgreens finalizes USA Drug deal

BY Michael Johnsen

Deerfield, Ill. — Walgreens on Monday announced that it has completed its purchase of 144 stores operating under the USA Drug, Super D Drug, May’s Drug, Med-X and Drug Warehouse banners located in Arkansas, Kansas, Mississippi, Missouri, New Jersey, Oklahoma and Tennessee.

The acquisition also includes corporate offices, a distribution center located in Pine Bluff, Ark., and a wholesale and private brand business, for a total of approximately $438 million subject to adjustment in certain circumstances.

USA Drug recorded sales of $825 million in 2011, Walgreens reported.

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