Survey: U.S. expansion is key growth strategy for retailers in 2013
Chicago — Despite all the headlines about Canadian and global growth, U.S. expansion remains a key growth strategy for retailers, according to a survey of 100 retail chief financial officers by BDO USA.
In the seventh-annual BDO Retail Compass Survey of CFOs, 30% of the executives said U.S. expansion will be their priority growth tactic in 2013, followed by improving merchandise assortment (24%) and e-commerce and mobile commerce (22%).
“The retail storefront isn’t going anywhere just yet,” said Ted Vaughan, partner in the retail and consumer products practice at BDO USA, a professional services firm providing assurance, tax, financial advisory and consulting services. “The opportunities abroad and online are clear, but retail executives still believe that U.S. stores are a core part of the business. In addition to investing in existing stores, we’re also seeing several online brands introduce storefronts for the first time as they look to appeal to shoppers who want to see and try on merchandise in person.”
Many retailers also will be looking to add staff in stores and their corporate offices. Over one-third of CFOs (34%) said the number of employees at their company will increase this year.
Other major findings of the survey include:
• Executive compensation may rise, but performance metrics are important. Attracting and retaining strong leaders is paramount to success as retailers reshape strategy and launch growth initiatives. As a result, 30% of CFOs expect their management’s compensation to increase this year, and only 5% forecast a decrease, despite continued scrutiny around pay packages. Still, a majority of retailers (66%) said their company’s leaders have an incentive plan to tie pay to performance, and 71% reported that a profitability-based metric is the primary measure.
• Regulation and industry competition rank among top risks. A majority of CFOs (34%) cited federal, state and local regulations as the top risk to their business in the next year.
In addition, 32% of CFOs said competition and consolidation is their most concerning risk as they look to differentiate offerings and attract consumers in a crowded marketplace. Retailers also pointed to U.S. and foreign supplier and vendor issues (16%), data breaches (12%) and geopolitical events and natural disasters (6%) as top risks in the year ahead.
• Retailers’ investments are proof of omni-channel push. When asked where they plan to invest the most capital this year, 32% of the CFOs said overall advertising and promotions will be their biggest investment. Twenty-nine percent of CFOs said they will invest the most capital in their e-commerce channel, and 26% said redesigning/remodeling stores will be their top investment.
The BDO Retail Compass Survey of CFOs examined the opinions of 100 CFOs at leading retailers throughout the country. The survey was conducted in January and February of 2013.
Planet Retail on Costco’s Q2 Results
Costco Wholesale Corp.’s winning streak continues as the chain reported a better-than-expected 39% increase in profits for its fiscal second quarter. Here is Planet Retail’s take on the company’s most recent performance and future prospects:
“Costco continues to outperform its peers in terms of overall sales growth, comparable club gains, and space and SKU productivity,” said Sandy Skrovan, U.S. research director, Planet Retail. “The retailer’s ability to keep members engaged and coming back for more is unparalleled. It has some of the most loyal customers across retailing.”
Based on a mid-year assessment, Planet Retail remains optimistic about the company’s future growth prospects.
Skrovan added: “A re-acceleration of club expansion efforts, both in the US and abroad, and advances in e-commerce on a global perspective will propel the retailer forward. Five years ago, international operations generated less than a quarter of Costco sales. Five years from now, we project a third will come from international.
“By 2018, Costco will have doubled its sales in the space of a decade, a remarkable feat considering it’s the result of entirely organic growth.”
Profits up at Urban Outfitters
PHILADELPHIA — Net income rose to $83 million at Urban Outfitters for its fourth quarter from $39.26 million in the year-ago period, on strong same-store sales and higher revenue.
Total company net sales for the quarter increased 17% to $857 million. Comparable retail segment net sales, which include comparable direct-to-consumer channel, increased 11% for the quarter, while comparable-store net sales were flat.
Comparable retail segment net sales at Free People, Urban Outfitters and Anthropologie increased 37%, 11% and 7%, respectively. Direct-to-consumer net sales surged 44% and wholesale segment net sales grew 22% for the quarter.
Sales from Urban Outfitters grew 16.5%, while Anthropologie sales rose 11.9%. Free People sales surged 39.9%.
For the year ended January 31, 2013, total company net sales increased to $2.8 billion or 13% over the prior year.
"We entered the year with a plan to invest in initiatives to drive top line growth and improve margins,” said CEO Richard A. Hayne. “We succeeded on both fronts especially in the fourth quarter. We will pursue a similar strategy in the current fiscal year as we believe we have only begun to unlock the opportunities ahead of us.”