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Meghan Warren
Bliss Integrated Communication
212.584.5469
Meghan@BlissIntegrated.com

Wednesday, February 13, 2013
RETAILERS FORECAST MODEST SALES INCREASES FOR 2013, BDO USA SURVEY FINDS
CONSUMER CONFIDENCE IS A KEY CONCERN, BUT RETAILERS ‘NO LONGER FEAR THE WORST-CASE SCENARIO’

Chicago, IL – Following uneven sales results in December and January, retail executives are moderating their expectations for 2013. According to a new survey by BDO USA, LLP, retail CFOs project a 3.2 percent increase in total store sales, down from last year's expected 4.5 percent increase, but still in line with recent projections released by the National Retail Federation. Similarly, they anticipate a 2.3 percent increase in comparable store sales this year, down from last year's projected 4.1 percent growth. While concerns over consumer confidence are likely driving these more conservative projections, the increase comes on top of 2012's strong 4.2 percent growth. Moreover, only seven percent of CFOs say they expect their total sales to decrease this year, a sign that retailers see the industry stabilizing.

"The mixed results of the past few months have retailers looking ahead with caution," says Doug Hart, partner in the Retail and Consumer Products practice at BDO. "But they no longer fear the worst-case scenario. As housing markets and other influencers of consumer confidence improve, the possibility of a decline in sales grows less likely."

With economic concerns lessening, retailers are focusing on adapting to the new normal in consumer behavior: online shopping. Just as stores integrate their brand experience across channels, they are also beginning to integrate online sales into their broader sales accounting practices to develop a more accurate picture of their performance. Two-thirds (66 percent) of CFOs say they include online sales in their comparable store sales reports, and e-commerce is also occupying a larger piece of the sales pie. Nearly three-in-four CFOs (74 percent) expect their e-commerce sales to increase this year, and on average, retailers anticipate a 6.9 percent increase in online sales in 2013.

These findings are from the seventh-annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country. The survey was conducted in January and February of 2013.

Other major findings of the 2013 BDO Retail Compass Survey of CFOs:

Consumer confidence remains unstable as tax concerns persist. Consumer confidence fluctuated substantially over the course of 2012, and started 2013 at a one-year low. With consumers watching the ongoing deficit and debt conversation unfold in Washington and seeing little substantial job growth, they are feeling the fragility of economic recovery. Retail executives are all too aware of the tenuous economic situation and are carefully watching the leading influencers of consumer confidence: 40 percent cite unemployment levels as the top factor influencing consumer confidence, while 24 percent and 18 percent cite tax increases and personal credit availability, respectively. And although the fiscal cliff debate was ostensibly resolved at the beginning of the year, retailers express concern that changes to individual taxes will further stretch consumers' budgets. When asked which tax changes concern them most in the coming year, 23 percent of CFOs cite individual income taxes, second only to corporate taxes (30 percent).

"Retailers have already observed increased consumer anxiety due to the expiration of the payroll tax holiday at the beginning of the year," says Randy Frischer, tax partner in the Retail and Consumer Products Practice at BDO. "The national tax debate is not over, and retailers know that customers may have less money to spend this year than last."

Mobile engagement is here to stay amid push to omni-channel retailing. If the 2012 holiday season is any indication, mobile engagement has become a cornerstone of retail operations. Consumers can expect to see ongoing engagement via these channels, with 60 percent of retailers planning to maintain their investment in mobile for 2013 and 38 percent planning to increase it. Retailers continue to tinker with ways to integrate mobile and create an omni-channel shopping experience, ranging from installing mobile technologies in their stores (such as in-store GPS and similar apps) to developing mobile shopping apps for the proliferating number of smartphones and tablets on the market.

Holiday post-mortem reveals that digital promotions are overtaking old-fashioned advertising. As the New Year begins, retail executives are analyzing holiday strategies to determine what worked best. In 2012, some of the most successful campaigns like Gap's "Pin to Win" promotion engaged customers via online channels. One-third of CFOs cite email and social media promotions as a top strategy in 2012, and 16 percent cite free shipping. And with consumers still very focused on deals, promotional discounting remains a stalwart of holiday strategy, with 29 percent of CFOs indicating that it was their most successful strategy last year. When asked about the least successful tactics, on the other hand, 41 percent cite extended store hours and 22 percent cite Thanksgiving weekend promotions. Despite record Thanksgiving weekend sales, retailers may be weary of competing for market share over what are often low-margin sales.

The BDO Retail Compass Survey of CFOs is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's retailers.

Material discussed in this release is meant to provide general information and should not be acted on without professional advice tailored to your firm's individual needs.

About BDO

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