Retailers Remain Cautious in Outlook

CHICAGO — Retailers overall remain cautious and most are predicting near-term economic stagnation, but a recent survey shows that some are becoming more optimistic about economic conditions.

Following a better-than-expected back-to-school season, retail chief financial officers surveyed by BDO USA here are projecting a 4.5% increase in total 2012 sales and a 3.6% gain second-half comparable-store sales. While 57% of respondents in the BDO Retail Compass Survey of CFOs 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.”

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Retailers in the survey cited product costs as a concern for creating pressure on margins, with 40% of retail CFOs noting it as the primary threat. That is closely followed by inventory levels and markdowns, with 36% of retail CFOs citing that as the top threat to their profit margins.

“Commodity costs may have stabilized, but price-conscious consumers are keeping retailers on their toes,” said Al Ferrara, partner and national director of the retail and consumer product practice at BDO. “This winter, meticulous inventory selection and promotion decisions will take center stage in the competition for holiday shoppers.”

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