Retailers Expect Modest Sales Gains in 2013

Following uneven sales results in December and January, retail executives are moderating their expectations for 2013. According to our new Compass Survey of Retail CFOs, retail executives 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 and no longer fear the worst-case scenario.

Consumer confidence is likely to remain the largest thorn in retailers’ sides this year, particularly as it relates to potential further tax changes. Confidence took a hit in January when the payroll tax holiday expired just in time for the first paycheck of the year, and high-income shoppers are feeling the sting of their first major income tax hike in 20 years. With the Washington deficit debate continuing, consumers fear that further tax changes may be headed down the pike. CFOs know this, and when asked what aspects of tax reform concern them most, nearly one in four (23 percent) cite individual income taxes. Meanwhile, job creation continues to inch along slowly and unemployment remains stubbornly stagnant. As a result, 40 percent of the CFOs we surveyed believe that unemployment will have the biggest impact on consumer confidence in the coming year.

Yet there may still be room for optimism. January posted strong same-store sales results, and the housing market is beginning to improve. Indeed, a weak housing market is no longer a top concern for retailers: This year, only 6 percent cite it as a major influencer of consumer confidence, in comparison to the 36 percent who cited it in our 2008 survey. In addition, e-commerce continues its rapid ascent: According to eMarketer, global online sales topped $1 trillion for the first time in 2012, and nearly three-in-four CFOs (74 percent) expect their e-commerce sales to increase this year. On average, retailers anticipate a 6.9 percent increase in online sales in 2013.

With consumer confidence on uneven ground, retailers are adapting their strategies to ensure that they exceed consumer expectations and reach shoppers across multiple platforms. This means taking more of their business online and paying attention to this crucial channel. Retailers are also continuing their integration of mobile commerce into their business strategy for 2013: 60 percent of CFOs plan to maintain their level of mobile engagement, while 38 percent plan to increase it. With more consumers shopping on their tablets and smartphones, we expect m-commerce to become a bigger slice of the retail sales pie in the future.

Stay tuned for more insights from the seventh edition of our Compass Survey of CFOs, including CFOs’ thoughts on M&A and IPO activity in the retail sector in 2013.