Retail CFOs Optimistic about 2015 Sales and Consumer Confidence

With solid sales gains at the end of 2014, retail chief financial officers are feeling upbeat about sales and consumer confidence in the year ahead. Preliminary results from our 2015 BDO Retail Compass Survey of CFOs show that retailers forecast a 3.9 percent increase in total sales and a 3.7 percent increase in comparable store sales this year, in line with the recently released National Retail Federation (NRF) projections of a 4.1 percent increase in sales for 2015. What’s more, nearly two-in-three CFOs surveyed expect comparable store sales to increase. 

Helping bolster these optimistic projections are consumer confidence levels that have continued to trend upwards. In January, the Conference Board noted that consumer confidence hit its highest mark since 2007, and our survey found that a majority (54 percent) of retailers expect this positive momentum to continue in 2015. Still, CFOs remain cognizant of factors that could disrupt these increases, and chief among them is financial market volatility, cited by roughly one-in-four (26 percent) CFOs as a potential impediment. Certainly, markets experienced a volatile start to 2015, due in part to an uncertain geopolitical climate in Europe and the Middle East, as well as sliding oil prices. On that note, another 26 percent of CFOs expect fuel prices to impact confidence levels in 2015, compared to just 7 percent in 2014, as the record low prices over the past few months have helped ease consumers’ discretionary spending.

At the same time, promising job market gains through the end of 2014 and into January have pushed concerns about consumer unemployment far down on the list of retailers’ concerns this year, as only 23 percent of them cited it as the top factor expected to impact confidence levels this year—the lowest amount in the survey’s nine-year history. Regarding their own employment plans for the year ahead, nearly six-in-ten (59 percent) retailers plan to maintain their 2014 employment numbers, one-in-three plan to increase their rosters, and a majority (59 percent) will increase their compensation levels to attract and retain key employees.

When it comes to performance, retailers are most worried about the hyper-competitive marketplace in the year ahead. As news of a merger between Staples and Office Depot stole headlines earlier this month, a plurality (37 percent) of CFOs cited competition and consolidation as their top concern for 2015. We entered 2015 with a relatively mild political landscape in Washington, complete with a GOP-controlled Congress, which likely contributed to retailers’ concerns over federal, state and/or local taxes falling by 50 percent year-over-year, with only 19 percent of CFOs noting it as their top perceived risk. Meanwhile, cybersecurity concerns remain top of mind for retailers following another year of large-scale, high-profile data breaches. Although IBM claims the number of cyber attacks against retailers fell in 2014, CFOs are still ardently focused on avoiding these situations, and 20 percent of them noted customer data security as their top concern for the year ahead, up from 12 percent last year.

When it comes to holiday promotional efforts, retailers saw successes and flops in a changing environment that brought 4 percent growth in sales, according to the NRF. As my colleague Ted Vaughan noted, this was the earliest—and longest—season on record, as retailers stretched their promotional activity from the first days of November, all the way to January. Convenient and competitive offers were critical to winning over consumers early and often, and free shipping (cited by 26 percent), price matching (cited by 18 percent), and email and social media promotions (cited by 16 percent) were the most successful holiday promotional strategies, according to CFOs. While this focus on digital strategies highlights the competitive advantage provided by online channels, more traditional tactics didn’t deliver as strongly. With Black Friday and Cyber Monday sales relatively muted due to more promotional activity in early November, Thanksgiving Weekend deals topped the list of 2014’s least successful holiday strategies, cited by 31 percent of retailers as such.

Stay tuned to the blog for additional findings from this year’s Retail Compass Survey of CFOs, including retailers’ expectations for M&A and IPO activity in 2015.