Sales Outlook of Retail CFOs Reflects Cautious Optimism

Buoyed by a strong back-to-school season and undeterred by recent reports of declining consumer confidence, retail CFOs are optimistic about the holiday season and year-end sales. In fact, retailer projections of a 3.6% increase in comparable store sales for the second half of 2012 marks the most optimistic projection in four years. This is just one of several positive findings from this year’s BDO Retail Compass Survey of CFOs, an annual survey that examines the predictions and sentiments of 100 retail CFOs. Boosted by expectations of a strong holiday season, the survey’s respondents also forecast an overall increase of 4.5% in total sales for 2012.

Optimistic sales forecasts are also reflective of growing confidence in the state of the economy. While the majority (57%) of respondents expect to see a continuation of economic conditions in the near future, this year 32% of CFOs forecast an ongoing economic turnaround—that’s nearly three times the number of CFOs who expected a turnaround last year. Nonetheless, increasing economic optimism comes with plenty of reservations. As the unemployment rate hovers above 8%, joblessness will undoubtedly affect holiday shopping practices this season. Reflecting this worry, 41% of CFOs say unemployment will have the greatest impact on consumer confidence during the remainder of 2012. Other year-end challenges cited by CFOs include the presidential race and its outcome (29%), financial market volatility (15%), personal credit availability and debt levels (7%), a weak housing market (6%) and fuel prices (2%).

So how do retailers approach a holiday season that is both highly optimistic and highly guarded? Retailers will be paying particular attention to inventory levels this year. Despite sunny sales forecasts, retail CFOs know that shoppers are as price-conscious as ever. Finishing 2012 on a high note will mean careful decision-making around product selection and promotion decisions. A majority (55 percent) of CFOs say they have maintained their inventory levels for the 2012 holiday season. Overall, CFOs project a flat inventory increase of 1.1% over 2011 levels. Combined with marketing strategies like exclusive products, free shipping, and in-store pickup (to name a few), retailers are hoping they have found the right balance for holiday success.

What’s ahead for online sales and mobile investment for the holidays? Stay tuned for more results from this year’s Compass Survey of CFOs.