Retail CFOs Project 3.9 Percent Boost to Sales in 2015: BDO Survey

February 2015

Gordon Porter
Bliss Integrated Communication
(212) 221-4521                                                                                                    
gordon@blissintegrated.com

Chicago – On the heels of solid holiday shopping season performance, retail chief financial officers are looking to 2015 with modest optimism. According to a new BDO USA, LLP survey, retail CFOs predict a 3.9 percent increase in total sales and a 3.7 percent increase in comparable store sales in the year ahead, coming in about one percentage point lower than 2014’s bullish projections. Still, nearly two-in-three (66 percent) retailers expect comparable store sales to increase, and with a full 71 percent of retailers including online sales in their comparable store sales reports, a considerable amount of this 2015 growth may come from further e-commerce sales, which grew 16 percent in 2014, according to eMarketer.
 
Behind retailers’ positive sentiments are upwards-trending consumer confidence levels that consistently rose in Q4 and reached 2007 levels in January, according to the Conference Board. A majority of retailers (54 percent) expect these increases to continue in 2015, despite a number of issues that could hamper gains. Chief among these concerns is financial market volatility, which roughly one-in-four CFOs (26 percent) note as a potential impediment to confidence. The stock market has already seen a shaky start to 2015, due in part to an uncertain geopolitical climate and ongoing declines in fuel prices. Speaking of, another 26 percent of retailers expect fuel prices to notably impact confidence levels, compared to just 7 percent in 2014, as continued rock bottom pump prices help lift consumers’ discretionary spending. Meanwhile, with slow but promising job market gains over the past several months and a strong January jobs report, only 23 percent of retailers cite unemployment as the top factor impacting consumer confidence this year—the lowest amount in the survey’s nine-year history.
 
“Steadily improving business and labor market conditions helped deliver a strong end to 2014, and as consumer confidence and unemployment are now at pre-recession levels, retail CFOs are upbeat about 2015 performance,” says Doug Hart, partner in the Consumer Business practice at BDO. “This momentum has already carried into the New Year, buoyed by ongoing recovery in the housing market and a record decline in fuel prices. As they look ahead to what are typically the slower winter and spring months, retailers are hoping these positive signals carry through to the second half.”
 
These findings are from the ninth annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The survey was conducted in January 2015.
 
Other major findings of the 2015 BDO Retail Compass Survey of CFOs:
 
Competition and consolidation top retailers’ list of concerns. Faced with a cutthroat retail environment rife with M&A activity—including Staples’ planned merger with Office Depot—a plurality of CFOs (37 percent) say that competition and consolidation in the sector is their top concern for 2015. As if competition for market share and consumers’ limited dollars weren’t enough, retailers will also be vying for qualified workers to strengthen both brick-and-mortar and e-commerce operations in anticipation of this year’s expected growth. While nearly six-in-ten (59 percent) plan to maintain their 2014 employment numbers, one-in-three retailers plan to increase their rosters, and a majority (59 percent) will increase their compensation levels to attract and retain key employees.
 
Heading into 2015 with a relatively mild environment in Washington and a GOP-controlled Congress, retailers’ concerns over federal, state and/or local regulations fell nearly 50 percent year-over-year, with only 19 percent noting it as their top perceived risk for the year ahead. Meanwhile, despite a decline in the overall number of cyber attacks against retailers in 2014, according to IBM, the year was still dominated by headlines of high-profile data breaches impacting major players. As they look to bolster their cybersecurity to avoid such scenarios, the number of CFOs noting protection of customer data as their top concern increased from 12 percent in 2014 to 20 percent this year.
 
Free shipping wins, Thanksgiving Weekend promotions flop. Holiday sales increased by 4 percent according to the National Retail Federation, in line with the projection of 4.1 percent identified in BDO’s Compass Survey of Retail CMOs last Fall. This past season was the longest on record, with retailers stretching out their promotional activity from the day after Halloween, all the way through to January. Getting in front of consumers early and often required brands to offer convenient and competitive deals for online shoppers, and free shipping (cited by 26 percent), pricing matching (cited by 18 percent), and email and social media promotions (cited by 16 percent) came in as this year’s most successful holiday promotional strategies. At the same time, with Black Friday and Cyber Monday sales relatively muted due to more promotional activity in early November, it’s not surprising that Thanksgiving Weekend deals came in as this year’s least successful strategy, cited by 31 percent of retailers as such.
 
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.
 
About the Consumer Business Practice at BDO USA, LLP
BDO has been a valued business advisor to consumer business companies for over 100 years. The firm works with a wide variety of retail and consumer business clients, ranging from multinational Fortune 500 corporations to more entrepreneurial businesses, on myriad accounting, tax and other financial issues.
 
About BDO
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals.  The firm serves clients through 58 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,328 offices in 152 countries. 
 
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information please visit: www.bdo.com