Retailers retreat slightly on expectations for 2013

A survey conducted by consulting firm BDO USA, LLP finds that following uneven sales results in December and January, retail executives are moderating their expectations for 2013 sales. However, those executives also noted that they expect online shopping only to keep growing.

BDO’s poll of 100 CFOs at major retail companies now projects a 3.2% increase in total store sales, down from last year’s expected 4.5% increase and anticipate a 2.3% increase in comparable store sales this year, down from last year’s projected 4.1% growth.

While concerns over consumer confidence are likely driving these more conservative projections, only 7% of CFOs participating in the firm’s survey expect their total sales to decrease this year – a sign that retailers see the industry stabilizing, noted Doug Hart, partner in the retail and consumer products practice at BDO.

“The mixed results of the past few months have retailers looking ahead with caution,” he explained. “But they no longer fear the worst-case scenario. As housing markets and other influencers of consumer confidence improve, the possibility of a decline in sales grows less likely.”

With economic concerns lessening, retailers are focusing on adapting to the new normal in consumer behavior: online shopping. Just as stores integrate their brand experience across channels, they are also beginning to integrate online sales into their broader sales accounting practices to develop a more accurate picture of their performance, Hart pointed out.

Indeed, 66% of CFOs in BDO’s poll said they include online sales in their comparable store sales reports. E-commerce is also occupying a larger piece of the sales pie as nearly three-in-four CFOs (74%) expect their e-commerce sales to increase this year, according to BDO, with retailers anticipating a 6.9% increase on average in online sales in 2013.

The big worry in the retail sector, however, remains consumer confidence, which fluctuated substantially over the course of 2012 and started 2013 at a one-year low, the firm noted.

With consumers watching the ongoing deficit and debt conversation unfold in Washington and seeing little substantial job growth, they are feeling the fragility of economic recovery – and retail executives are all too aware of this tenuous economic situation and are carefully watching the leading influencers of consumer confidence, said Randy Frischer, a tax partner with BDO’s retail and consumer products practice.

He said some 40% of retail CFOs point to unemployment levels as the top factor influencing consumer confidence, while 24% and 18% cite tax increases and personal credit availability, respectively.

And although the fiscal cliff debate was ostensibly resolved at the beginning of the year, retailers express concern that changes to individual taxes will further stretch consumers’ budgets. When asked which tax changes concern them most in the coming year, 23% of CFOs cite individual income taxes, second only to corporate taxes at 30%.

“Retailers have already observed increased consumer anxiety due to the expiration of the payroll tax holiday at the beginning of the year,” Frischer added. “The national tax debate is not over, and retailers know that customers may have less money to spend this year than last.” 

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