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U.S. Retailers Forecast a 2.7% Decrease in Comparable Store Sales and a 2.8% Decrease in Total Sales This Holiday Season According to BDO Seidman, LLP Survey of CMOs |
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Chief Marketing Officers Cite Increased Promotions, Reduced Inventory |
According to a new study conducted after the financial market meltdown in September by BDO Seidman, LLP, one of the nation's leading accounting and consulting organizations, chief marketing officers (CMOs) at leading U.S. retailers expect comparable store sales for the 2008 holiday season to decrease from last year by a drastic 2.7 percent. Concerns about credit and the economy have led three quarters (75%) of the CMOs to be more cautious about their sales and inventory purchase plans this holiday season, up from 64 percent of CMOs who reported cautious inventory plans last year. A whopping majority (88%) of CMOs expect to offer more discounts and promotions this holiday season as a result of the economy and credit crunch, which is up from 73 percent last year. Most of the CMOs (42%) cite that those discounts will take the form of in-store promotions, followed by markdowns (37%) and online promotions (20%).
'The pessimism among Chief Marketing Officers this year is unprecedented and highly attributed to the recent turmoil in the financial markets,' said Al Ferrara, a Partner in the Retail and Consumer Product Practice at BDO Seidman. 'While there is much uncertainty in the retail sector this season, retailers have been consistent in citing reduced inventory purchases as a result of tightened credit and slow spending. Without a doubt, we can expect a very promotional environment that will appeal to cost-sensitive consumers, despite the impact it may have on shrinking margins.'
These findings are from the most recent edition of The BDO Seidman Retail Compass Survey which examined the opinions of 100 chief marketing officers at leading retailers located throughout the country regarding their expectations of the 2008 holiday shopping season. The retailers in the study were among the largest in the country, excluding automotive dealers and restaurants, with revenues of more than $100 million, including 13 percent of the top 100 based on annual sales revenue. The survey was conducted in October of 2008.
Some of the major findings of The BDO Seidman Retail Compass Survey of CMOs:
• An Unprecedented Poor Holiday Season. Thirty-nine percent of CMOs at leading retailers expect comparable store sales to decrease this holiday season, while 41 percent expect sales to be flat and only 20 percent expect sales to increase. In 2007, only 5 percent of CMOs cited a decrease in sales, while 41 percent cited increased sales and 54 percent said sales would be flat. Looking back to 2006 holiday sales predictions, when the economy was much brighter, 67 percent of retailers expected an increase in sales, while 31 percent said sales would be flat and only two percent said sales would decrease.
• C-Level Forecasts. Overall, CMOs are predicting a 2.7 decrease in comparable store sales and a 2.8 decrease in overall sales, which is drastically down from last year's same store sales prediction of 5.03 percent growth. By comparison, a survey of CFOs conducted in August and early September, found the CFOs expected comparable store sales for 2008 to be flat (.72%), but that was before the financial market meltdown.
• Critical Concerns. Recent market turmoil has trumped all other concerns this holiday season. When asked to pick one external issue that will have the greatest impact on the holiday shopping season, more than half (54%) of the CMOs cited uncertainty in the financial markets. Other issues cited were high energy and fuel costs (25%), unemployment (10%), the weak housing market (8%) and the Presidential election (3%). In 2007, a majority (27%) of the CMOs viewed credit concerns as the number one concern, but high fuel costs (22%) and a weak housing market (17%) were close behind. Gas prices were the chief concern in 2006, with 52 percent of CMOs citing energy as the biggest concern.
• Turnaround Predictions for Q3 of 2009. Sixty-five percent of CMOs do not expect to see a meaningful turnaround in the economy until the third quarter of 2009 or beyond, with 29 percent citing a turnaround in the third quarter, 17 percent citing a turnaround in the fourth quarter and 19 percent expecting a turnaround in 2010. By comparison, 47 percent of the CFOs predicted (in August and early September) that the economy will experience a meaningful turnaround in the first half of 2009, with the highest concentration of CFOs (28%) citing the second quarter as the most promising.
• Retailers Need a Financial Rebound. More than a third (35%) of retailers say that an economic turnaround will be most dependent on a rebound in the financial markets. Other responses included a rebound in the housing market (22%), lower fuel and energy costs (20%), a new president (16%) and lower unemployment (6%).
The BDO Seidman Retail Compass Survey is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief marketing officers, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's largest retailers (with revenues ranging from over $100 million to billions of dollars).
BDO Seidman, LLP has been a valued business advisor to retail and consumer products companies for almost 100 years. The firm works with a wide variety of retail clients, ranging from multinational Fortune 500 corporations to more entrepreneurial businesses, on a myriad of accounting, tax and other financial issues.
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