While retail executives are looking for modest growth this holiday season, they're also bracing themselves for more last-minute markdowns, as consumers fret about the economy.
In its new Retail Compass Survey of CFOs, BDO says the 100 retail CFOs it polled are forecasting a 3% gain in sales for 2011, the most upbeat prediction since 2007. And they project a 3.5% increase in same store sales for the second half of the year, nearly doubling the pessimistic projections of 1.9% they were making in the same period last year.
Still, 77% expect that the economy will continue to stagnate, and just 11% expect to see an economic turnaround in the next year. (That's up a bit from 9% last year.)
"Compared to all the headlines about gloom and doom, you have to take some solace in this prediction of 3%," Doug Hart, partner in the retail and consumer product practice at BDO, tells Marketing Daily. "And these are CFOs at large retailers, so they are realists, and not overly optimistic. They've got live access to sales data."
And macroeconomics, he says, just aren't worrying consumers as much many other pundits are saying. "Despite low confidence levels, macroeconomic conditions are not weighing on the consumer's wallet as much as expected, and CFOs anticipate moderate spending levels to continue through the holiday season."
Still, they worry about the unemployment rate, and 57% say it is the biggest barrier to consumer confidence. Fuel prices (17%), personal credit availability (14%), a weak housing market (7%) and inflation (5%) are also big concerns.
So stores will be keeping a close eye on sales and inventories, and may well start lowering prices as the holiday approaches. "There has been some acknowledgement that there is a likely to be a bit more discounting this season," he says. "But retailers are going to try to use early strategic promotions to get people in, and hold the line on broader discounts as long as they can."