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BDO USA: Retailers bullish on holiday, cautious on inventory; jobs top concern


Chicago --The marketing chiefs of U.S. retailers are optimistic about the upcoming holiday season, forecasting a solid 4.1% increase in overall holiday store sales, according to a recent BDO USA survey. The projection is in line with the National Retail Federation’s 4.1% expected holiday sales increase, and is a full percentage point higher than actual retail sales gains in the 2013 season.

BDO’s 2014 Retail Compass Survey of CMOs, a poll of 100 retail chief marketing officers on their holiday shopping season outlook, finds that while retailers are bullish on holiday sales, they will keep inventory levels constant. Many retailers began purchasing holiday inventory early this year as uncertainties around labor agreements at critical West Coast ports forced them to consider contingency plans, the report notes.

But despite early buying and slightly more upbeat overall sales projections, retailers are largely sticking with 2013’s numbers when it comes to stocking shelves with merchandise. Fifty-five percent of retailers say they have kept their inventory levels consistent with last year, pointing to an expected 1.1% increase in overall inventory for the 2014 season.

In other findings, 65% of the surveyed executives believe sales will increase this year; only 12% expect a sales decrease. The increased optimism points to ongoing improvements in the broader economy: Housing markets are recovering, the employment picture is slowly rebounding and consumer confidence is rising, though still volatile.

“Sales gains have been uninspiring this year, but retailers have pushed through, and there’s confidence in the air as they gear up for the make-or-break holiday season,” said Doug Hart, partner in the Retail and Consumer Product Practice at BDO USA. “To execute on this confidence, retailers need the right mix of attractive new products and enticing deals to loosen the purse strings of skittish consumers. Expect to see an even longer season this year, with heavy promotions from November through January.”

Additional findings of the 2014 BDO Retail Compass Survey of CMOs include:

• Consumer electronics most popular category. The CMOs anticipate that consumer electronics will be both the top performing (73% ) and most discounted (58%) category this holiday season. Apparel (13%) hangs on as the second highest performing segment.

• Gift Card Sales Growth Plateaus. Among surveyed retailers who sell gift cards, 38% expect gift card sales to increase this year, a notable drop from 2013, when 61% forecasted an increase.

• Unemployment Top Threat to Holiday Sales. In terms of the single issue that presents the biggest risk to holiday sales, a plurality of retailers (45%) identify unemployment as their number one perceived threat.

Regarding other risks to sales, the number of retailers citing energy and fuel costs (15%) remains constant with last year’s figures, as does the amount that cite global market volatility (7% vs. 9% in 2013) and tax changes (7% vs. 6% in 2013). Fewer retailers (12% vs. 16% in 2013) noted housing market changes as their greatest risk to holiday sales.
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