According to a new study conducted after the financial market meltdown in September by BDO Seidman, LLP, chief marketing officers (CMOs) at larger U.S. retailers expect comparable store sales for the 2008 holiday season to decrease from last year by a drastic 2.7%.
“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% 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
39% of CMOs at leading retailers expect comparable store sales to decrease this holiday season, while 41% expect sales to be flat and only 20% expect sales to increase. In 2007, only 5% of CMOs cited a decrease in sales, while 41% cited increased sales and 54% said sales would be flat. Looking back to 2006 holiday sales predictions, when the economy was much brighter, 67% of retailers expected an increase in sales, while 31% said sales would be flat and only two percent said sales would decrease.
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 years same store sales prediction of 5.03% 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.
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% of CMOs citing energy as the biggest concern.
65% of CMOs do not expect to see a meaningful turnaround in the economy until the third quarter of 2009 or beyond, with 29% citing a turnaround in the third quarter, 17% citing a turnaround in the fourth quarter and 19% expecting a turnaround in 2010. By comparison, 47% 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.
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%).
