Two-thirds of senior executives in the retail industry expect to see better revenue, profitability and an improving jobs picture in 2010, according to a recent survey conducted by KPMG
LLP, the audit, tax and advisory firm.
In the KPMG survey, which focused on the retail industry specifically, 70 percent of the executives said they expect business conditions to improve in 2010, with 68 percent expecting stronger revenue and 66 percent expecting improved profitability. However, 44 percent of those surveyed still believe the U.S. economy as a whole could take as long as 2011 or later to substantially recover.
Overall, 84 percent of retail executives see an improving jobs picture in their industry in 2010, with 52 percent saying it would be stable and 32 percent saying it will be better than 2009. At the same time, three-quarters of them said they had already instituted headcount reductions and only 14 percent were contemplating further such actions.
"This outlook for the year ahead and beyond should be heartening, since the importance of the U.S. retail industry to gross domestic product and overall economic health cannot be overstated. It's the second largest industry in the U.S. and employs the second highest number of people among all sectors," said Mark Larson, KPMG global retail sector chair.
"The KPMG survey findings reflected an expression of guarded optimism among retail executives, given the industry's challenges as demand for goods continued to plummet during the recession," said Larson. "Their optimism is in sharp contrast even with the latest report from the Commerce Department, which revealed last week that retail sales dropped in July - despite evidence that the economy has stopped contracting and that economists were forecasting a gain in sales."
The KPMG survey also asked retail executives to indicate if their strategic focus was now on investing for growth or cutting costs. More than half (54 percent) chose the investment option, but 46 percent said they were still focused on cost cutting.
Consumers the Key to Recovery
When survey respondents were asked to identify the triggers they think will spur a U.S. economic recovery, the most frequently cited factors by far were increased consumer spending (52 percent), improved consumer confidence (51 percent) and an increase in jobs/employment (48 percent).
Biggest Challenges to Recovery
When asked to identify the biggest challenges they currently faced in dealing with the economic downturn, retail leaders most frequently cited restoring consumer confidence (55 percent), finding new sources of revenue growth (51 percent), managing/cutting costs (48 percent), and adjusting to changing customer demand (46 percent).
Virtually all Retail execs say they have cut capital expenditures.
When asked to identify how they were coping with the economic downturn, more than nine in 10 retail industry executives (91 percent) said they cut capital expenditures.
A clear majority (77 percent) of the retail executives said they were implementing IT solutions to reduce operational costs as a means to adjust to the downturn.
Industry Well-Positioned for Recovery
Interestingly, 69 percent of retail executives believe their business is well-poised right now to take advantage of an economic recovery. Also, 49 percent of the respondents said they thought the retail industry would fully recover ahead of the U.S. economy, while 51 percent thought their industry would recover at the same time or after the U.S. economy.
"Those retailers who have taken the opportunity to consolidate, and to restructure their operations and risk exposure, as well as invest for the future during the past year are preparing for the new American marketplace surely to emerge as the economy rebounds," said Larson. "While the Conference Board's Consumer Confidence index continues to languish, the retail execs surveyed are cautiously optimistic that we've seen the economic bottom and 2010 will begin trending favorably for the industry."
The KPMG Industry Pulse Survey
The KPMG survey was conducted from May through July of 2009 and reflects the responses of 65 CEOs and other C-level suite executives in the retail industry. Approximately 31 percent of respondents work for retail companies with annual revenues exceeding $1 billion; 37 percent represent companies with annual revenues in the $250 million-$1 billion range and 32 percent represent companies with annual revenue below $250 million. Clarion Research Inc. conducted the survey and compiled the data.