Majority of Retail CFOs Are Concerned About the Election According to BDO Seidman, LLP Study

CHICAGO--(BUSINESS WIRE)--According to a recent study by BDO Seidman, LLP, one of the nation’s leading accounting and consulting organizations, a whopping 69 percent of chief financial officers (CFOs) at leading U.S. retailers are worried about tax reform as a result of the 2008 Presidential Election.

“Further, on top of shrinking margins, it is also an election year and most retail CFOs are very concerned about higher tax payments and fewer incentives as a result of any tax reform.”

Consumer confidence is also top of mind, with 57 percent of CFOs citing high fuel costs as the issue having the greatest impact on consumers so far in 2008, up by 10 percent from the first half of 2007. Looking forward to the balance of 2008, fewer CFOs (47%) cite fuels costs as having the greatest impact on consumer confidence, as CFOs report concern over other consumer issues including the housing market (28%), the election (13%) and inflation (11%). In regards to the recent economic malaise, 47 percent of the CFOs are predicting that the economy will experience a meaningful turnaround by July of 2009, with the highest concentration of CFOs (28%) citing the second quarter as the most promising.

“Last year, we saw consumers start to pull back when the economy weakened. But, alas, fuel costs skyrocketed in the first half of 2008, draining consumers’ discretionary income and spurring a perfect storm of economic factors that have lead us to the current recessionary climate. Retailers may remain wary for the rest of the year, as consumers stretch their dollars to cover inflation and, of course, heating bills,” said Al Ferrara, a partner in the Retail and Consumer Products Practice at BDO Seidman. “Further, on top of shrinking margins, it is also an election year and most retail CFOs are very concerned about higher tax payments and fewer incentives as a result of any tax reform.”

These findings are from the most recent edition of the BDO Seidman Retail Compass Survey which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country, with revenues of more than $100 million, including 24 percent of the top 100 based on annual sales revenue. The survey was conducted in August and September of 2008.

Some of the major findings of BDO Seidman Retail Compass Survey of CFOs:

Overall Sales Slide When comparing sales revenue in the first half of 2008 to the first half of 2007, more than half (64%) of retail CFOs report flat or decreased sales. Last year, 18 percent cited a decrease and 26 percent reported flat sales. Only 36 percent of retail CFOs say sales increased when comparing the first halves of 2008 to 2007, which is down from 56 percent who cited an increase last year when comparing sales revenue to the first half of 2006.
Comparable Store Sales Sink. Comparable store sales faired slightly worse in the first half of 2008, as 44 percent of the CFOs cite a decrease in sales when looking back on the first half of 2007, compared to only 22 percent of CFOs who reported a decrease last year when looking back on the first half of 2006. Twenty-one percent say that comparable store sales were flat in the first half of 2008.
Flat optimism. Looking forward, 36 percent of the CFOs anticipate that comparable store sales revenue will be higher in the second half of 2008 than they were in the second half of 2007, while 37 percent say sales will be flat and 27 percent cite sales will be lower. Overall, the CFOs estimate that the average comparable store sales growth for 2008 will be virtually flat, averaging 0.72 percent growth. Total revenue growth is estimated to be a higher 3.5 percent, but that is still down from an estimated 5.6 percent growth last year.
Top 100 Retailers. The largest retailers have had a more difficult time this year, with 48 percent of the CFOs at the top 100 retailers reporting decreased total sales, and 62 percent reporting decreased comparable store sales, in the first half of 2008 over the first half of 2007. Last year, the top 100 retailers were stronger than the average, with 83% reporting increased sales in the first half of 2007 over 2006. When asked about their total sales for 2008, half of the top 100 retailers predict that sales will be lower than they were in 2007. Thirty-nine percent of the CFOs anticipate that sales will be higher and 11 percent say sales will be flat.
Top 100 Retailers Battle Fuel Costs. Among financial officers at the top 100 retailers, 79 percent point to fuel costs as the primary issue to impact consumer confidence in the first half of 2008, up from 47 percent compared to last year’s survey. For the remainder of the 2008, 54 percent of the CFOs at the top 100 retailers cite fuel costs as the top issue, followed by the weak housing market (25%), the election (13%) and inflation (8%). Last year, when asked the same question, the majority (45%) of the top 100 CFOs cited the weak housing market as the primary issue impacting consumers.

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 financial 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.

About BDO Seidman, LLP

BDO Seidman, LLP is a national professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. Guided by core values including, competence, honesty and integrity, professionalism, dedication, responsibility and accountability for almost 100 years, we have provided quality service and leadership through the active involvement of our most experienced and committed professionals.

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