NEW YORK--()--Market share defensibility will remain a key challenge for many traditional U.S. retailers in 2013, against a backdrop of minimal growth and heavy competition, according to Fitch Ratings. Fitch views trends in market share as an important indicator of a company's long-term financial outlook.
In view of the strong growth in online sales and other alternative formats, traditional retailers that are willing and capable of investing in a multi-channel strategy will continue to drive market share gains at the expense of retailers that struggle to maintain relevance in a mature but dynamic sector. In addition, retailers that in general lack a sound strategy and financial resources to fend off competition are more susceptible to the negative rating pressure.
While Fitch's overall credit outlook for the U.S. retail industry is generally stable for 2013, there will continue to be a modest negative tilt to rating activity.
Concerns around market share losses have resulted in multi-notch downgrades over the past 24 months on some of the largest industry participants. Fitch may take additional negative rating actions in 2013 as indicated by the Negative Outlooks on several retailers.
Fitch expects 3-4% total retail sales growth in 2013, similar to 2012 levels, driven mainly by 2-3% in comparable store sales (comps) and modest square-foot expansion. Fitch expects slow improvement in employment levels and flat to lower wages, which could be further affected by food inflation next year, will translate into uneven comps performance among retailers.
Fitch also expects holiday retail sales to grow at 2%-4% a decline from 5.6% in 2011. The lower end of the range reflects Fitch's expectation that the aftermath of Hurricane Sandy could dampen consumer spending through the holiday season, particularly in the Northeast and Mid-Atlantic states, and a potential modest effects from the uncertainty surrounding the impending fiscal cliff.
The full 'U.S. Retail 2013 Outlook' is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2013 Outlook: U.S. Retailing -- Grab for Share Intensifies