Retailers lag behind in business expectations

A clear gap is emerging between retailers and the rest of the economy as consumers continue their reluctance to spend, according to the latest Dun & Bradstreet Business Expectations Survey.

Dun & Bradstreet surveyed 1,200 business owners and senior executives across major industry sectors in December 2010.

The survey reveals near-record business expectations for most sectors, but retailers have reported some of their most difficult circumstances in recent years.

Dun & Bradstreet director of corporate affairs Damian Karmelich says companies exposed to the emerging economies in Asia are keeping the economy afloat, while retailers struggle to secure sales.

“During the Christmas period, there has been an understandable focus on the challenges faced by retailers and the survey shows that retailers are preparing to discount in response to those challenges,” Karmelich says.

“However, for firms engaged in business-to-business trade and exposed to the growth of emerging economies like China, the outlook is positive.”

Despite Karmelich’s comments about retailers, the survey shows the sector is expecting a significant turnaround in results over the December and March quarters.

The report states: “The confidence of retailers has climbed significantly in recent months, with the retail sales index surging 10 points to 47.”

“However, despite these significant expectations for the New Year, retailers are yet to see strong gains in actual sales.”

According to the survey, sales expectations for the March quarter are strong, with 52% of firms anticipating increased sales.

Strong sales expectations are flowing through to profits, with this index rising by 22 percentage points since the September quarter to a net index of 34, with 47% expecting profits to increase during the March quarter.

According to Dun & Bradstreet chief executive Christine Christian, the strength of sales expectations is also driving inventories and employment plans, with firms anticipating a need to replenish stocks and take on new staff to meet demand.

The report reveals 16% of firms are planning to increase staff levels during the March quarter, with only 4% planning to reduce employee numbers.

With regard to employment expectations, durables manufacturers and wholesalers have the highest net indexes at 17 and 13 respectively, while retailers and nondurables manufacturers have respective indexes of 11 and seven.

Finally, 34% of businesses rank interest rates as their primary concern in the next quarter. While 30% consider wages growth to be the major influence on their business, with 10% believing fuel prices will have the greatest impact on their operation.