Retail Executives See Recession Ahead
While U.S. GDP is pegged to show growth of 1.9 percent from 2021 to 2022, retail executives polled by KPMG have a bearish outlook for this year — thanks to inflation.
The good news first: driving a lot of the GDP growth last year was a resilient consumer. The report’s authors said total retail sales for 2022 through November showed an increase of 8.5 percent compared to the same period in 2021.
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“Given these tailwinds, 80 percent of retail executives surveyed reported increasing top-line revenue from 2021 to 2022, with 75 percent reporting increases in operating profit,” KPMG stated. “Both in-store and online traffic appear to be drivers of this growth, with 72 percent of retailer executives noting an increase in consumer foot traffic in physical stores and 78 percent noting an increase in e-commerce traffic.”
Now the bad news: KMPG said 73 percent of retail executives “think the U.S. is already in a recession or will enter one in the next six months, which is up 32 percentage points from 41 percent in the August survey. This year’s report also revealed that 72 percent of executives polled “anticipate a recession lasting a year or less, which was less optimistic, down 9 percentage points, from 81 percent in August,” the report noted.
Like other recent surveys, retail executives said they expect in-store traffic to dip this year while seeing an increase in online sales. When asked about their most significant concerns this year, inflation topped the list, followed by increased operating costs, increased product input costs and eroded margins.
KPMG also found that 71 percent of retail executives polled said they are prioritizing supply chain efficiency over the next 12 months, “making it a more common priority than other strategic initiatives like top-line growth, e-commerce and labor.”
Regarding the supply chain, 56 percent of respondents cited sku rationalization as their top priority to improve it, which was followed by modifying the distribution network and diversifying the supplier base. With investments, 77 percent of those polled expect to increase spending on technology, while 76 percent said they would do so with equipment. Sixty-three percent of retailers polled said spending would be on increasing warehouse and distribution capacity.
With the workforce, 37 percent expect “to reduce headcount or not backfill employee attrition, while only 20 percent anticipate increasing headcount.” Additionally, KPMG said retailers increasing hourly wages to retain workers was down 38 points to 19 percent as compared to the May survey while increasing signing or retention bonuses dropped 35 points to 16 percent of those polled.
