Holiday: Retailers Foresee Tough Margins

Chicago —Merchandisers expect holiday 2006 to be strong on sales but tough on margins, suggesting that retailers plan to absorb rising energy and transportation costs rather than pass them on to consumers, according to software company Oracle.

Oracle's Retailer Perceptions Holiday Survey, released at the Retail Systems Expo in Chicago, found that retailers also expect holiday markdowns to start early and run deep. Optimists in the survey pointed to the strength of the economy and the introduction of new merchandising strategies. Pessimists cited rising gas pricing as a factor likely to depress spending.

While 51% of retailers surveyed projected comp growth between 5% and 9% for the 2006 holiday season over last year, the next largest group, 39%, expect comps to be flat.

The majority, 61%, expect flat holiday margins, and 27% project lower margins. Executive management and IT management are more pessimistic about margins than senior management (merchandising, planning, marketing managers, etc.) and store operations respondents, Oracle said.

Retailers cited staff training as the single investment that yields the greatest ROI for their companies, followed by inventory planning and management solutions.

Oracle surveyed 186 executives across the country, including national chains, regionals and independents. Roughly one-third of the respondents operate businesses with revenues over $1 billion, with 28% of respondents running businesses between $100 million to $500 million. Another 22% operate businesses of less than $5 million.