Retailers Eye Consumer Behavior as Economy Improves

CHICAGO -- Retailers are keeping a watchful eye on consumer behavior as ringing cash registers indicate consumers are loosening their purse strings, according to a study by BDO USA LLP, "The RiskFactor Report for Retail Businesses."

The study, which takes a look at risk factors listed in the most recent SEC 10-K filings of the largest 100 public U.S. retailers, found that consumer confidence and spending fell from the fifth most cited risk factor in 2010 to 11th this year.

The research indicated retailers are more concerned over consumer demand and interest (87 percent compared to 63 percent in 2010) as they try to grab consumers' attention with merchandising offers. And, the study found, general economic conditions still remains the top risk at 97 percent, although the decline in risks associated with consumer spending points to increasing retailer confidence in the economic recovery.

In addition, companies are becoming increasingly concerned with federal, state and local regulations, jumping up 28 percent this year to 92 percent. Risks associated with accounting standards and regulation saw a 24 percent jump this year to 72 percent as concerns over the new lease accounting standards, among other regulations, mount.

"Retailers are shifting away from the defensive recessionary mode. They are paying more attention to controllable risks, as opposed to external factors like economic conditions," said Doug Hart, partner in the Retail and Consumer Product Practice at BDO USA. "Consumer balance sheets are stronger, and retailers see a critical opportunity to sharpen inventory and offer a breadth of merchandise. Still, concerns persist in the boardroom over potential increases in taxes and regulation and whether consumers will continue to withstand price increases this summer and the upcoming back-to-school season."

Other concerns cited in the study include rising commodity costs, increased internal pressure on business strategy, rising personnel risks, protecting customer data and the return of mergers, acquisitions and growth plans.