Amid Economic Gloom, Retailers Remain Upbeat

Retailers are optimistic about the Christmas holiday season ahead, despite warnings in other sectors about a potentially worsening global economy.

Kohls Department Store
Gustav Caballero | Getty Images
Kohls Department Store

Department store operator Kohl's Department Stores said it expects to hire 10 percent more workers this year, or about 52,700 workers, to support its business during the holidays, which tends to be the busiest time of the year for retailers.

On average about 41 associates will be added to each of Kohl's stores, or an increase of 4 percent from 2011. The remaining workers, about 5,700 in total, will be added at its distribution centers to help support its ecommerce business, while more than 30 will be added to its credit operations.

The news from Kohl's follows a Hay Group survey issued earlier this month that predicted that retailers would be looking to hire more permanent and seasonal workers to handle the holiday rush. (Read More:Happy Holidays! Retailers Are Looking to Staff Up)

About 57 percent of retailers polled by the consulting firm said they would keep holiday hiring at about the same level as a year ago, while about 36 percent said they planned to hire more. That was a shift from last year, when about 10 percent of retailers said they would hire more seasonal workers than the prior year.

According to Hay, the retailers it polled offered a fairly consistent view of their expectations for the holiday season.

Kohl's announcement comes at a time when the retailer has been battling disappointing sales and weakening profit margins. However, the company said in a statement that the additional staff was needed to make sure the company provides "excellent customer service" during the holiday season.

In general, most of the holiday sales forecasts issued to date have been rather upbeat.

One of the latest, issued by BDO, was based on discussions with 100 chief financial officers at leading U.S. retailers conducted in August and September. Based on these conversations, retail CFO's are expecting an overall increase of about 4.5 percent in total sales in 2012 and a 3.6 percent increase in same-store sales for the second half of 2012.

Last week, ShopperTrak forecast a 3.3 percent increase in sales during the November and December holiday shopping period. The people-counting firm said the number of shoppers at stores will grow at a less robust pace than sales, but traffic to stores will still be up 2.8 percent from the year-earlier period.

The BDO forecast is an improvement over recent years. In 2011, the survey of retail CFO's resulted in a projected 3 percent gain in retail sales. That was far below the 7.3 percent gain in retail sales that occurred last year, according to the Commerce Department.

What's surprising about these forecasts is that they come at a time of increased concerns about the U.S. labor market and amid gloomy projections about the global economy.

Earlier today,FedExcut its fiscal 2013 outlook, citing a slowing world economy. FedEx has benefited from the shift by consumers to online shopping, which is expected to continue this holiday season. Still, the company has seen a drop in demand for its air express shipments as corporations look to save money by shipping through less expensive methods.

So far, U.S. consumers have shown themselves to be resilient to any potential slowing in the economy. This was made clear by robust back-to-school sales, which have in turn helped fuel optimism about holiday sales.

Still, Doug Hart, a partner in BDO USA's retail and consumer product practice, said retailers "aren't counting their dollars just yet."

"Forecasts are cautious as retailers closely watch unemployment, election results and inventory levels — any of which could throw a wrench in holiday results," Hart said.

One factor that is on the side of retailers is that the industry has maintained tight inventory levels for the holiday 2012 season. In the BDO survey, only one-in-four said they boosted inventory this year.

Retail CFOs are more willing to take a risk on not having enough product in stock and thereby losing sales, rather than risking having too much inventory and putting margins at risk if items are overstocked. This is a change in sentiment. In the 2011 survey, 53 percent of retail CFOs said insufficient inventory was a bigger risk than having too much on hand.

These executives overwhelmingly expect that unemployment will have the biggest impact on how consumers feel heading into the holiday season. About 60 percent said unemployment levels will have the biggest impact on consumer confidence, while only 29 percent said the presidential election and its outcome will be the biggest challenge.

At the moment, U.S. consumers seem to be remaining confident. The latest read on consumer sentiment as measured by the Thomson Reuters/University of Michigan showed the gauge at its highest level in four months.

Separately, a consumer survey conducted by Chase of more than 1,000 adults said about 64 percent of consumers believe the economy is either at a bottom or is getting better. Last year, only about 33 percent of consumers felt this way at this time.

One factor in the Chase survey was that consumers felt better about their own personal finances, with nearly eight in 10 consumers saying they have changed their spending habits and are spending less on everyday items. More than three-fifths said they have been paying down their credit card balances and more than half have created a monthly budget.

-By Christina Cheddar Berk, News Editor

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