Credit Suisse has published the annual study 'Retail Outlook 2012' together with the consultancy firm Fuhrer & Hotz. Swiss retailing will continue to be hit by the adverse effects of the strength of the Swiss franc and price erosion in 2012 though to a lesser extent than in 2011. Credit Suisse economists forecast a slight decline in nominal retail sales for 2012.
The study estimates that between CHF 4 and 5 billion in purchasing power flowed abroad in 2011 as a result of cross-border shopping. Through the key topic of city centers, the study also reveals that the city centers of Zurich, Geneva and Berne are particularly attractive from a consumer perspective. The share of chain stores in the Swiss city centers is constantly increasing but Credit Suisse experts have nevertheless found no evidence of a general deterioration in the sector mix.
In terms of the general economic climate, the outlook for retail in 2012 is mixed: As long as uncertainty about the outcome of the euro crisis persists and unemployment climbs, retail sales performance will be held back by poor consumer sentiment. However, immigration, which should drop slightly but still remain at a high level in 2012, will continue to have a positive impact. Falling retail prices will also counteract a loss of purchasing power.
Credit Suisse economists therefore anticipate moderate growth in real retail sales in 2012. As in 2011, the forecast nominal decline in sales will primarily be due to falling prices.
Fundamental outlook in the sector less optimistic for 2012
The survey conducted by the consultancy firm Fuhrer & Hotz among 200 decision-makers in Swiss retailing and their supply partners reveals a less optimistic fundamental outlook in the sector than a year ago. 38% of those surveyed are expecting sales to stagnate or decline in 2012 versus the previous year, while as many as 51% of respondents anticipate stagnating or declining profits.
Despite the gloomy economic prospects, 55% of retailers plan to increase their sales area by over 5% on average in 2012. Productivity per area unit will consequently remain under pressure. In 2012, the retail trade will mainly focus on leveraging labor productivity and cutting jobs in net terms, as in 2011. The strength of the Swiss franc caught retailing and supply partners by surprise in 2011.
Those surveyed budgeted for an average euro-Swiss franc exchange rate of 1.34 in the 2011 financial year. The franc's strength was one of the reasons why 58% missed their sales targets and 43% their profit targets. Only 11% of those surveyed reported that the strength of the Swiss franc had had predominantly positive effects. It therefore comes as no surprise that half of the companies consider the Swiss National Bank's current exchange rate lower limit of CHF 1.20 to be too low.
Greatest fall in prices since 1969 soaring rise in cross-border shopping
Retail trade prices dropped by over 2% in 2011 the greatest fall since records began in 1969. Price erosion added to the decline in nominal retail sales. The key clothing retailing segment made the most significant contribution to the slowdown in the sector's economic activity in 2011 with a 3% decline in sales. However, various retail trade segments, such as food retailing and electronic goods, sold more goods than in the previous year in real terms.
Despite the stabilization of the exchange rate situation, Credit Suisse economists anticipate a continued fall in retailing prices in 2012 albeit to a lesser extent than in 2011. Cross-border shopping soared in 2011 by an estimated 20% to 30%, having an adverse impact on Swiss retail trade in border areas in particular.
Credit Suisse economists estimate the total outflow of purchasing power in 2011 at CHF 4 to 5 billion. Cross-border shopping should continue to affect Swiss retailers in 2012 but is not expected to increase further after massive rises in 2010 and 2011.
Above-average presence of chain stores in the city centers
The main topic addressed by the latest study is re