14 | www.retailenvironments.org RETAIL ENVIRONMENTS november.december.2013
experienced in 2008/2009. Unfortunately,
they haven’t always been as consistent
in actually realizing those sales gains. In
particular, 2012 did not finish with sales
growth as strong as the median industry
company expected. At the same time, some
retail environments industry segments
tend to vary significantly from industry
averages. In general, suppliers to retailers
that tie their new store openings to housing
expansion are likely to continue to lag, as
much of the growth in retail environments
continues to come from renovations by new
tenants of existing locations rather than
new, out-of-the-ground stores.
For example, vendors serving the mid-priced department store segment could
face some unique challenges. If a retailer
such as JCPenney (hypothetically) should
cut capital expenditures significantly, sales
and profits could be challenging in this segment as the company’s existing vendors
look for new opportunities to replace $50
million or more per year in sales.
The results of A.R.E.’s most recent
Revenue Trends Survey were generally consistent across the fixturing, visual products, and retail design segments, with all
segments moderately optimistic about
prospects for 2013 and 2014. Visual companies, however, expect a slightly stronger
sales performance in 2013, predicting a
13.0 percent increase.
PROFITS? WHAT PROFITS?
Profitability continues to be a challenge
for many retail environments product and
services providers in North America. “It’s
still a competitive grind,” notes one fixture
manufacturer. But overall, the outlook for
profits is optimistic. Of the survey’s respondents, 65 percent expect improved profits
in 2013, 26 percent expect little change in
their companies’ profitability compared to
2012, and just 9 percent expect a decline.
Visual companies reported a slightly
more pessimistic profit forecast than the
fixture and retail design segments, with
50 percent expecting improved profits, 43
percent expecting flat profits, and 7 percent
expecting a decline.
There is plenty of room for improvement
in the profitability of A.R.E. member companies as they continue to recover from
the recession. This is particularly true at
the gross margin line on the income statement of the typical industry participant.
The industry median gross profit of 18. 1
percent recorded in both 2011 and 2012
equals the lowest gross profit margins ever
recorded in the 18 years A.R.E. has conducted this survey. Fortunately, pre-tax
profit margins have improved somewhat
because companies have experienced some
success in containing general and administrative expenses, according to A.R.E.’s
most recent Industry Performance Report,
published in June. But the median pre-tax
profit of retail environments providers in
North America are still averaging about 30
percent less than their pre-recession levels.
IS RISK DECREASING?
One welcome trend is an apparent slowing
in the rate of bankruptcies of retail environments supplier companies. Between 2009
and 2012, A.R.E. recorded a consistent and
disconcerting trend of bankruptcies and
Sales growth for providers of store fixtures, visual presentation products, and other products
and services for retail environments continues, with A.R. E. member companies predicting
a 10 percent increase in 2014.
2000 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
– 1.0 – 1.5%
Lasted from March
Lasted from December 2007
to July 2009
Gross profit margins among retail environments industry suppliers remain weak,
according to A.R.E. research.
INDUSTRY MEDIAN GROSS PROFIT MARGIN
2000 1999 1998 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: A. R. E. Industry Performance Report
Source: A.R.E. Industry Performance Report