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    C-Store Retailers Look on the Bright Side

    VNU Retail Index shows retailers feeling positive about current and future business conditions.

    NEW YORK -- Retailers appear to be increasingly concerned with the sustainability of economic growth, and specifically, the effect of gas prices, according to the latest VNU Retail Index, the industry's only comprehensive monthly survey of retailer sentiment.

    The competitive environment continues to lead the list of challenges to earnings growth, as it has since the Index began in December 2003. However, economic conditions are being cited by more and more retailers. In the May 2005 survey, 26 percent of retailers surveyed named economic conditions as their biggest challenge, compared to only 15 percent in January.

    Other results from the May survey show the index of current business conditions reaching 107.3 for the month, rebounding from a low of 99.2 in March (compared to the December 2003 baseline of 100). A total of 59 percent of retailers were positive about conditions in May. Among the various retail channels, convenience store operators were happiest of all, as 66 percent reported current conditions as positive, perhaps a result of optimism that gas prices are stabilizing. In comparison, only 59 percent of supermarket operators gave positive assessments of their current business conditions.

    In their assessment of future business conditions, overall retailer expectations rose by about 2 points to an index of 95.5 in May. Sixty-three percent of retailers indicated positive expectations for the future, consistent with 63 percent in April, while the percentage of retailers indicating negative expectations declined from 10 percent to 7 percent. Once again, c-store retailers are more likely than their counterparts to give a positive assessment for the next six months (69 percent, vs. 62 percent for supermarket operators). This is a reversal of results from April, when supermarkets led the positive ratings.

    The Index for hiring expectations in the next six months reached 113.7 in May, a 3.7-point jump. Interestingly, this increase was driven by a rise in retailers who expect no change in hiring and a decline in those who expect to decrease their workforce during this period. In fact, the percentage that expect hiring to increase actually dropped from 48 percent in April (its highest point in the 18-month lifespan of the VNU Index) to 44 percent in May.

    While the hiring Index has generally remained over 100, there have been some significant swings from month to month. James Russo, director of retail services for ACNielsen, suggests this is a reflection of uncertainty in consumer spending and concerns over the stability of economic growth. “This uncertainty is evident across the financial markets as there is clearly a lack of momentum in the business sector,” said Russo. As cautiousness prevails, are opportunities being missed? Russo advises: “Never underestimate the resiliency of the U.S. consumer to spend!”

    The VNU Retail Index is based on a monthly panel survey of more than 500 convenience, drug, grocery, mass and specialty retailers across the country. The survey contains six questions calling for an appraisal of current business conditions and operational challenges, as well as expectations regarding business conditions, hiring and store count in the next six months.

    If you are a retailer interested in joining the VNU Retail Index panel, please contact Debra Chanil, director of market research, at [email protected].

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