Surveys of executives in the technology, financial, retail, and food and beverage industries by KPMG found that all expect higher revenues and profits in 2010, though banks and financial services providers believe their industry will lag the general recovery, while tech execs expect to be out in front of the rebound.

Two-thirds of senior executives in the retail industry expect to see better revenue, profitability and an improving jobs picture in 2010, and 72 percent of food and beverage executives said they expect business conditions to improve in 2010, with 72 percent also expecting stronger revenue and 65 percent expecting improved profitability. However, 48 percent of the food and beverage executives believe the U.S. economy as a whole could take as long as 2011 or later to substantially recover.

Opinion was similar among retailers, with 70 percent saying they expect business conditions to improve in 2010, 68 percent expecting stronger revenue and 66 percent expecting improved profitability. Forty-four percent thought the U.S. economy would not recover until 2011 or later.

Senior business leaders in the banking and financial services industry foresee their industry’s recovery lagging that of the national economy, but still see 2010 as a turnaround year as they expect improvements in revenue (72 percent) and profitability (68 percent).

Technology executives believe that the technology sector will recover from the current economic crisis substantially faster than the U.S. economy, with senior business leaders expecting improved revenue and profitability in 2010 and about half seeing an improved job picture.

The Retail Picture

Overall, 84 percent of retail executives see an improving jobs picture in their industry in 2010, with 52 percent saying it would be stable and 32 percent saying it will be better than 2009. At the same time, three-quarters of them said they had already instituted headcount reductions and only 14 percent were contemplating further such actions.

“This outlook for the year ahead and beyond should be heartening, since the importance of the U.S. retail industry to gross domestic product and overall economic health cannot be overstated. It’s the second largest industry in the U.S. and employs the second highest number of people among all sectors,” said Mark Larson, KPMG global retail sector chair.

The KPMG survey also asked retail executives to indicate if their strategic focus was now on investing for growth or cutting costs. More than half (54 percent) chose the investment option, but 46 percent said they were still focused on cost cutting.

When survey respondents were asked to identify the triggers they think will spur a U.S. economic recovery, the most frequently cited factors by far were increased consumer spending (52 percent), improved consumer confidence (51 percent) and an increase in jobs/employment (48 percent).

When asked to identify the biggest challenges they currently faced in dealing with the economic downturn, retail leaders most frequently cited restoring consumer confidence (55 percent), finding new sources of revenue growth (51 percent), managing/cutting costs (48 percent), and adjusting to changing customer demand (46 percent).

When asked to identify how they were coping with the economic downturn, more than nine in ten retail industry executives (91 percent) said they cut capital expenditures.
A clear majority (77 percent) of the retail executives said they were implementing IT solutions to reduce operational costs as a means to adjust to the downturn.

Interestingly, 69 percent of retail executives believe their business is well-poised right now to take advantage of an economic recovery. Also, 49 percent of the respondents said they thought the retail industry would fully recover ahead of the U.S. economy, while 51 percent thought their industry would recover at the same time or after the U.S. economy.

Food & Beverage Bites

Overall, 86 percent of food and beverage executives see an improving jobs picture in their sector in 2010, with 54 percent saying it would be stable and 32 percent saying it would be better than 2009. At the same time, nearly half of them (48 percent) said they had already instituted headcount reductions and only 22 percent were contemplating further such actions.

“These survey results show a cautiously optimistic outlook from industry execs, even as the underlying volatility in the food and beverage sector–based on companies wrestling with the sting of higher costs, shrinking consumer spending, and working capital constraint–continues to develop,” said Patrick Dolan, KPMG LLP national line of business leader - Consumer Markets, and U.S. sector leader - Food, Drink and Consumer Goods. “With the food and beverage industry in the midst of potentially disruptive change–led by accelerating technological, social, and economic shifts–the executives surveyed are still upbeat about their future, though much hard work remains.”

The KPMG survey also asked food and beverage executives to indicate if their strategic focus was now on investing for growth or cutting costs. Almost two-thirds (63 percent) chose the investment option, but 37 percent said they were still focused on cost cutting.

When survey respondents were asked to identify the triggers they think will spur a U.S. economic recovery, the top three factors by far were increased consumer spending (46 percent), an increase in jobs/employment (also at 46 percent) and improved consumer confidence (45 percent).

When asked to identify the biggest challenges they currently faced in dealing with the economic downturn, food and beverage leaders most frequently cited finding new sources of revenue growth (58 percent), managing/cutting costs (52 percent), managing risk (49 percent) and adjusting to changing customer demand (42 percent).

Interestingly, 82 percent of food and beverage executives cited implementing IT solutions to reduce operational costs as a means to adjust to the downturn. Almost two-thirds of food and beverage executives (63 percent) cited cutting capital expenditures as a way to adjust to the economic downturn.

When asked to identify how they were coping with the economic downturn, almost two-thirds (63 percent) of the food and beverage industry executives said they had created or modified their risk management plans.

Notably, 60 percent of the respondents said they thought the food and beverage industry would fully recover ahead of the U.S. economy. Also, 65 percent of food and beverage executives surveyed believe their business is currently well-poised to take advantage of an economic recovery.

Financial Blues

“The downturn impacted the banking and financial services industry to a greater degree than most industries and therefore it will take longer to fully recover,” said Tony Anzevino, partner-in-charge of KPMG LLP’s Banking and Finance practice. “And although the results of this survey suggest senior leaders think the industry has hit the bottom of the downturn, clearly they still indicate that finding new sources of revenue and improving their management of risk will be major challenges in the year ahead.”

When asked to identify the top three triggers they think will spur an economic recovery, 46 percent of banking and financial services respondents cited a stabilized real estate market, 45 percent said an increase in jobs, and 43 percent said improved consumer confidence. The banking executives most frequently cited the stabilization of the real estate market as a key trigger for recovery.

The three triggers cited least frequently by the banking and financial services executives included effective regulations (6 percent), government stimulus spending (3 percent), and government bailouts / Troubled Asset Relief Program (2 percent).

When asked to identify the biggest challenges they currently faced in dealing with the economic downturn, banking and financial services leaders most frequently cited managing risk (70 percent), finding new sources of revenue growth (57 percent), complying with regulations (44 percent), raising capital (44 percent), and restoring investor confidence (44 percent).

More than half of the banking and financial services executives said they already had created or modified their risk management plans, while one-third more said they were in the process of doing so in reaction to the economic downturn. Interestingly enough, almost half (45 percent) cited implementing IT solutions to reduce operational costs as a means to adjust to the downturn, while about one-third said they were increasing the amount of outsourcing they were doing.

Two-thirds of respondents in banking and financial services noted they had already completed their headcount reductions and only 15 percent were contemplating further actions.

Banking and financial services leaders were not sanguine about the employment situation in their industry next year; 70 percent said it would be worse or about the same. Conversely, 30 percent think it will be better in 2010.

Tech is Bullish

Two-thirds of senior technology executives said they thought their industry would fully recover from the current economic crisis ahead of the overall U.S. economy. Silicon Valley-based executives were even more bullish - 77 percent expect the technology sector’s recovery to outpace the U.S. recovery. About 43 percent of the technology leaders surveyed expect the U.S. economy to recover after 2010 while 39 percent predict the economy will recover by next year.

Eight out of 10 executives surveyed said they expect business conditions in the technology sector to improve in 2010, with 78 percent expecting stronger revenue and 72 percent expecting improved profitability.

“The results are in line with recent earnings reports in the technology sector which suggest business conditions are starting to improve,” said Gary Matuszak, partner, global chair and U.S. leader for KPMG’s Information, Communications & Entertainment practice. “There are also reports of software industry sales expanding five to ten percent annually after the recession, so while it’s far from blue skies in the industry, the worst seems to be behind us,” said Matuszak.

The KPMG survey asked the executives to indicate if their strategic focus was on cost cutting or investing for long-term growth. The results show that most technology executives are focused on building the business with 69 percent indicating they are placing emphasis on long-term growth versus 31 percent who said they are focused on cost cutting.

When asked how they responded to the economic downturn in the past year, the most frequently cited action was reducing headcount (68 percent). Only 14 percent of respondents said they are planning or considering further reductions in 2010. In fact, technology executives are fairly optimistic about the industry employment picture in 2010, as 49 percent expect it to be better.

The second most frequent action cited in response to the downturn was cutting capital expenses (60 percent said they already had done so and 28 percent are considering or planning cuts). When asked what else they would do to adjust to the downturn in 2010, 42 percent of executives said they were creating or modifying risk management plans and another 42 percent said they were looking at implementing IT solutions to reduce operating costs.

When asked to identify the top three triggers they think will spur an economic recovery, 42 percent of the technology executives cited improved business confidence, 41 percent said improved consumer confidence, and 32 percent said an improved job market. Increased consumer spending was fourth (30 percent) but was most frequently cited by the hardware technology company executives (39 percent).

The three triggers cited least frequently were effective regulation (6 percent), government stimulus spending (5 percent) and the government bailouts (4 percent).

When asked to identify the biggest challenges they currently face in dealing with the economic downturn, the executives most frequently said finding new sources of revenue (66 percent), managing costs and restoring business confidence (42 percent each), and adjusting to changing customer demand (37 percent).