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BDO: Retail CFOs Detail 2025 Growth Strategies
Vicki M. Young
6 min read
Most retail CFOs aren’t planning for price increases in 2025 as they eye other strategies to improve margins.
A study from BDO found that 85 percent of retailers experienced revenue growth in 2024, but only 38 percent saw profitability gains even though many implemented price-increase strategies. With increased costs eroding margins, retailers this year are focused on investing in technology to future-proof their businesses. Investments can range from inventory optimization to AI integration. And with more investments in supply-chain technology, as well as some store closures, the expectation is the creation of a playbook that can provide a path to sustainable growth in the years ahead.
Natalie Kotlyar, Assurance principal and BDO’s national retail and consumer practice leader, said the last year 85 percent of retailers expected revenue to go up, but only 38 percent saw profitability gains.
“If you look into 2025, retailers are expecting revenue, once again, to go up, but profitability is not at the same percentage. That’s because they truly understand that they cannot increase prices at the same rate that they have in the past. The consumer is just not willing to pay for it,” Kotlyar said.
She said retailers going to have to “eat some of it,” and work with their vendors to see how much they are willing to take on, especially from the tariffs perspective.
The retail expert said retail CFOs are willing to make significant investments in technology, such as predictive analytics, so they can improve tracing and tracking inventory and conduct scenario modeling to anticipate what-ifs that could come up.
“All that becomes more and more critical as things become more uncertain,” Kotlyar said. “With either the tariffs or the supply chain, the investment in digital and in AI becomes a lot more critical in order to make sure that you get the products in at the right time.”
The latter is in part due to some retailers having had a shortage of inventory—42 percent of respondents cite moderate shortages and 16 percent reported extreme shortages—for one reason or another. Some likely didn’t plan properly, and others had supply chain issues, the retail expert said.
“One of the strategies for retailers is to revisit their supply chain and add on a significant amount of investment into digital to make sure that they have the right system to predict and understand where their goods are at any given point in time,” she said.
Kotlyar explained that using analytics, retailers can have a better idea on how much to order based on past sales, when to order and if they are doing scenario planning, figure out possible timing and costs when ordering from country A versus country B. Moreover, the data can also estimate for retailers how much inventory—and what items—should go to each store location.
BDO said that cost monitoring is fueling real estate decisions on which stores to keep and the locations that need to be shuttered. The strategic thinking is geared towards focusing resources on high-performing doors. Retail CFOs said the strategy also includes a shift from traditional brick-and-mortar stores to other channels, such as online and app-based shopping. Thirty-four percent said they are reassessing store locations and regions to be closer to their targeted customer; 32 percent are planning on store openings for growth; 28 percent will shed stores to optimize their store network, and 24 percent will experiment with new or small-store formats.
“While the survey responses indicate slightly more openings than closures, we anticipate an overall decrease in footprint,” BDO said in its report.
Seventy-five percent of CFO respondents indicated a willingness to take on more debt due to increased technology investments. And to improve their financial flexibility, 25 percent of retail CFOs plan to shed underperforming assets, either through a carveout or divestiture. While that will mean more mergers and acquisitions (M/A) activity on some fronts, these retail CFOs are also more interested in strategic partnerships for growth over taking on new acquisitions to grow their revenue base. Thirty-four percent said they would consider a joint venture or alliance. Thirty-eight percent said dealmaking plans could include a company sale to a strategic buyer, while only 20 percent they were thinking of making an acquisition.
Kotlyar said the trend toward an “asset-light” model translates to less overhead on the books, which can create a more efficient way to the grow the business. A partnership could be less cumbersome and deliver faster and more streamlined results, she explained, adding that it would also be easier to end a partnership than to take on an asset and then figure out a way to dispose of it. The flip side is that the partnership could also represent a test drive of the business, giving the retailer a chance to see in real time the operation and whether or not it should take on a bigger stake. She described strategic partnerships as a more “palatable path under the current interest rates [cycle, which] are still relatively high.”
As for other ways to future-proof, retail CFOs said they are using AI to improve margins while meeting the changing needs of their customer base. Thirty-one percent are partnering with outside vendors, while 17 percent said they are building their own proprietary AI platform. The top AI use at 34 percent centers on optimizing pricing strategies based on market dynamics, followed by 33 percent using AI to deliver hyper-personalized content. Thirty percent said AI is helping with analytics focused on customer sentiment and behavior analysis. Twenty-five percent said AI can help enhance logistics and other supply chain management strategies, while 24 percent said the technology tool can streamline customer service processes through chatbots or virtual assistants. And 23 percent said AI can help with automation of back-office processes.
While the retail CFOs said they viewed AI adoption as a strategic workforce priority, only 25 percent said they plan to increase training efforts connected to up-skilling or re-skilling this year, a drop from 52 percent last year. That suggests that they may be looking to recruit outside talent instead, the BDO report concluded. While plans to increase headcount fell to 22 percent from 30 percent in 2024, headcount reductions were down slightly to 18 percent from 19 percent last year.
The BDO survey polled 100 retail CFOs with revenues ranging from $350 million to over $3 billion in November 2024 after the U.S. presidential election.
BDO also survey manufacturing CFOs. Their top strategies to drive revenue growth in 2025 include enhancing customer relationships, introduce new products and services, and implement dynamic pricing strategies. The top three strategies to improve profitability include invest in automation, optimize procurement processes and re-evaluation pricing strategies.
