If retailers have a vested interest in whether or not Punxsutawney Phil sees his shadow or not, you can’t blame them. According to recently released data from the National Retail Federation, retail sales in the months of November and December only rose 3%. Before the holiday season started, it forecasted 3.7% growth. Specialty apparel stores were among those hit the hardest, losing close to $600 million in revenue over the course of the season. Department stores and other major stores were not included in this number.
In a Fortune.com article detailing holiday season results on major retailers in the country, many stores suffered setbacks in holiday sales. Macy’s, for example, took a 5.2% loss in comparable sales. Gap and Best Buy also experienced a significant loss in sales compared to other years, forcing them to reassess their operations and marketing plans in the next quarter. So the question then becomes how did this happen? According to the National Retail Federation, there were several factors in play.
Warm Weather, Early Promotions, and More Online Spending
In his assessment of the holiday seasons sales report, NRF President Matthew Shay said the following: “Make no mistake about it, this was a tough holiday season for the industry. Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds.”
In many areas in the country the weather was warmer this holiday season than ever before. In the Democratic Presidential Primary Debate, Bernie Sanders even remarked how it was significantly warmer in Burlington, Vermont than it had ever been before. He is not wrong. The second, third, and fourth weeks of December were the warmest in over 55 years for the New England region, while the Mid-Atlantic, East North Central, and West South Central regions all had 2 out of the 5 weeks trend warmest in 55+ years. Macy’s attributed 80% of its holiday sale losses to the weather. The Burlington Coat Factory experienced poor winter clothing sales and is now only showing figures that exclude its coat sales.
Because of this clothing retailers will need to heavily discount their winter clothing to make up sales and reduce inventory. Although Old Man Winter has recently made his presence known in New England and the Mid-Atlantic, retailers are gearing up their spring inventory planning. Spring inventory is typically seen in February and March. Therefore, they must discount their winter inventory to make room for spring items.
In addition to the weather, early promotions and consumer shopping behavior all impacted sales. Many shoppers stayed at home and shopped online or shopped early when they saw heavily discounted items. These discounts had a great impact on margins, which hurt sales for retailers even further.
What Lesson Should Retailers Learn from This Holiday Season?
In short, retailers who experienced losses during the holiday season will have to take better care to use weather analytics to determine how weather affects their sales. While retailers eventually caught on and responded accordingly with sharp discounts and other promotions to encourage people in the doors, the damage was already done. The fact that some companies attribute weather as 80% of the reason why they lost sales shows the importance of weather trends in future strategic plans.