Mother Nature to Help Retailers in December
By: David Moin
It’s been one the strangest years ever for weather, but the forecast ahead looks good for retail.
In a season clouded by spiking COVID-19 cases, at least the weather will work in favor of retailers banking on holiday 2020 for profits.
“With December, there’s better news in store. Much of the north can expect colder and drier weather than last year,” said Evan Gold, executive vice president, global partnerships and alliances at Planalytics, a firm that provides weather intelligence to help retailers in their planning.
“Last year was the warmest December since 2015,” said Gold. “Colder year-over-year conditions will help with seasonal demand” for products such as hats, gloves, scarves, boots and coats.
“There are a lot of unknowns out there right now — the weather is not one of them. It has a known impact,” said Gold, during a conference call with John Harmon, senior analyst at Coresight Research.
December will prove to be a contrast to November, which was generally very warm during the first two weeks, diminishing the demand for seasonal products, observed Gold.
This year has certainly been one of the strangest ever for weather. As Gold said, “2020 was the busiest hurricane season on record. There were 29 storms in the Atlantic Basin this season. The second biggest was 2005, when we had 28. In a typical year we get 12.…The hurricane season is not over, stay on the outlook.”
Hurricanes did lead to a demand for certain products, like bottled water, canned goods, paper products and home repair supplies and equipment, while reducing demand for fashion and other categories.
He also said there were days in November when Montreal and Toronto were warmer than Los Angeles, and that Death Valley in California on Aug. 16 reached 130 degrees Fahrenheit, which was the highest temperature on Earth since 1931, and the third-hottest temperature ever recorded on Earth.
According to Harmon, American consumers are generally staying at home this season, rather than traveling, meaning they have more money to spend in stores and online, for themselves and for gifts. And there are more positive macroeconomic indicators than negative ones, helping push consumer sentiments up.
Harmon predicted a 5 percent increase in retail sales for the 2020 holiday period, which he characterized as stretching from October through December this year because of retailers unleashing Black Friday deals in October and not letting up on them.
The gain will be driven by a 33.5 percent increase in online shopping, accounting for 21.7 percent of total holiday sales, and positive macro indicators, Harmon said. Clothing, beauty, furniture and electronics have been strong selling categories online, he added.
The 5 percent prediction is consistent with some other retail pundits, including Craig Johnson of Customer Growth Partners, who predicted a 5.8 percent U.S. holiday retail sales gain, based largely on this year’s 5.4 percent in growth disposable income, wages being up, 11.5 million jobs created since the April nadir of the COVID-19 recession, and healthy household balance sheets. However, Deloitte was far more conservative, and somewhat uncertain, forecasting two possible scenarios: a 0-to-1 percent increase or a more significant 2.5-to-3.5 percent increase.
With COVID-19 cases spiking across the country, retailers could soon be faced with another round of mandatory store closings, possibly for weeks until the spread is contained, leading to a plummet in business, and pundits revising optimistic sales forecasts for the holiday.
In the third quarter, macro indicators were more plus than minus, Harmon pointed out, with gross domestic product rebounding recently, gas prices down, consumer sentiment rising for the last three months, and unemployment declining for the last six months and currently at 6.9 percent.
Retail sales turned positive in May and were quite robust in June through September, he said.
The best performers were Amazon, as well as home improvement, groceries and warehouse clubs. Generally, apparel retailers showed the weakest growth, he said.
“Black Friday is happening now,” said Harmon, with Walmart Inc, Target Corp., Kohl’s Corp., Best Buy Co. Inc. and Home Depot Inc. among the big retailers already offering Black Friday deals.
On the downside, Harmon did warn of a possible shortage of shipping capacity as online buying increases. He noted that one retailer advised shoppers to place orders by Dec. 4 so they’re guaranteed to receive their gifts in time for the holiday.