Unusual Weather Plays Havoc with Retailers
A cold month chills outlook for apparel, home-improvement retailers
By: Andria Cheng
The cycle of good and bad weather that retailers often credit—or blame—for sales fluctuations will likely swing into the negative in March as Tuesday’s Nor’easter disrupted travel and forced store and mall closings.
Bad weather is just another challenge for the apparel sector, which is already struggling with declining store visits and downbeat sales. While home-improvement retailers led by Home Depot and Lowe’s have seen demand rise thanks to an improved housing market, cold weather will likely hurt sales of lawn and garden goods in a key sales month.
March is forecast to be the fifth-coldest in 30 years, in contrast with March 2016, which was second-hottest on record, said Bill Kirk, CEO and Co-Founder of Weather Trends International, which provides long-term weather foreacasts and advisory services to the retail sector.
“That’s a huge negative,” Kirk said in an interview. A single-degree temperature drop can translate into a 2% to 3% hit in apparel sales, he said. With a forecast that March temperatures in the eastern two-thirds of the country will turn 5 to 15 degrees colder than last year on average, the apparel industry alone could see a 15% to 45% weather-related sales decline. More than 70% of the population lives in the eastern two-thirds of the country, he noted.
Planalytics, another weather consulting firm, estimated that March’s weather pattern will hurt retail sales by more than $500 million, with the apparel sector facing a $310 million downturn this week alone. (That said, the decline will be partly offset by a roughly $208 million boost in sales of early spring merchandise in February, which Planalytics said was the second-warmest February on record.)
“The bump in February, while good, was too early in the season to offset a weak March,” said Kelly Carroll, director of client services at Planalytics. “It will be an uphill climb as we move throughout the spring season. The fact that the negative conditions are focused in major markets where retailers have a large presence will work against them.”
The Northeast region represents 30% of the U.S. population, she said. It’s also among the biggest markets for retailers, including T.J. Maxx parent TJX, Staples and Dollar Tree.
It’s not just apparel retailers that will see a big dent in sales. Carroll said the home improvement retailers will actually be the hardest hit.
“March is their ‘Christmas season,’ when yard work and outdoor projects get going,” Carroll said, adding that the sector is looking at about a $1.2 billion loss in sales versus the same week a year earlier. “They are no longer looking to sell snow shovels, blowers etc.”
To be sure, retailers partly have to shoulder some blame for the weather-related hit as they tend to sell things before consumers are ready for them. That’s despite the fact that the apparel industry, for instance, for years has promised to have a “wear now” strategy to sell apparel when consumers actually have want them.
“Old habits die hard,” Candace Corlett, president of consultancy WSL Strategic Retail, said. “Retailers are used to buying months in advance of the season and that inventory arrives and needs to go somewhere. Shoppers do like to buy in anticipation [of] a season, and retailers need to figure out just how far forward to go. Current practices put them foolishly ahead—sandals in March may be too early in the Northeast.”
That said, consumers can expect to get some good bargains again, just when the weather turns warmer, spurring shoppers to look for spring dresses and capris.
“Retailers’ selling season is out of sync with” consumers’ buying season, Kirk said. Stores typically ship goods two to three months ahead of when shoppers want to buy. “You just build up too much inventory. There’s going to be a lot of markdowns come April and May.”