Hot Temperatures Leave U.S., U.K. Marketers Sweating

Historic Heat Wave Could Dampen Spending as Consumers Grapple With Big Energy Bills in August

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As temperatures rose in mid-July, so too did consumers' consumption of energy. And that could mean big bills in the midst of the all-important back-to-school shopping season.

A Dyson cooling zone in London
A Dyson cooling zone in London

Record temperatures have been reported the Northeast, Midwest and Mid-Atlantic, as well across the pond in the U.K. The second week in July ranked as the warmest in more than 50 years in the U.S.

And while the heat has been a boon for some marketers -- think ice cream and air conditioners -- it has the potential longer-term ramifications because many consumers will be grappling with bigger-than-usual electric bills come August. From Burlington, Vt. to Chicago, major cities required more power due to the weather for the week ending July 20, according to Planalytics, which provides weather intelligence.

"There's been record power consumption in New York City, and that's something," said Planalytics President Scott Bernhardt. "When you have a lot of power consumption in July, the bill hits in August. [That's] in the peak of the back-to-school season for the Northeast. It's not earth shattering, but it … definitely slows things down. It's a factor."

The heat is troublesome for many apparel and accessories retailers who are now beginning to mark down summer styles as they stock back-to-school and fall goods. Heat also tends to deter shoppers in the U.K., where malls are becoming more popular but most money is still spent on the high street, which lacks the comfort of air conditioning. John Lewis blamed the heat for a 9% fall in sales the week of July 13, despite a more than tripling of sunglass sales and a more-than-sixfold rise in parasol sales.

While things like sandals, air conditioners and fans move quickly in warm weather, for apparel and home improvement retailers it may be too little, too late.

"Two weeks of sales is not going to fix two months of difficult weather," Mr. Bernhardt said. "The timing stinks for an apparel retailer who wants it warm in March and April when they're selling at full price. …And [home improvement retailers] are not selling lawn mowers, weed wackers and other outdoor products that make the big bucks."

The warm weather is also affecting restaurants and bars, contributing to a 3% decline in traffic, as well as a 3.5% decline in on-premise alcohol volumes, according to GuestMetrics. Restaurants that count on outdoor seating to goose sales in the summer, like Cheesecake Factory, Ruby Tuesday and California Pizza Kitchen, have all been hard hit, according to Planalytics.

Still, there are a few winners when the weather gets steamy. Bottled and iced beverages, ice cream, ice and suncare products all fly off the shelves. Beverage companies, in particular, stand to benefit, given the soft second quarter many experienced due to an unseasonably wet and cold May and June. And the convenience stores, mass merchants and quick serve restaurants that carry summer-weather products win big.

"Beer, soft drinks should all benefit," said Bill Pecoriello, CEO of Consumer Edge Research. "When the heat gets really extreme, products like bottled water and sports drinks benefit more than carbonated soft drinks, but all beverages in general should benefit [compared to] their May/June trend."

In the U.K., Dyson bladeless fans set up a cooling zone for commuters in London's Waterloo Station. And, so far this month, John Lewis' supermarket chain, Waitrose, has seen a barbecue sales jump four and a half times; ice cream sales more than double and ice cream sales more than triple. Meanwhile, sales of the traditional summer tipple, Pimm's, have also more than tripled.

Indoor entertainment venues usually see an increase in traffic during unseasonable weather. Yet, U.S. box office sales were down 16% the weekend of July 19, compared to a year ago. The weekend prior, box office sales were up 19%. And while the lure of an air conditioned living room might be appealing, there was little fluctuation in the number of people who tried to beat the heat on the couch. During the week of July 15, 102.9 million viewers watched TV in prime time compared with 103.2 million the week prior and 103.8 million during the same week in 2012.

Contributing: Emma Hall, Jeanine Poggi

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