Stores Lost $185 Million in Sales Due to Warm Weather
Retailers are praying for snow. With 10 days to go until Christmas, a cold snap has yet to hit many parts of the country, leaving retailers with excess stock of cold weather gear.
Temperatures for the week ended Dec. 12 were about 10% higher than last year for the U.S., according to Planalytics, which provides weather analytics for businesses. The firm projects that temps will be up 4% overall for the month of December, driven by cities including New York, Nashville, Baltimore and Chicago.
"Warmer temperatures have put significant pressure on apparel and outerwear sales," read a recent research note from Cowen & Co.
Even before Thanksgiving, stores including Macy's, Kohl's and Gap Inc. blamed unseasonable warmth on sluggish sales in early November. Planalytics estimated that warm weather cost stores some $185 million in lost sales in November -- a crucial time when stores expect consumer demand to surge --compared with last year.
Of course, consumers should have more disposable income from the lower heating bills that come with warm weather. But they're not spending that extra cash at retail stores, said Jack Kleinhenz, chief economist for the National Retail Federation.
"Consumer households are spending more on services," he said, noting that the cost of health care, phone services and rents have gone up. Auto insurance rates are expected to increase 3% this year as well.
The warming trend has only worsened in recent weeks, with many analysts expecting huge markdowns for the end of the year -- despite a swing back to cooler temperatures predicted by meteorologists for the end of the month. Paul Walsh of The Weather Company said there should be a sharp return to seasonably cold temperatures in time for Dec. 21, the Saturday before Christmas, that may trigger a "seasonal spending spree."
But that could be too late for retailers, which are already losing margin in an effort to get goods out the door. Advertising experts expect marketing will become more promotional, highlighting discounts in the weeks ahead.
"The warmer than average weather continues to dampen demand for heavier winter items and has also resulted in a rash of discounting across a number of retailers which has, in turn, driven some volume -- but largely at the expense of total value," wrote Neil Saunders, CEO of retail research firm Conlumino in a recent report.