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Unseasonal Weather Takes a Toll on Retail

The retail sector is no stranger to volatility, but there are few factors quite as unpredictable as weather. Slight changes in weather patterns can play a significant role in retail sales.

In J.C. Penney’s recent reporting of its third quarter results, for example, the retailer blamed warm weather for lackluster sales figures. During the company’s earnings call on November 12, CEO Mike Ullman said, “While the lower levels of clearance merchandise certainly helped us maintain healthy gross margins during the quarter, when we were hit with unseasonably warm weather, it hindered our ability to sell fall and cold weather goods. Ultimately, this impacted our top line.”

On the flip side, anticipation of weather patterns can offer hope for improved results. In a press release issued by Macy’s last week, chairman and CEO Terry Lundgren explained that the company’s third quarter earnings were solid, but that sales performance “fell short of our expectations.” He expressed optimism for fourth quarter sales adding, “We are poised to capitalize on a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year.” However, in an article in The Donovan Report, Kevin Donovan remarked that there are risks associated with this optimism. He wrote, “Our old friend the polar vortex could chill shopping again and a more promotional environment could hurt margins.”

Weather-related sales slumps have not been unique to the U.S. The U.K. experienced a wide ranging dip in retail sales due to an unusually warm start to autumn. British retailer Marks & Spencer Group PLC said hot weather in September dragged down clothing sales and contributed to a fall in half-year profits. The U.K.’s largest fashion retailer, Next, blamed the same conditions for its disappointing third quarter results, and Swedish clothing retailer Hennes & Mauritz AB (H&M), said comp sales for September, “have so far been affected by the unusually warm weather in most markets.”

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A recent webcast given by Planalytics, a consulting firm which offers weather tracking and business planning services, focused on the effect that weather patterns can have on domestic retail results. Ryan Baumgartner, manager of client services, said the period from back-to-school to present could be best characterized as “volatile,” noting that the warm October negatively impacted most seasonal clothing sales. “There is plenty of cold air coming in which will be great for seasonal categories,” he said.

But weather predictions are tricky business. In fact, according to Jeff Doran, Planalytics senior business meteorologist, “Weather repeats itself only about 20% year-on-year.” He added that, on average, temperatures are about five degrees warmer this year than they were at the same time last year. However, Doran stressed, “The big story for this year is that the weather toward December will be drier and less stormy,” which will make traveling–and shopping–easier.

The Old Farmer’s Almanac has predicted that three-quarters of the nation will “see temperatures below normal” this winter. Jennifer Mankins, owner of the Bird boutique in Brooklyn, shifted this year’s buying budget toward practical yet luxurious outerwear. She noticed that her customers were “looking for more down, more shearling, more wind resistance.” Canada’s Holt Renfrew department store also began offering heavier coats as early as May and June. The store’s fashion director Barbara Atkin said this year, the company is prepared. The store’s coat sales in August were double what was expected.

Minneapolis-based retailer Target is working hard to improve on its disappointing year-to-date performance, so a lot is riding on the fourth quarter. Target Canada has been working hard to correct the mistakes made during last year’s winter season, when it learned that being prepared for the cold weather meant more than just stocking up on outerwear. It has to be the right kind of outerwear.

In a recent interview with Canada’s The Financial Post, John Butcher, Target Canada’s senior vice president of merchandising, said, “We had a lot of wool outerwear last year, and it didn’t sell.” Canadians seemed to want a more “durable” product, such as coats with water repellent fabric that also offered wind resistance. Mr. Butcher said, “We got rid of 90% of our outerwear assortment from last year and just started over.”

Shifts in buying patterns have been seen even in milder climate areas. The highly competitive retail environment and small window of opportunity for retailers to sell outerwear make promotions necessary to drive traffic, even when the products are in season. A San Francisco-based fashion stylist for Kate Spade New York described how the warmer weather has affected selling/buying for his clients. “Usually, outerwear doesn’t go on sale or promotion due to the high demand, and we usually sell out of these pieces before they can even go on sale. But this year we had a 20% promotion on outerwear, which was pretty shocking given that we’re in season and our coats and jackets should be flying off the racks with no promotion needed.”