Unseasonably mild weather in the U.K. is putting a damper on retailers hoping to rid their fall merchandise to make room for Christmas stock.
According to auditing firm KPMG, investors are concerned that a lackluster start to winter trading this year, with eight weeks of the key sales season gone, stores are running out of time to sell their remaining stock.
Restructuring partner at KPMG Chris Laverty said, “With the hottest Halloween for 160 years now forecast for some parts of England, retailers risk being left with a ticking time bomb as they struggle to sell their winter stock in the remaining weeks before Christmas.” He added, “Despite a slight uptick in sales seen in mid October, many are already restating their sales forecasts for this quarter.”
In order to combat stock overhang, KPMG reported that some retailers could be forced to discount goods earlier and deeper in order to reduce the risk of being left with a “mountain of winter woolies and boots at Christmas.” However, Laverty noted that early discounts would likely have negative consequences for a number of retailers across a scope of categories. In particular, discounts would cut into working capital needed to fund spring and summer orders.
Laverty said, “By launching a sale for just one category retailers will further shoppers’ belief that other discounts will inevitably follow if they delay their spending. This leads retailers to bring forward their wider Christmas promotions campaigns and they end up discounting items that they could have sold at full price. This has an impact on the entire supply chain and the overall availability of popular items.”