The worst heat wave in more than 75 years continues to grip the U.S., and consumers are not much in the mood to shop.
This story first appeared in the July 19, 2012 issue of WWD. Subscribe Today.
What now seems like a perpetual summer has kept shoppers out of stores and saddled retailers with cheaper summer goods for longer than they’d like.
“Retailers plan for weather shifts,” said Dan Butler, vice president of retail operations at the National Retail Federation. “In this particular case, and as we saw last winter, when you have a weather event that doesn’t just affect one market or one company,” there can be serious ramifications.
“In this case, we’re looking at a cumulative effect,” Butler said. “As the heat wave persists, consumers stop and look at how it’s impacting their lives. They realize they’re spending more to cool their homes and spending more in the grocery store. When we get into these periods of prolonged weather, we feel more of a pinch.”
The heat has been blamed for at least 46 deaths in the Midwest. Excessive temperatures caused bridges to buckle in Illinois and Wisconsin, and ponds to drain and parch. “This is becoming a black swan of heat waves, in the sense that it’s such a long heat wave, such a severe heat wave and encompassing such a large area,” said Chris Vaccaro, spokesman for the National Oceanic and Atmospheric Administration.
Extreme weather patterns “effectively put retailers in a mismatched situation with consumers where they don’t have in the stores what people want to buy,” said Jaime Katz, an equity analyst at Morningstar. “We had a mismatch in the winter, when temperatures didn’t get very cold” in much of the country and winter goods sold poorly. “This year, a lot of retailers are running a little leaner inventorywise, so it might not be a wound that cuts as deeply as it might have,” Katz said.
“The downside is you’re going to sit out there with a lot of fall or b-t-s apparel when people want bathing suits. It’s pretty uncomfortable just going outside in a significant portion of the country. Three-quarters of the U.S. is much hotter than it should be by 5 to 8 degrees, which makes quite a difference at this time of year. Everybody is really baking out there.”
“The heat is going to have a huge macro impact on retail as a whole,” said Carol Spieckerman, president of Newmarketbuilders. “Here is this heat wave happening this week when everyone is cranking up for back-to-school.”
“Complaining about the weather is kind of taboo for retailers,” said Erik Nordstrom, president of stores of Seattle-based Nordstrom Inc. “We like to focus on things we can control.” Nordstrom’s Anniversary Sale catalogue, which came out last week, is filled with fall items such as nubby sweaters, tweed jackets, shearling-lined coats and a variety of boots that all seemed itch-inducing in light of the weather.
“Yes, it’s hot,” Nordstrom said. “Oh sure, it’s psychologically difficult [to shop for fall], but that’s the intention of the Anniversary Sale. We take a very slow time at retail and offer new merchandise for the next season and make a special event of it. It’s always hot this time of year. It remains the busiest time of the year for us. I don’t think people are putting on shearling jackets and wearing them in 900 degrees. Customers like newness. The heat wave is in most of the country, all through the Midwest and the East and the South. We’ve had strong business. Maybe [shoppers] are coming to get the air-conditioning,” he said.
The next forecast for a chance of rain in the Midwest is sometime next week. The heat could have a withering effect from one business sector to another. “Corn is a commodity that’s going to be impacted and will have a ripple effect in the long term,” Butler said. “Farmers have to count on mother nature, and there’s only so much water in the ground.”
“Everybody talks about the economy, but that’s becoming a catchall, even when it doesn’t tell the full story,” Spieckerman said, adding that the heat wave is impacting retailers more than they’d like to admit. A retail executive who didn’t want to be named, said, “People use weather as an excuse no matter what. Is the heat wave affecting anyone’s business? If you have the right goods, no matter how hot it is, customers will buy it.”
“We had a very warm start to the season, so that may have pulled sales forward,” said Evan Gold, senior vice president of client services at Planalytics, which offers weather intelligence to business. “Retailers have b-t-s, and they’ve got to push that product, but maybe they don’t have to give it away. Some of the discount folk mentioned weather as a reason for disappointing sales in June, such as Destination Maternity. Some of the mall-based business may get a kick out of the heat wave by people going in to beat the heat. Granted, consumers are going there to beat the heat more than to shop.”
Retail sales in June on a year-over-year basis increased 3.5 percent at apparel specialty stores, while sales at department stores fell 3.2 percent and sales at general merchandise stores declined 0.3 percent.
“Retail sales continued to stall in the month of June, as consumers held off on discretionary and nondiscretionary spending, marking three consecutive months of retail sales decreases, implying that persistently high domestic unemployment, stagnant job growth and international economic unease have taken a toll on American consumers this spring,” said Matthew Shay, president and chief executive officer of the National Retail Federation.
Retailers had dramatic promotions this week, planned or otherwise. Target’s weekly circular, which a spokesman said was planned, was called “Bonus Black Friday in July,” with a quarter-page image of the iPad 2 in white, for $499 in stores and $399 online, less than Amazon’s price of $426.99. Target touted a 65-percent-off sale on apparel, including a sale on select swimwear.
“The intensity of heat we have impacts shopping in a negative way,” said Walter Loeb, president of Loeb Associates. “People don’t feel like shopping, and they will postpone back-to-school shopping until it gets cooler. In a heat wave, you don’t have to get your kids anything except bathing suits.”