Chilly temperatures added $200m in extra sales to US apparel retailers in the run-up to the New Year. Yippee. No, wait… quick calculation. In a country of nearly 323m people and some pretty hefty climate extremes, that’s a spend of less than 62 cents per person. Ouch!
So what went wrong? A warm autumn + a not-too-cold early winter + the late temperature plunge = cold weather apparel apathy and markdowns of 50%-plus.
So when shoppers did start to buy heavy coats and jackets, skiwear, boots, hats and gloves, they did so at profit-destroying knockdown prices. And making up the gap will be tough, if not impossible, for even the strongest retailers.
Who says so? Reuters cited a report from retail consulting firm Consumer Growth Partners (CGP) saying that US shoppers did start spending on winterwear in the last two weeks of December as storms in in the Midwest and Northeastern US brought over 30cm of snow. But those storms boosted the 3.4% rise in seasonal spending by just 0.1 of a percentage point – or that $200m quoted earlier.
CGP’s president Craig Johnson didn’t mince his words on the impact of that tiny increase: “Let’s just say it’s better than a sharp stick in the eye,” he told the news agency, adding that it may have helped winterwear sales but it was too little to save “an otherwise sorry season.”
Johnson said profits are going to be at risk even if cold weather clothing sales pick up this month. That’s because so many items are at clearance prices. He said heavy coats and accessories are currently averaging markdowns of around 40% to 50% with knits at 60%-off.
Those retailers who are holding their nerve and still selling their coats and boots at full price (or as near as they can get to it) might benefit from shoppers with gift cards to spend. But more shoppers will be tightening their belts in the usual must-be-thrifty January purge and only looking for discount bargains.
And the pain could continue. Retail consulting firm AlixPartners told Reuters it thinks department stores and teen retailers will struggle to get their customers to think about buying at full price for the rest of this year.
The fact is that 2015 was remarkable for its season-defying weather in so many countries. Combine that with the impact of special discount events like Black Friday and terror alerts, it all meant sales woes for lots of the sector’s biggest names.
We can only keep our fingers crossed that this spring brings true spring-like weather and hopefully puts us all in a better (shopping) mood.