What can stores do to minimize the warm weather woes?

The warmer-than-normal weather across much of the country has taken a good chunk of the blame for weak sales at department stores and other retailers this fall.

While the weather can’t be controlled, stores are seeking to minimize margin losses on all the coats, boots, down comforters and other cold-weather merchandise stacked up on selling floors.

Many publicly-held retailers have already lowered their fourth-quarter earnings guidance due in part to higher-than-planned promotions to trim inventory levels.

Beyond markdowns, several options to reduce inventories involve the vendor community.

On Dick’s Sporting Goods’ third-quarter conference call with analysts, Ed Stack, CEO, said that beyond taking additional markdowns, the company is working with key vendors to return slow-moving product as well as cancel some orders. The company is also working on securing markdown allowances.

Macy's Herald Square

Photo: RetailWire

Some of the product will find its way to TJX Cos., Ross Stores and other off-pricers that pack away opportunistic buys for sale the following year. Said Carol Meyrowitz, chairman and CEO at TJX, on her company’s third-quarter conference call, "At the end of the season are they going to be a ton of coats in cold weather available? Probably and we’ll take full advantage of that."

Product may be transferred by vendors or retailers with locations across the country to stores where the weather is more accommodating.

The big hope is that chilly weather arrives. But Meteorologists expect warmer-than-average weather patterns to continue at least until mid-December and perhaps longer. The culprits are an arctic jet stream that remains well to the north in Canada as well as the repercussions of El Niño.

On his company’s third-quarter conference call, Terry Lundgren, president and CEO of Macy’s, discussed the challenges of timing markdowns around weather-related merchandise.

"You want to believe that it eventually is going to get cold … So you don’t necessarily need to mark all of that inventory down," said Mr. Lundgren. "At some point, we will; but you’d like to be able to get some of that business in the higher margin and at the higher average retail early when the weather does break before you have to mark down."

BrainTrust

"The practical reality is that apparel is seasonal, especially warm weather clothing associated with the holidays. If consumers aren’t "feelin’ it," they’re not "needin’ it.""

Chris Petersen, PhD.

President, Integrated Marketing Solutions


Discussion Questions

Can retailers do much about the weather? Are there any newer approaches or strategy shifts for minimizing margin losses of merchandise largely driven by weather?

Poll

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Roger Saunders
Roger Saunders
8 years ago

Proper store allocation of merchandise isn’t new, but too often “snow shovels” show up in the wrong area of the country. In addition, all stores don’t need the identical plan-o-grams throughout.

See each store through the eyes of the customer who is going to walk that store. Merchandisers and store operations teams would do well to borrow from the “localized globalization” or “mass customization” strategies from companies outside of retail.

David Livingston
David Livingston
8 years ago

Blaming the weather for your woes is classless and cowardly in the retail world. You are either good at what you do or you are not. Only those that are not good at what they do will blame the weather rather than take responsibility that perhaps their business model is to blame. Many retailers adjust and compensate. Those that do come out winners leaving the others devastated in the wake of their brilliance.

Chris Petersen, PhD
Chris Petersen, PhD
8 years ago

Seems like the weather is a central topic in most everything these days! The practical reality is that apparel is seasonal, especially warm weather clothing associated with the holidays. If consumers aren’t “feelin’ it,” they’re not “needin’ it.” Pretty hard to substitute a swimming suit for a winter coat!

Most apparel is manufactured offshore and shipped by the boatload for cost savings. This creates long lead times and supply chains for suppliers, and retailers have to pre-order well in advance. This will inevitably create major markdowns in periods when mother nature is “not average.”

Retailers can shift focus to other items that are not so weather dependent, suppliers not so much. The challenge for both is warm weather is creating a situation of non-productive inventory sitting on the floor taking up space in the busy holiday season. Nothing worse in retail stores.

In many ways, winter apparel is very much like farming … highly dependent upon the weather which no one can change. The uncomfortable answer is — there’s not much you can do about it but cut your losses now, or wait till the weather changes.

Frank Riso
Frank Riso
8 years ago

I think the real problems for retailers will begin after the holidays. Now shopping is key for gift giving so sales will be on track, but come January it will be another story. Hanging in there is not an issue for most retailers but getting a jumpstart on spring merchandise may be the answer to saving the next quarterly report. Secondly, moving product from one location to another may also help reduce margin losses.

Brian Kelly
Brian Kelly
8 years ago

“Weather merchant” is not a flattering term. I’ve been wondering how this became acceptable to bankers on the latest Q3 earnings calls. Perhaps too much chatter around global warming?

Any time inventory builds due to lack of demand, retailers have a way to liquidate those goods, either profitably or unprofitably. Therein lies the rub. In our current super-heated promo attitude, profits are scarce. Last week, while walking Woodfield, I noted a lack of aggressive promo activity. The calendar taking a breather after the Thanksgiving Day/Cyber days. That will change this morning after reviewing the weekend numbers.

But I don’t think this is about snow shovels, boots and parkas. Instead this has more to do with “Christmas weather” and the lack thereof putting pressure on holiday inventories. It’s a whole store issue not merely a category and merchants are getting out in front of the Q4 earnings call.

Rest assured that Christmas is still coming and geese are getting fat. Trees are going up and gifts will be arrayed beneath them. Yet some do say that not all lost sales in early December will be replaced by the 24th. The procrastinators will be joined by those “not in the mood” and that will make the final 10 days an operational challenge. Throughput, adequate staffing and on-time deliveries will be a holly-covered pain.

And with a twinkle in his eye, Old Saint Nick said, “retail ain’t for sissies!”

Gordon Arnold
Gordon Arnold
8 years ago

This discussion topic is getting more and more attention from the entire span of national and world markets. We should all hope it is for reasons like the weather in anticipation of a far healthier fiscal year 2016. A top view of key market indicators is apparently supporting these positive reassurances. Increases in borrowing, housing starts and automobile sales are all reassuring until we see need for operating cash, increases in underwater mortgages and automobile attrition rates. We should all be aware that a seven-plus year stagnant or struggling recovery is not a recovery at all. It is with this understanding that we can face our markets and look to the task of finding opportunities instead of waiting for a return of the middle-class consumer.

Li McClelland
Li McClelland
8 years ago

I should think that with more online shopping and warehousing nationwide, the major retailers should have much less a problem with weather related overstocks than in the past. Maybe Macy’s can’t move their furry muklucks in Chicago right now due to warm temperatures, but their customers in Wyoming and Colorado and Nebraska are getting hit with snow and ice. In other words — excuses, excuses.

Liz Crawford
Liz Crawford
8 years ago

Well, it may be warm weather, but it’s still Christmas. That means people are still looking for presents — to give and to get. I think that appealing to the shopper, like “What to get Aunt Belinda?” will be more effective than simply showing hero shots of merchandise. Let’s use the personalization tools we are always talking about to get us over the hump!

Patricia Vekich Waldron
Patricia Vekich Waldron
8 years ago

Great comments on how retailers can react to weather. Even better would be to use accurate weather forecasting and predictions to more accurately determine demand as well as course correct in real-time. IBM’s partnership with The Weather Channel is designed to do just this.

 

Kai Clarke
Kai Clarke
8 years ago

This is the cost of doing a seasonal business. Weather cannot be controlled. Inventories are limited. Welcome to retail…better planning, shorter cycle times and some good, old-fashioned luck is what every retailer needs.