Retail same-store-sales (SSS) were announced December 3rd and came in much lower than Wall Street expectations at -0.3%. Many analysts expected +2% to +7% gains due, in large part, to the easiest year-over-year comparisons for any month with the abysmal November results last year of -7.7%.
So why were results so bad after a supposedly strong Black Friday? Blaming the weather was a valid excuse this year due to cannibalized sales into October and other simple trends. First, the industry sales history over the past 30 years tells us a lot. October usually outshines November SSS about 87% of the time and when October is stronger than expected it’s followed by a weaker than expected November 73% of the time. This year, October was so strong (+2.1% gains) because it was the 3rd coldest October in history, wettest ever and snowiest in 40+ years driving exceptional demand for Fall and Winter merchandise, thereby cannibalizing November seasonal sales.
So what’s left for retailers to sell us in November since we already bought coats, sweaters, snow shovels, mouse traps, firelogs and all the other cold weather merchandise in October? Holiday gift categories and, especially, electronics but that’s about it and obviously not enough to salvage the very weak sales during the rest of the month. The only problem there is consumers are buying holiday gift categories about 2 weeks before the holidays so while Black Friday sales were OK, the warmest November in 8 years was certainly a big negative. The International Council of Shopping Centers surveys confirmed the later holiday shopping this year with 42% of consumers indicating they’ve completed their holiday shopping vs 48% last year. This is one reason why December will bring a surprise in the other direction with stronger gains – more on that below.
The attached chart summarizes the regional trends for the 4-week retail calendar November (1st – 28th).
So what’s in store for December, the most important month of the year? While the National Retail Federation is forecasting gloom and doom (-1%) the news is likely to be better. Why? Better weather and a double easy sales comp! The past two year’s we’ve had record snow and cold right around the holidays which dramatically curtails store traffic, results in consolidated/fewer trips to brick and mortar retailers and cannibalization of sales with increased on-line purchases. With a much warmer, drier and much less snowy 2-weeks before Christmas this year, store traffic will remain high benefiting gift categories sales. The two very weak Decembers -0.7% in 2007 and -4.7% in 2008 make for very easy comparisons this year – easier than November since we’ve had two back-to-back negatives! Another interesting stat is over the past 9 years a weak November = a stronger December and strong November = a weak December 8 of the past 9 years (89%) which bodes well for better news this holiday season!
Weather Trends December sales expectations in light of better weather and very easy comparisons to the past two years is for a +2% or better SSS gain. Retailers will be singing HO HO HO this year when results are announced January 7th!
For detailed summaries recapping November weather click on the links:
U.S. NOVEMBER 2009 RETAIL WEATHER REPORT
U.K. NOVEMBER 2009 RETAIL WEATHER REPORT
G-20 NOVEMBER 2009 WEATHER SUMMARY
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