News / Business
Back-to-School 2010 will bring a "D-" for Retail Sales!
So far in 2010, retailers have been up against very easy sales comparisons to last year when retail industry SSS averaged -4.5% - the worst ever. So, the +3.8% pace so far this year is pretty good but not great since the +9% in March, when the Easter weather was the best in 20+ years, skewed the average. But in the months ahead, those soft comparisons to last year become much more difficult with a +0.2% SSS trend last year in Q3 (Aug - Oct). The simple math suggests we're headed for flat to negative SSS trends in Q3 2010 and that's before we factor in all the other hurdles described below. (Click here to view the year-over-year SSS trends by month)
The next BIG TEST is the weather. Last year, the nation had the coldest back-to-school/Fall season in 7 years with the Northeast the coldest in 12 years and some early, big, snow storms in October across the U.S. This helped retailers post the much higher than expected sales gains in Q3 as consumers flocked to buy seasonal must have items to brave the elements. The weather/sales pattern is more similar to 2006-2007 when we went from a cold Fall in 2006 (retail sales strong at +5.5%) to a very warm Fall and retail sales stumbled to just +1.8%.
Unlike last year, this Spring-Summer has been much hotter across the U.S. pushing Summer seasonal sales up earlier than last year when Summer heat didn't even arrive until August in the East after the coldest June/July on record for parts of the Northeast.
Click here to see WTI's projections of a continued much hotter year-over-year pattern through early November! Consumers have already bought all the air conditioners, fans, shorts, t-shirts and sandals they need, so now it's all about a weather trigger to end the Summer mindset to spur those Fall purchases. Other than a brief blip in September, the quarter ahead will prove to be very challenging weather wise.
So what else could possibly go wrong for retail sales this Fall - maybe a mid-term election year! Ordinarily, presidential election years bring higher risk to Fall retail sales, but seldom does a mid-term do the same unless the economy is weak and consumer sentiment is weak. A hot October with a hot election spells "F" for October SSS as we would expect the "CNN effect" on this year's election to create some uneasiness.
Now lets throw in some disruptions to store traffic from an active hurricane season. As our blog post suggests, WTI and everyone else expects a parade of storms and land falling hurricanes from middle August to October. WTI research suggests land falling hurricanes can cost the industy 1/2% to 1% in total SSS. We had no impacts last year, so this will be a more disruptive Fall. The only winnners in a Summer-Fall like this might be the home centers that benefit from an extended outdoor season.
What about consumer confidence? Historically, the consumer confidence index correlates to a pretty respectable 42% relationship to July retail industry SSS - higher confidence, higher sales...lower confidence lower sales. Since this index is again plunging back to 2009 levels, things don't look good for July. But this index shows less and less importance through the Fall with the correlation falling to 30% in August, 12% in September and 4% in October as the weather is the main driving factor to retail sales.
Gas prices don't historically have much impact on retail sales unless they’re over $4, but this too is up 10% over last year, so it certainly doesn't help put anymore money in consumer's pockets.
The cooling season has been record setting for parts of the country with the Northeast off to the hottest Summer in decades. Residential cooling bills are up 30% to 150% further impacting discretionary income. Northeast consumers are just about to get those first shocking bills in the mail!
So what do consumers have to say about spending this Fall? According to Marketing for Moms, a June 2010 survey suggests they'll cut back by 12% on back-to-school items this year, especially on clothing.
All in a all a "D-" might be wishful thinking this back-to-school/Fall season!
###
PRESS CONTACTS:
Bill Kirk, CEO & Co-Founder Weather Trends International
(O) 610-807-3585 (C) 484-903-6887
bkirk@wxtrends.com
About Weather Trends International: The global leader of actionable year-ahead business weather guidance for retailers, manufacturers, pharmaceutical companies, agricultural firms, financial equity and commodity analysts. Clients include some of the world’s most respected and successful companies like Wal-Mart, ASDA, Target, Kohl’s, AutoZone, Sherwin-Williams, Anheuser-Busch, Johnson & Johnson, 3M, SC Johnson, JP Morgan, Agway, Hershey’s and over a hundred fifty others. Its business centric weather solutions and understanding of how consumers respond to the weather is used throughout organizations to help "manage the weather risk”. Utilizing technology first developed in the early 1990s, Weather Trends International’s unique statistical math based trade secret formula forecasting methodology projects temperature, precipitation and snowfall trends by day and week a year-ahead for 720,000 locations across the globe (all 195 countries) with an industry leading 75% to 95% accuracy. WTI is recipient of 6 business/technology awards this year: 2009 winner of the Red Herring North America technology award, 2009 winner of the American Business Award for Most Innovative Company of the Year, International Business Award for Most Innovative Company of the Year in North America and Forbes #5 Most Promising Company of the year. Offices in Bethlehem, PA, and Bentonville, AR. Visit http://www.wxtrends.com/ or http://www.myskeye.com/ for more information.
Bill Kirk, CEO & Co-Founder Weather Trends International
(O) 610-807-3585 (C) 484-903-6887
bkirk@wxtrends.com
About Weather Trends International: The global leader of actionable year-ahead business weather guidance for retailers, manufacturers, pharmaceutical companies, agricultural firms, financial equity and commodity analysts. Clients include some of the world’s most respected and successful companies like Wal-Mart, ASDA, Target, Kohl’s, AutoZone, Sherwin-Williams, Anheuser-Busch, Johnson & Johnson, 3M, SC Johnson, JP Morgan, Agway, Hershey’s and over a hundred fifty others. Its business centric weather solutions and understanding of how consumers respond to the weather is used throughout organizations to help "manage the weather risk”. Utilizing technology first developed in the early 1990s, Weather Trends International’s unique statistical math based trade secret formula forecasting methodology projects temperature, precipitation and snowfall trends by day and week a year-ahead for 720,000 locations across the globe (all 195 countries) with an industry leading 75% to 95% accuracy. WTI is recipient of 6 business/technology awards this year: 2009 winner of the Red Herring North America technology award, 2009 winner of the American Business Award for Most Innovative Company of the Year, International Business Award for Most Innovative Company of the Year in North America and Forbes #5 Most Promising Company of the year. Offices in Bethlehem, PA, and Bentonville, AR. Visit http://www.wxtrends.com/ or http://www.myskeye.com/ for more information.
