How is U.S. retail supposed to recover if Mother Nature won't cooperate? Retailers had just finished dressing windows with pre-spring merchandise this weekend when Winter Storm 2003 blew in, virtually shutting down Washington, Philadelphia and New York, and disrupting sales throughout the East Coast. Best Buy alone closed 33 stores in the region, and most retailers had 50 percent of their store base in the affected northeast, Mid-Atlantic and southeastern coastal markets. Some malls, neighborhood centers and streetfront retailers are still closed for lack of customers and sales staff. And unless strappy halter tops and surfer-boy shorts go over well in 10 feet of snow, February's sales could reach a new low.
A lot of these retailers were still reeling from a spate of holiday ice storms that flattened Christmas sales. Mike Robbins, general manager at Triangle Town Center in Raleigh, N.C., says the past few month's cold weather is taking its toll on sales at the new super-regional mall. "We had an ice storm here that really disrupted business for about a 10-day period," he says. "Parts of the area were without power for a week and it hit right after Thanksgiving."
Cold snaps, to say nothing of blizzards, tend to put a chill on sales. According to US Bancorp Piper Jaffray analyst Jeffery Klinefelter, cooler-than-average February temperatures have damaged retailers' bottom lines for two years running. In February 2001, the western United States had temperatures consistently below seasonal averages each week, and the 17 apparel retailers Klinefelter covers posted a combined 3.7 percent decline in same-store sales. Klinefelter says Jack Frost struck again in February 2002, when cooler-than-average temperatures in the southeast and southwest produced a 7.1 percent decline in same-store sales. Klinefelter adds that while weather was only a contributing factor to these numbers, he'll continue to monitor weather patterns closely and factor them into his investor advisories.
"Given that cleanup is expected to take up to three days in some of the hardest hit areas, we believe that sales will continue to be adversely impacted throughout the rest of the week and possibly into the coming weekend," says Wedbush Morgan Securities softlines analyst Elizabeth Pierce in her report on the storm's effects. "While we believe February results should not have a significant impact on the overall first quarter sales and earnings results because it is the smallest month of the quarter, we do believe that February comps for several retailers could be at risk." Specialty chains dElia*s and Aeropostale are particularly vulnerable, with 67 percent and 50 percent of their overall stores located in the northeast, respectively.
But it could be worse. Pierce notes that February comprises less than 10 percent of annual sales and 25 percent of first quarter sales for most retailers. And while the storm ruined President's Day sales and promotions, it left the lucrative Valentine's Day selling season untouched, giving lingerie, jewelry and children's retailers an advantage.
Pierce expects retailers to extend promotional activities in an attempt to recapture the past weekend's lost sales. The impact of the storm on sales will be easier to gauge as retailers begin reporting earnings and expectations during the next several weeks. Merrill Lynch analyst Paul Friedman says retailers could still gain some lost ground, considering the month has 11 shopping days left, and temperatures are expected rise, unleashing the pent-up consumer traffic and demand.
If anyone's sales are up thanks to Winter Storm 2003, it would have to be airport retailers. After all, they had quite a captive audience with all the canceled flights and storm-stranded travelers. Home improvement retailers also seem to have an obvious edge, as many northeastern consumers find themselves in sudden need of a shovel.