May Weather Casts Gloomy Light on Retail Results

Retailer’s can’t blame the weather for soft May results, except maybe Fred’s, and, in some cases, taking the month’s weather into considerations makes performance look worse than the basic numbers indicate.

According to climate monitor Planalytics, softline retailers, those selling clothing as their core operations, enjoyed a 17 percent boost on its scale of weather-related demand influence. Broadliners and home centers, the big box boys including Target, enjoyed an 11 percent bump.

Yet, results for a lot of major retailers came in below expectations on the month, which wouldn’t necessarily be so bad if they were coming in a little short on sales increases, but, in this economy, they are suffering additional declines. The department store sector took a particular hit. Nordstrom comparable store sales fell 13.1 percent when analysts were expecting a 12.7 percent decline. Saks comparable store sales fell by 26.6 percent, so no reference to analysts is necessary to demonstrate that the venerable retailer is facing significant erosion among the regular customers that once supported its ongoing operations.

On the other hand, Macy’s, while certainly not having a great month with comps down 9.1 percent, beat analyst expectations of a 9.3 percent slide, demonstrating that, within various retail sectors, its better being at the lower end of the price scale than the upper these days. Still, Dillard, which has struggled particularly in the recession, saw its comparable store sales tumble by 13 percent when the analysts predicted eight percent.

Department stores weren’t alone in suffering unexpectedly severe May declines. For example, Target’s comps, down 6.1 percent, also failed analyst expectations.

As bad at that all is, consideration of the weather makes things worse. Warmer than average weather in May and downright scorching temperatures out West, which are the kind of conditions that drive sales in seasonal merchandise such as clothing, should have helped apparel-heavy department store retailers.

Stabilization has been the buzz word observers have been applying to retail, given that the pace of decline — outside the industry’s discount end — has generally been softer than many predictions, but May demonstrates that consumer determination to bargain hunt remains powerful. Wal-Mart and dollar stores have continued to post solid comp numbers recently. However Fred’s, which is not exactly a dollar store but operates in the value space between them and Wal-Mart, only managed a 0.2 percent comparable store sales gain, below analyst expectations in at least one poll and on the low end of its own guidance.

However, Planalytics analysis noted that Fred’s demand was depressed by six percent on its scale due to terrible weather in the middle South, where the Memphis-based company has many of its stores.

When retailers cite weather as a reason for their woes, it can sound like an empty excuse. The circumstances at Fred’s suggest this isn’t always the case. Of course, retailers don’t point out when weather conditions are such that they should have enjoyed better results than they actually posted, but this past month demonstrates that watching the weather can weigh in on determinations about a retail performance in a positive or negative way.