The Final Insult: Weather to Hinder Last Week of Holiday Shopping

With only a week left until the Christmas holiday, every day (every hour) is critical for retailers hoping to hit their sales numbers. And this year they’ve gone to extraordinary lengths to overcome the depressed consumer spending environment to lure shoppers into their stores. Time and traffic is now the final key to successfully – or as successfully as possible given the environment -- close out the year.

Making this last week even more critical is the fact that – according to the National Retail Federation – only 47% of shoppers had completed their Christmas shopping as of the second week of December. This compares to 53% who had completed by this time last year. This is a huge shift and is compelling evidence that consumers are, more than ever, holding on to their money for as long as possible.

And now, after a season of historic job loss, financial meltdown, and the freezing of the credit markets, retailers in some of the largest cities in the US face the final insult: snow, rain, ice, and bitter cold weather during the last and most important week of the holiday shopping season. It’s Mother Nature playing hard ball below the belt.

As I’ve noted earlier, the weather in December this year represents a down-side only factor in retail sales: bad weather is very negative to sales, and perfect weather is only marginally helpful. In contrast, cold weather in November contributed to sales results that were bad, but not as bad as the very low expectations. This has set up a December expectation of results that, as in November, may be bad but not horrible. The weather will likely reverse that scenario and contribute to even worse than expected sales results.

Four reasons for potential downside surprise in December retail sales:

1. Horrible weather during the last 7 days of the holiday season, including snow in the northeast on the last weekend before Christmas.

2. Elevated risk of snow events in the east through the balance of the holiday season and the end of the December fiscal period.

3. Sustained bitter cold weather across the northern US and Pacific Northwest.

4. Spending on non-discretionary seasonal items largely exhausted in November and late-October.

On the positive side, what is bad for bricks and mortar retailers is great for on-line retailers. This kind of weather is very positive for internet shopping and will likely fuel even stronger on-line sales this year.

Disclosure: Author holds positions in WMT, M

Comments

[bosun.j:]

Sad. So sad.

At least this article lays the ground work for a plausible dodge for whats really happening.

2008 Dec 19 03:58 AM