Retail Sector: Mother Nature Adds Insult to Injury

This is a year where the threat of a lost weekend due to an ill-timed snowstorm could be a disaster for a struggling retailer.

Do You Really Dream of a White Christmas, Newsletter, November 17, 2008

In a year of historic and almost unimaginable retail headwinds, Mother Nature may have delivered the final coup de grâce on the holiday shopping season.

In an unfortunate melding of meteorological physics and Murphy’s Law, the final and “critically important” shopping days of the 2008 holiday season were slammed by bitter cold temperatures, snow and ice. At least 25% of US households – representing population centers in the northeast, Midwest, and northwest – were subjected to weather conditions that were, to say the least, unfavorable for travel and shopping.

It now appears likely that December retail sales will fall short of even the dire expectations set by analysts and economists.

Department stores, specialty apparel retailers, and big box electronics retailers will all have been hit hard by the traffic disruptions caused by the Super Saturday storms. For some – e.g. Bon Ton (BONT), Talbots (TLB), Dillard's (DDS), and Charming Shoppes (CHRS) – the hit to sales caused by the weather this weekend may be enough to push them over the edge.

On the positive side, Wal*Mart (WMT) continues to be positioned well to weather both the economic and physical retail climate. The Super Saturday storms were largely blue state events; while Wal*Mart has a large store presence in those areas, the heartland of their US store footprint in the south central US was largely dry and trafficable.

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Disclosure: WMT, M.