The nasty economic effects of nice winter weather
Spring-like weather is giving residents in parts of the U.S. a December to remember -- and one that businesses that count on cold temperatures to bolster their bottom lines would rather forget.
Take New Jersey's Flemington Furs. "It's affecting us. That is the truth," said Cynthia Schulze, sales manager at the 95-year-old retailer, who declined to provide specifics. "Last year, we had a very cold, cold winter and our October, November and December were for lack of better words 'kick butt.' This year we are making much less."
Flemington Furs' situation is understandable. According to Accu-Weather's Paul Postelock, New York and Philadelphia, where Flemington Furs draws its customers, have experienced 15 straight days of above-normal temperatures. Boston's streak has been 14 out of 15 days.
Planalytics, which analyzes weather's impact on businesses, estimates that specialty retailers lost $185 million in sales in November because of the weather and another $158 million during the first two weeks in December. That sales drop comes in the midst of the critical holiday season and as chains such as Macy's (M), Dillard's (DDS), Kohl's (KSS) and Gap (GPS) continue to struggle.
"The number one gift item for Christmas is apparel," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm. He added that many retailers are heavily discounting apparel to move it. "If you wait till after Christmas, you're dealing with 70 percent off, and if you're doing it now, you're dealing with 40 to 50 (percent) off. You would be crazy not to do it now."
Not surprisingly, shares of VF (VFC), parent company of The North Face outerwear brand, have plunged more than 11 percent over the past three months, as have shares of ski resort operator Peak Resorts (SKIS). VF didn't respond to emails seeking a comment for this story, while a Peak Resorts spokeswoman said company executives were traveling and unavailable.
Sales of food items generally associated with cold weather also are feeling the heat. In the week ended Dec. 10, sales of soup posted sales declines in key markets such a Baltimore (12 percent), New York City (9 percent) and Dallas (6 percent), according to Planalytics.
"Obviously, we can't predict the weather and it's not something we control, so we don't build our soup plans around the weather," said Campbell Soup (CPB) spokesman Thomas Hushen in an email.
Business also is down at ski areas such Vermont's Killington Resort, the largest on the East Coast. It was forced to temporarily close last month because of the weather, though it's now open for business. According to Killington spokesman Michael Joseph, the resort had 30 percent fewer skiers during the Thanksgiving holiday.
"Obviously every snow-dependent business in the East is hurting to some degree right now, but we will persevere," he said.
Flemington Furs also is confident that it can weather the "storm" of unusually warm weather, and it's offering plenty of deals to entice customers into it stores, according to Schulze.
It may have to keep the come-ons coming because after sliding down to more seasonable levels in the Northeast over the next few days, temperatures are forecast to climb back up again for Christmas.
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