Fall lingers into December, and retailers feel the heat

Workers at Corniche Furs, a wholesale business, where business slumped 30% this month, in New York, Dec. 11, 2015. Purchases of boots, coats and other cold-weather items are down significantly, and steep discounts are in the forecast as stores try to move their merchandise.
Workers at Corniche Furs, a wholesale business, where business slumped 30% this month, in New York, Dec. 11, 2015. Purchases of boots, coats and other cold-weather items are down significantly, and steep discounts are in the forecast as stores try to move their merchandise. NYT

High above the pedestrians milling about Herald Square in New York in light coats and jackets, Stuart Greenberg, a seller of luxury furs, fondly recalled chilly Decembers past.

“For the first 10 years of our business, we never even paid attention to the weather. It always just got cold,” said Greenberg. But sales at his Corniche Furs wholesale business have slumped 30 percent this month.

What was selling were capes, vests, raincoats with fur trimming and lighter-weight furs – items tailored more to fashion than warmth.

“These days, we wake up and we look at the 10-day forecast to see whether we’re going to do business or not,” Greenberg said. “I’ve been in the business 20 years, and I haven’t seen a December like this. I have to hire a meteorologist here.”

The changing of the seasons has gone from a reliable constant to yet another factor that can upend retailers’ best-laid plans. The winter quarter, which includes the holiday season, generally makes up a slightly larger percentage of retailers’ sales and therefore is especially critical.

But despite the rise of weather planning and the use of analytics, retailers large and small say they have been stumped by this year’s warm start to the season, which has pushed temperatures into the high 60s along some parts of the East Coast. In some places, fading rose blooms and drooping flowers still cling to plants along some city streets.

Understandably, shoppers are not in the mood for winter coats or boots.

Macy’s has already warned that it will need to offer big discounts to sell the winter inventory that is piling up in its stores after a slow third quarter. Nordstrom similarly blamed warm weather for its underwhelming fall performance. And the unseasonable weather has been no help to ailing retailers such as J.Crew, which lost $760 million last quarter and had banked on the holiday season to rebound.

“Not to make excuses, but October was the warmest October ever,” Art Peck, chief executive at Gap, told investors after reporting a 3 percent decline in net sales in the third quarter. “And we’re still seeing the temperatures in the Northeast stay pretty warm, which obviously means people aren’t ready to buy into sweaters and outerwear.”

Sales of women’s boots in New York plunged by 24 percent in the first half of December, according to data from Planalytics, a weather intelligence firm that works with some 250 retailers to plan for weather changes.

Nationally, sales of boots were down 3 percent because of the weather, as were sales of fleece items, according to Planalytics, which assesses previous sales numbers and weather patterns to analyze how much temperature swings and other weather changes are bolstering or hurting sales. Sales of hats, gloves and scarves were down 2 percent, the company said.

Planalytics’ president, Scott Bernhardt, said that last year’s long, cold winter had led some retailers to prepare for more of the same. But as weather patterns become more volatile, previous years do not necessarily provide a good guide to the future.

“Last November, they came close to or ran out of outerwear early. It was such a panic. So this year, no matter what the data tells them, they plan up from last year,” he said. “They get stuck in the past a little bit.”

‘Winter is coming’

Still, retailers have stepped up their tracking of weather patterns. Since 2004, Target has had a “climate team” that studies historical weather patterns and scrutinizes weather forecasts to head off a shortage, or glut, of merchandise.

And some New York retailers bought coverage against the weather from a startup, Storm Exchange, that guaranteed payouts if temperatures in New York City exceeded the historical average for December. But that startup, which began in 2006, lasted only three years when funds dried up during the financial crisis. Its founder, David Riker, reached in New York on Tuesday, declined to comment.

Fast-fashion retailers such as H&M or Zara are – for now – riding out the lengthy warm spell more effectively than other traditional retailers.

Zara, which says it can take a product from design to its stores in a matter of weeks, starts each season with a very low commitment to any style or item, said Jesús Echevarría, chief communications and corporate affairs officer at Inditex, Zara’s parent company.

Instead, Zara makes small runs of many designs, and relies on daily feedback from its 2,143 stores worldwide to make decisions on what to manufacture throughout the season. Zara’s New York stores are filled with lighter jackets and coats this year, for example, as well as more casual ponchos.

Some relief may be on the horizon for the wider retail industry. With cooler weather forecast toward Christmas, shopper interest in cold-weather items could increase, said Paul Walsh, a weather and climate strategist at the Weather Co.

“This weekend, it’s going to get cold, though it may be too late for retailers from a sales and margin perspective,” Walsh said. “Winter is coming, but it’s definitely been delayed.”