(Reuters) - Apparel retailers saw a boost of no more than $200 million in sales from cold weather just before the new year, and with product markdowns above 50 percent, it will be very difficult to make up margins in the coming months, industry researchers said.
Shoppers came out to spend on winter apparel in the last two weeks of December as cold weather finally rolled in after an unseasonably warm run-up to the holiday.
Holiday sales are a major influence on retailers’ financial health, and department stores like JCPenney and Macy’s are some of the most affected from warm weather slowing apparel sales, according to consultants.
Winter storms in the Midwest and Northeastern United States, some bringing more than a foot (30 cm) of snow, boosted spending on apparel by about $200 million, contributing around 0.1 of a percentage point to this season’s 3.4 percent growth over last year, calculated Craig Johnson, president of retail consulting firm Consumer Growth Partners.
“Let’s just say it’s better than a sharp stick in the eye,” Johnson said, adding that while the year-end bump was good for outerwear sales, it is too little to save “an otherwise sorry season.”
Despite some retailers’ apparel sales troubles, the athletic leisure players including company Lululemon Athletica fared well in the third quarter according to filings and consultants.
There could be some relief for others as the winter chill seeps into 2016 and shoppers stock up on warmer clothing, helping move stuffy inventories that have built up since October said Planalytics, a firm that determines how weather is affecting consumer demand.
But with heavy coats and other winter accessories at 40 and 50 percent off on average, and sweaters at upwards of 60 percent off, deep discounts will pressure profit margins for retailers said Johnson.
On Thursday (December 31), some coats at Macy’s were up to 65 percent off and some parkas at Abercrombie & Fitch were marked down to $130 from $260, according to retailer sites online.
Companies did not respond to requests for comment. Abercrombie declined to comment.
While cooler weather is welcome, its late arrival is not in retailers’ favor as most shoppers have blown through their holiday spend and have little discretionary dollars, said Sonia Lapinsky, a director of retail practice at consulting firm AlixPartners.
The firm expects department stores and teen retailers especially will suffer into 2016 unless companies find a way to cut back on deep discounting.
Off-price retailers are expected to continue to challenge traditional retail models and grow at a healthy rate.
(It has been refiled to capitalizes ‘P’ in AlixPartners in final paragraph.)
Reporting by Kylie Gumpert; Editing by Andrew Hay