Should retailers blame slow sales on the weather?
The impact of weather on retail performance is not a new debate. It’s a subject that’s been argued for years. Do good retailers overcome bad weather or is the polar vortex or some other meteorological event a legitimate factor in explaining away a subpar performance?
In its earnings announcement this week, Home Depot said that same-stores sales in the fourth quarter rose 3.7 percent, below the 4.5 percent increase expected by analysts, because of weather conditions across the country. The home improvement chain’s stock fell three percent in early trading on that news as well as a tepid forecast for the coming year.
“[What] we did not plan for was the extent of the unfavorable weather we experienced in all regions throughout the quarter. It was cold. It was snowy. And perhaps worst of all, it was wet. Wet weather delays projects and this was evidenced in our sales performance in the quarter,” said Home Depot CEO Craig Menear on the company’s earnings call.
Mr. Menear and Home Depot CFO Carol Tome said the retailer performed up to expectations in the few markets where weather was not a factor in the fourth quarter.
On the topic of weather, AccuWeather issued a press release earlier this week stating that its forecast for holiday sales was more accurate than the one issued by the National Retail Federation, which had omitted weather as a factor in its model. AccuWeather predicted that sales would fall below the 4.3 percent to 4.8 percent gain projected by the trade association.
- Home Depot, Inc. (HD) CEO Craig Menear on Q4 2018 Results (Earnings Call Transcript) – Seeking Alpha
- ‘Cold, snowy, wet’: Home Depot suffers as winter hits house makeovers – Reuters
- AccuWeather Correctly Predicts 2018 Holiday Sales Would See Lower Bump than National Retail Federation Estimates – AccuWeather
DISCUSSION QUESTIONS: Do you think retailers fully understand the impact of weather on sales performance? Should retailers incorporate weather into their forecasting models?
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16 Comments on "Should retailers blame slow sales on the weather?"
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Managing Director, GlobalData
There’s no doubt that Home Depot is affected by the weather. Sometimes the impact is positive, such as the rebuilding required after storms. Sometimes the impact is negative, such as colder snaps which prevent or delay outdoor projects.
This quarter, I am not so sure the weather was the main reason for a slowdown in revenue growth. It was certainly a factor but the sluggish housing market and weaker overall demand for home improvement were far more important factors.
President, Integrated Marketing Solutions
If retailers blame bad weather for slow sales, should they also credit good weather for better-than-expected sales? The bigger issue is that retailers still rely too much on the historical metric of just sales, especially just store sales. In this age of omnichannel, it is critical to understand customer behavior across the spectrum. In bad weather periods, do search and online purchases go up? Do ship-to-home sales go up in severe weather? No one can change the weather. The question for today’s retailers is, what are you doing to adapt to changing conditions? Or are you just sitting there waiting for customers to return after the weather changes?
Founding Partner, Merchandising Metrics
I think retailers understand very well how the weather impacts their business. They just aren’t very good at perfect forecasting at the moment of buying their inventory. How could they be? And how come we read about “blame” when the weather is detrimental but we don’t read about “credit” when good weather is a boost? So of course weather is a factor in any given moment, but over time it’s up to the retailer to figure it out. Just like they have to figure out all the other moving parts of the market.
Principal, Your Retail Authority, LLC
Yes and I have to add that 40+ years ago when I was new to Retail IT, we called the weather bureau every day in order to add the weather to the daily Flash sales report which was the retail bible of the day. Not only that, but when we pulled reports to forecast, we didn’t just pull up similar weeks, we pulled by weather as well. Hey, far from perfect but yes, weather was known to be important. Are they doing a better job now? Don’t know, but I’m sure there are much better tools today. For my 2 cents.
Vice President, Strategic RelationsHamacher Resource Group
Weather (and other such uncontrollable circumstances) certainly plays a role in the ability of shoppers to frequent a retailer and/or make purchases. And I do believe that part of a retail operator’s “predictive analytics” should incorporate weather patterns and predictions.
However, there are countless “controllables” that retailers should include as part of their predictive strategies and planning exercises that are too often taken for granted or otherwise overlooked.
Independent Board Member, Investor and Startup Advisor
The challenge stems from weather not being considered an independent variable in the same sense as assortment, historical sales and promotions. One category comes under the control of the business through concrete actions, the other is completely outside of their control but no less illuminating on outcomes.
It’s not a question of understanding the full impact of weather so much as it’s simply easier to not include it or give it the weight it deserves in driving comp numbers up or down. What is even more insightful is how different product categories are affected by the weather: from DIY to basics or fashion, especially when you correlate in-store sales (store pickup) with online sales (delivered to the home).
Associate Professor, Fashion Institute of Technology
Interesting — as another BrainTrust member already stated, we rarely see weather as the hero of great sales! Retailers certainly do understand the impact of weather on their business, however, more retailers should be using data and analytics to better predict weather related issues. Companies like Planalytics do exactly this for retailers. What needs to change is retailers need to stop blaming weather for poor sales and start talking about how to better understand predictive analytics to better forecast sales. A historical sales planning model is inherently antiquated in today’s technological environment. Additionally, with speed to markets being faster than any previous time in our industry, modifications on allocations should be less complex than 10 years ago.
Senior Vice President, Dechert-Hampe (retired)
In general yes, though retailers more dependent on weather patterns and big box DIY retailers would certainly qualify. It’s not that hard to anticipate the major seasonal changes. Spring follows winter and that means fertilizer and lawn mowers. The difficulty is specific weather events — think major snow storms, unusual rain events like we just had in the southeast or even hurricanes. But even those events tend to impact the timing of spending more than the overall level in a budget cycle.
EVP Thought Leadership, Marketing, WD Partners
Working for Les Wexner a long time ago, he used to say, “there is no excuse for poor sales other than the fact that you don’t have the right fashion.” There’s some truth to that, but when a monster snow storm covers the entire Northeast for an entire weekend, well, you might have a case against him (but I wouldn’t try it!).
Today, online sales should (operative term) mitigate the weather effect, but even in the best cases, that’s still only 30-some percent of sales. So ultimately, I’d say yes, weather plays a role but Les is right to this extent: I certainly wouldn’t lean on that weak excuse for too long.
President/CEO, The Retail Doctor
Lowe’s blamed Canadian home sales and not the weather for their miss. I think the blue state tax deduction cap has slowed sales and affected these retailers. The big concern: are home stores showing signs of a worsening economy? Hard to see past the excuses.
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Weather, such as major storms, can negatively impact the sales of certain retailers. Some of the impact is the difficulty getting to the store and it can delay certain projects. In some cases, like with grocery stores, bad weather can stimulate sales. Recently our town, that rarely gets snow, was forecasting a couple inches of snow and the local grocery store was stormed by consumers stocking up on groceries. The checkout lines extended to the back of the store.
Over the course of a quarter, most retailers have a chance to make up the sales. While there may be blips that are driven by weather, retailers that are most impacted by these peaks and valleys should incorporate weather into their forecasts to help improve staffing and inventory levels. And post-storms, retailers should be analyzing the impact of the weather on a daily basis.
Managing Director, StoreStream Metrics, LLC
Data-driven content must be the goal/objective of every marketing and merchandising professional. Weather is another data source and as such, should be integrated into the brand-retail-consumer workflow. While not 100 percent accurate, weather forecasting is an easy predictive indicator for retailers. Taking the time and effort to actually do something proactively for the shopper’s benefit is another matter. This is another example of what is referred to as the “knowing-doing” gap.
Vice President - Industry sectors , Capgemini
Agree with Chris. Weather’s impact on DIY sales should reflect across the omnichannel. If there exists a true cause-effect relationship between the weather and sales of DIY items (especially those related to rebuilds), the sales decline should be felt evenly across the omnichannel (irrespective of how you buy, the weather is going to discourage you from doing any building). Slightly different for grocery, I would expect online sales to peak during bad weather days.
CFO, Weisner Steel
I think they OVER understand it, i.e. they exaggerate the impact. Of course the impact varies greatly between different types of retailers and different types of weather, so in the case of HD, the slight deviation from expectations may well be due climatic reasons. But the retailer that every quarter finds a reason — too cold, too hot, too rainy, etc. — that’s just an excuse.
Incorporate weather into models? How, when we have only vague ideas on what lies ahead?
Vice President, Research at IDC
In the case of Home Depot, they knew exactly what’s going on with the weather and attributed accordingly 85 basis points of negative impact from weather for Q4. They also identified that issues such as storms and hurricanes are a positive influence as most of these communities require substantial rebuilding and usually on short notice for infrastructure, buildings and municipality charges.
In the broader scope, retailers usually have a good handle on weather impact, except perhaps one-time events, which are usually positive for Home DIY chains. This understanding begins at the store level with managers understanding local weather conditions and its impact on their stores. More important, localization is a factor that many retailers already incorporate into demand forecasting as well as cost structure.
Weather remains one factor of doing business. Retailers that don’t incorporate weather in their thinking either are minimally impacted by it or are at competitive peril.
I agree – Home Depot’s sales are affected by weather. The lack of additional color on how/where is what leads to people feeling like they’re using it as an excuse. For example — had they additionally stated that the weather was colder and wetter for, on average, 10 more days during the quarter in geographies impacting over 40 percent of store count, then these statements could become comparisons in future instances.
I agree with Chris Petersen below as well – in the era of omnichannel, being shut in due to weather can often times increase sales on e-commerce purchases. Whether those are still purchased on Home Depot’s website or Amazon is an open question – but the better takeaway is the opportunity to target promotions to customers in affected areas during the weather events to increase the probability and amount of e-commerce they can salvage in trade for poor foot traffic.