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?