Retailers have a common scapegoat to justify slow sales and missed earnings targets this quarter: Blame the weather.
Despite the industry posting positive growth across several sectors in the first part of the year, some retailers have failed to meet earnings expectations for the quarter. When it comes to the reasons why, there are several, including growing pains as companies seek to try to adjust their business to compete against Amazon.
[Related: Target has Amazon in its sights after quarterly growth]
But one of the most popular justifications is the winter storms the Northeast and Mid-Atlantic regions received in the first few months of the year, and with it, delayed spring weather across those markets.
Home improvement chain Lowe’s Companies, Inc. announced on Wednesday a 2.97 percent increase in sales to $17.36 billion for the quarter that ended on May 4. Net income rose to $988 million or $1.19 per share, lower than analysts’ expectations. Outgoing chief executive officer Robert Niblock blamed it on the winter storms.
“In the first quarter, we experienced a delayed Spring selling season due to prolonged unfavorable weather across geographies that impacted outdoor categories,” he told investors.
Company executives also said sales of exterior stains and paints slowed in the quarter, which they attributed to the inclement weather.
Competitor Home Depot, Inc. provided a similar justification, despite the company growing its sales 4.4 percent to $24.9 billion for the quarter that ended on April 29.
“From a geographic perspective, weather impacts can be seen in the variability of performance across Canada, our three U.S. divisions, and nineteen regions. Our largest division is the Northern division, which posted flat comps due to weakness in our seasonal categories,” chief executive officer Craig Menear told investors.
Some businesses are likely to be impacted more significantly by inclement weather given the products they sell. Home improvement companies, for example, could miss out on sales in their popular lawn and garden sectors if cold weather persists longer than anticipated. But it’s not just companies in the sector that say they suffered from the weather.
Department store chain J.C. Penney — which is struggling to turn around its business after reporting a 4.3 decrease in net sales for the most recent earnings period — said it’s comparable store sales dropped in April due to unseasonable temperatures.
“We’re confident that our strategic plan is working, and this is evidenced by the sales recovery we experienced in the final 2 weeks of April when the temperatures began to normalize,” departing chief executive officer Marvin Ellison told investors.
Others retailers, however, used the weather to their advantage and cited the winter storms to further highlight a strong earnings quarter.
“We’re pleased to report such strong comps in the first quarter despite unfavorable weather from snowstorms, which we estimate reduced our first quarter comps by approximately a 100 basis points,” Bruce Besanko, chief financial officer of Kohl’s, told investors.
The company previously reported a 3.6 percent increase in net sales to $3.9 billion for the most recent quarter. Kohl’s chief executive officer Michelle Gass said the company focused on less seasonally dependent categories like home and active footwear to buffer from lost sales elsewhere.
Retail experts say the divide within the industry over the impact of the prolonged winter weather could also be an indicator of poor planning on the part of some businesses.
“The fact that some are calling it out and some are not shows that it is a very real impact, but it’s a very real impact that can be side-stepped and avoided,” Simeon Siegel, a senior equity analyst with Nomura Securities, said in a recent interview. “It’s a very difficult thing to plan for, and I wouldn’t fault retailers for not being able to plan for it by putting the right product out.”
“The question is though: Is there a point at which you need to account in your internal planning for the flexibility to deal with things that are out of your control?,” he added.
The New England region had several nor’easter storms — categorized by winds from the northeast — in the first five months of 2018. But severe weather during the early months of the year is not uncommon. In 2017, for example, blizzards hit the Northeastern U.S. in both February and March.
And as more companies move to bolster their online presence, some retail experts say the focus on e-commerce should mitigate the impact of winter storms or colder weather.
“You’d expect companies that have more of a digital footprint saw much less of an effect,” said Dan McCarthy, assistant professor of marketing at Emory University.
