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Retail Newsline: Same Store; Same Story, but What About El Nino?

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By Garrick Brown, Vice President, Research – West Region

Before I get going this week, Gray UmbrellasI want to point all of you to a compelling work that was released by Jim Tompkins of Tompkins International last week; Respond to the Titans.

If you don’t know him or his work, he is one of the leading supply chain/logistics guys in the field and one of the foremost thought leaders when it comes to e-commerce. If you’ve ever uttered the words omni-channel his stuff is required reading.

October same store sales comparables came out last week. You can check out detailed retailer-by-retailer data by clicking here. By the way, these come to us by way of our good friend Mike Palenchar of the MR Group. In addition to putting together this free monthly report that he shares with the industry (you can get on his mailing list by dropping him a line at mpalench@columbus.rr.com) , Mike is also one of the top retail talent recruiters in the business. He’s been active in the industry since 1999 and he specializes in identifying top talent for mid to upper level positions in the retail and building industries nationally. He’s helped a lot of people I know some great positions and he is a good friend to the Newsline.

There are a number of indexes out there that measure same store sales performance. Mostly they vary in terms of which retailers they track and so typically they tell the same overall story though the numbers might vary a bit. I am personally partial to Thomsen Reuters index.

According to Thomsen Reuters, the retail sector as a whole saw same store gains of just 0.3% in October. This isn’t awful, but it’s not that good. Last year the retail sector as a whole (or at least as they measure it) was up 3.1%. Apparel was actually up 1.3% (compared to -0.5% a year ago), but really anything below the 3.0% mark is hard to get excited about. Their discount sector was actually down 0.5%, but their index is only tracking Costco and Fred’s, so I don’t see that as the best indicator. Unfortunately because most of the dollar store chains report on a quarterly basis that leaves a pretty small sampling of retailer performance to base things on.

Ultimately, what we are talking about is relatively weak traffic in October at the nation’s malls. Weather remains the primary culprit with much of the nation still experiencing warmer than usual temperatures. This unfortunately continues to impact consumer purchases of fall and winter clothing. And when consumers don’t need to go to the mall to buy a new winter coat, they miss out on all those other items they could be buying as well. Meanwhile, a strong U.S. dollar has taken a nibble out of foreign tourism related retail spending in places like New York, San Francisco and Miami, though nibble—not bite—is the operative word.

Sound kind of familiar? Well, it was pretty much the same story with September’s same store sales. Clearly it’s not just cold or inclement weather that can have a negative impact on retail sales but the real question is what’s it mean for November and beyond?

Assuming we bounce back to typical weather trends, one would assume we would see some pent up demand for fall and winter apparel and that we will see some stronger performances heading deeper into winter as trends normalize. But will they? This year, probably not. Virtually every climatologist out there has predicted that this year might see the strongest El Nino conditions in the west that we have had since 1997/1998. Of course, that was at the height of the dot.com boom and came at a time when the overall economy was on fire. So comparing sales growth totals from then to now is beyond comparing apples to oranges. It was a different economy and a much different retail world. But we can look at how that 1997/1998 El Nino event impacted weather across the nation that year.

In the spring of 1998 the National Climactic Data Center released a comprehensive report on the impact of that winter’s El Nino effect and it found

  1. The 1997/1998 winter was the second warmest and the seventh wettest since 1895.
  2. Severe weather events included
    1. Flooding in California
    2. Tornadoes in Florida
    3. A severe ice storm in the Northeast
    4. Flooding in the southeast
    5. There were wetter than normal conditions across most of the southern third of the US;
      1. California and North Dakota had their wettest February ever recorded
      2. Florida, Maryland, Nevada, Rhode Island and Virginia had their second wettest February ever recorded
      3. There were warmer than normal conditions across most of the northern two thirds of the US;
        1. The warmest February on record took place in much of the Upper Midwest and parts of the East (including Minnesota, Wisconsin, Illinois, Michigan, Ohio, Pennsylvania and Connecticut)

Now that I have scared all of you, there are a few things to keep in mind about that winter… it still happened. Yes, temperatures were warmer than normal. But this is how it broke down:

Region

Normal Temp. (Fahrenheit)

Winter of 1997/1998 Temp. (Fahrenheit)

Difference (Warmer)

Northeast

23.7

29.8

+6.1

East North Central

16.4

26.6

+10.2

Central

31.3

37.4

+6.1

Southeast

46.2

48.4

+2.2

West North Central

19.4

25.8

+6.4

South

43.1

45.7

+2.6

Southwest

33.2

34.2

+1.0

Northwest

30.5

33.4

+2.9

West

39.9

40.9

+1.0

National

32.3

36.4

+4.1

Things warmed up… slightly but certainly not enough to stop you from needing a coat in Minneapolis… or on a cold night in Tucson for that matter.

What should be of much greater concern is the possibility of ice storms, tornadoes or other extremely disruptive weather… should it occur. By the way, most of the severe weather events of that winter came in late January and in February. So even if this turns out to be the strongest El Nino since then, and it happens to play out almost exactly as it did then… the holiday sales season is not likely to be impacted.

But remember… there is absolutely no guarantee that an El Nino will actually happen this year (though I wouldn’t bet against all the climatologists in the world on that one). And there certainly is no guarantee if (when) it does happen that it will play out in the same way. For example, during the winter of 1997 California began to record higher than normal levels of rainfall by November. We’re nearly halfway through the month already and this has not happened yet in 2015.

So what’s it all mean, other than increased umbrella sales? I say the smart money is still on pent up consumer demand and a tidy increase in sales through the remainder of the year. But what do I know… predicting this stuff is like predicting the weather.

Oh… one last thing, nationwide energy savings in the winter of 1997/1998 were estimated to be at about 10%. Not a bad thing for consumers…

This post is commentary from the latest weekly edition of our Cushman & Wakefield Retail Newsline, which you can subscribe to for free by e-mailing garrick.brown@cushwake.com.

garrick-brownGarrick joined Cushman & Wakefield (formerly DTZ / Cassidy Turley) in October 2010. He serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.

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