Blustery winter reshaping family budgets, hurting retailers

by The City Wire staff ([email protected]) 176 views 

Retailers often mention weather as a reason for lackluster sales. It was too warm during the holiday season of 2012 which weighed down sales of winter coats, sweaters and other warm apparel.

But the holiday season of 2013 and the blustery "Polar Vortex" is far worse, at times crippling air travel to the tune of $1.7 billion in January, with an early economic cost estimate of $5 billion, according to Planalytics, a weather intelligence company based in Philadelphia.

Retailers from Amazon to Wal-Mart have said extreme winter weather is partly responsible for weaker earnings through the holiday season and month of January. And with three winter storms expected the first week of February there doesn’t seem to be any relief in sight.

“Middle income consumers are facing higher heating costs just to stay warm at home, which is bound to mean there is less money for discretionary spending. Their food spending is even compromised. They have been conditioned to shop with coupons, seeking bargains and that behavior is not likely to change, even if the economy does improve,” said Rich Yamarone, chief economist with Bloomberg Brief.

Marc Henning of Bella Vista, said his electric bill was $340 this month. Up just shy of $100 from last month.

“Our bill usually runs in the $140 range most the year. We're going to have to adjust our budget or to compensate for this recent bill,” he said.

Jami Dennis, of Powell, Mo., said she has shopped less frequently because of the inclement weather. That said, when Dennis does shop, she tends to stock up for longer periods of time.

“I have spent a little more online to ward off cabin fever, but with propane prices rising above $4 per gallon this past week I will need to tighten other spending to ensure I can stay warm until spring arrives,” Dennis said.

While consumers have spent more time inside this year, it’s understandable that store traffic would also have been lighter, Yamarone said. But a there’s another problem also impacting retail sales and that’s competitive pressure eroding operating margins. He said when retailers are sitting on unsold inventory they are forced to reduce prices to try and lure people into their stores, and lower prices mean tighter margins with less room to absorb the shocks being seen this winter.

“Middle class and lower income consumers are having a tough time, paying higher taxes this year and Mother Nature isn’t doing anyone any favors. Budgets are tighter and there is less fuel in the tank to move this economy forward,” Yarmarone said.

Jack Kleinhenz, chief economist for the National Retail Federation, said it’s tough to quantify the direct impact to the retail sector from the eight named winter storms already in the books, when there’s still six more weeks of winter expected for much of the country. He said it’s important to remember that this winter weather is transitory in nature and it will eventually pass. Kleinhenz expects some retailers will make up some of the losses when spring does arrive.

In the meantime, the demand for electric blankets, heaters, boots and ice melt are up year-over-year, according to Planalytics.

On another positive note, Kleinhenz said some of the ski areas are having great seasons, after suffering heavy losses the past two years.