Business

Warm Winter Weather Is Bad News For Retailers, Great News For Your Wallet

Many retailers stocked up expecting a cold winter. Instead, coats and sweaters are piling up, and only giant discounts will clear the glut.

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Retailers are preparing to offer enormous post-Christmas discounts on jackets, sweaters and other winter clothes, after unusually warm weather wreaked havoc on shopping patterns.

Sales of winter apparel can fluctuate 3% to 5% for every 1-degree change in temperature, according to Weather Trends International, a weather consultancy used by companies from Kohl's to Walmart to help plan their businesses.

Sales of fleece, for example, tend to fall 3% for each degree above the prior year's temperature, according to Bill Kirk, the Weather Trends CEO. New York City was roughly 20 degrees warmer this past weekend than it was in 2014, meaning sales of fleece in the area were probably down as much as 60% from last year, he told BuzzFeed News.

"Not until the 23rd do we show a day that's colder, so in theory, the next two weeks are a continuation of a disastrous trend," Kirk said. "The after-Christmas sales are going to be ginormous. If you saw 50% off sales last year after Christmas, you might expect 75%-off next year. It will be exponentially better because there's so much inventory to clear."

The warmth will be especially disastrous for companies that planned for this year based on near-record cold temperatures last year, Kirk added.

Macy's, Kohl's and Gap Inc. are among chains that have pointed to the warm fall and winter as a challenge in recent earnings calls. In a call last month, Macy's CEO Terry Lundgren noted the company has a "build-up in inventory" in outerwear, boots and even down comforters based on recent temperatures.

While some companies like Land's End can pack away cold-weather merchandise for next year without having to take much in the way of markdowns, that's not an option for many retailers, especially those selling fashion-oriented goods. Carrying costs are "enormous" on merchandise that sits in a warehouse for eight months, Kirk said.

"It's much better for them to just give it away, because they're still going to make a little bit of money on these products even at 80% off," he said. "This year, you probably will get 80%-off sales and have a massive selection and have a lot of good stuff to choose from."

Retailers that planned for a warmer winter, which Weather Trends predicted a year ago, may have purchased less cold-weather merchandise or bought lighter coats in place of heavy down parkas, Kirk said. Others may have started markdowns back in November while competitors maintained higher prices in anticipation of colder weather, he added.

But even the stores that prepared for a sunny December are unlikely to emerge unscathed. Retailers' fourth quarter results include sales from January, meaning the pressure will be on that month.

"They know they've got 45 days to fix the problem and the only way to fix the problem is massive markdowns," Kirk said. "They'll all be playing that game to be the least of the bad."

Sapna Maheshwari is a business reporter for BuzzFeed News and is based in New York. Maheshwari reports on retail and e-commerce.

Contact Sapna Maheshwari at sapna.maheshwari@buzzfeed.com.

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