Stores are forced to discount heavily when stock doesn't match the temperature, chipping away at profit margins. Photo / Michael Craig
Stores are forced to discount heavily when stock doesn't match the temperature, chipping away at profit margins. Photo / Michael Craig
The cold blast of winter has arrived and retailers will be breathing a sigh of relief after a warm autumn. And some are using long-range forecasts to take control back from the weather gods.
Clothing retailers have for years blamed numerous bad results, at least in part, on extreme or unexpected weather.
Last year's late start to winter saw retailers Kathmandu, Pumpkin Patch, The Warehouse and Hallenstein Glasson struggle, with heavy discounting to clear stock resulting in narrowed profit margins. However First Retail NZ chief executive Chris Wilkinson said retailers were increasingly moving away from the "cookie cutter" approach.
"There's been constant awareness of the effects of weather but what's happening now is increasingly the smart and savvy retailers are looking at long-term weather predictions," Wilkinson said.
"They're using weather intelligence provided by a number of agencies, but they're using this information and overlaying things like the geographic information system technology to look at, in the long-term, how they will order product and the kinds of product they will have in different areas."
"Sainsbury's and other large retailers like that use weather right now to make predictive strategies around things like strawberries and cream for Wimbledon and that type of occasion- or event-based demand.
"There's a lot more of this happening than people realise and we'll start seeing more of it happening with fashion in the next few years."
Retailers have traditionally worked months or even years in advance in stock ordering, so when the season was delayed or unusually mild, stock accumulated, often triggering price cutting and discounts to keep it moving.
Wilkinson said although necessary, this action chewed into profit margins and could have a serious impact on business profitability.
Outdoor equipment and clothing retailer Kathmandu, which was tied closely to seasonality with its products, had suffered considerably in recent years, blaming weather issues.
Pumpkin Patch chairman Peter Schuyt says sales have picked up. Photo / Nick Reed
The company most notably lost more than a quarter of its market value in one day last year.
Chief executive Xavier Simonet declined to comment on what the company was hoping for or how it would mitigate the potential effects of the weather.
Peter Schuyt, chairman of children's clothing retailer Pumpkin Patch, said the autumn period had started slower but sales had picked up in recent weeks, which was likely to continue.
"All I can say is I'm very pleased the temperature has dropped," Schuyt said.
"We expect - and are starting to see - an uplift in winter clothing, albeit later than we would have liked to see it but now the weather is colder we expect to see faster movement of clothing through stores."
Temperatures across the country dropped rapidly last week, bringing a quick descent into winter, however forecasters are predicting a milder season with the National Institute of Water and Atmosphere (Niwa) projecting temperatures are "very likely" to be above average in all regions for winter.
Increasingly the smart and savvy retailers are looking at long-term weather predictions.
According to Retail Association NZ's Greg Harford, a milder winter may not be a bad thing.
"We haven't got any sales numbers through yet for the last month or so, but anecdotally the warm weather can be good for retailers," Harford said. "People like to get out and shop when the weather is good and they don't like to go out so much when it's cold or wet.
"Having said that of course, winter clothing hasn't been moving as fast as it otherwise would but I think from what we're hearing around the traps, the cold weather has arrived now and people are getting out and stocking up on those warm winter clothes."
Harford said the association's members were positive about the late autumn/winter period and were expecting good sales.
According to Wilkinson, weather was being accepted less by analysts and commentators as an excuse for poor results, particularly with the advent of fast fashion, or businesses bringing new stock in regularly as opposed to half-yearly or quarterly.
Changing consumer habits were also helping fashion businesses with fast fashion encouraging shoppers back into stores on a more regular basis, and a growth in clothing layering in New Zealand changing buying habits.
"Overseas you'll see there's a lot more layering that goes on in fashion," Wilkinson said. "New Zealand hasn't really been into that in a big way but layering means you can layer up or layer down according to the season or even how the day is."
"That has been really successful for many of the retailers overseas where it's less reliant on having to sell big jackets because people will just put a number of items together, accessories included, like scarves and things."
But he said retailers would be hoping for the cold to continue, with Grant Williamson from investment business Hamilton Hindin Greene agreeing the warm autumn had not helped fashion stores.
"I would think retailers would want the cold early in the season to get customers into the stores because the last thing retailers want is a lot of stock left over at the end of winter, and they have to then heavily discount which has a huge effect on their margins," Williamson said.
"It's not easy but it's just part of being a retailer."
