Severe weather that hammered retail sales in January has continued to pound much of the eastern United States during February, putting a chill on hopes for a quick rebound.

National Retail Federation, NRF, Jack Kleinhenz, Harm Bandholz, UniCredit, Costco Wholesale Corp., Bruce Efird, Fredís Inc., Walgreen Co., Rite Aid Corp., Kohlís Corp.

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Storms slam sales

February 24th, 2014

NEW YORK – Severe weather that hammered retail sales in January has continued to pound much of the eastern United States during February, putting a chill on hopes for a quick rebound.

According to the National Retail Federation (NRF), year-over-year retail sales excluding automobiles, gas stations and restaurants rose 3% on an unadjusted basis in January, while remaining flat on an adjusted, month-to-month basis. The Department of Commerce, which includes autos, gas and restaurants in its computations, calculated that sales gained 2.6% year over year while decreasing 0.4% sequentially.

Moreover, the government revised its December sales report to show a 0.1% decline rather than the previously reported 0.2% uptick.

"Harsh winter weather is masking the performance of the broader economy," said Jack Kleinhenz, chief economist for the NRF. "Extreme temperatures and severe ice and snow are making it increasingly difficult to assess if the retail sales slowdown is temporary or a telling sign of a longer-lasting weakness in the consumer-fueled economy. No one can jump to any solid conclusion until we shovel out of the snow."

Adding to the uncertainty is the fact that jobless claims kicked up in January, while consumer spending was flat. "Unusually cold winter weather is weighing on economic activity," Harm Bandholz, chief economist for UniCredit research, told ­Reuters. "Consumer spending has literally frozen."

While wintry weather is par for the course in the Northeast and Midwest during January and February, the South has been rocked with a succession of devastating storms. In late January a storm paralyzed the Atlanta area, leaving thousands stranded in cars, schools and places of business — including stores. That blast was followed by another storm just two weeks later.

While ongoing severe weather is easy to single out as a factor behind disappointing brick-and-mortar retail sales, nonstore sales also fell 0.6% sequentially in January, although year over year they showed a 6.5% increase.

Sales at general merchandise stores dipped 0.1% sequentially, but managed a 1.4% gain over January 2013. Health and personal care stores suffered a sharper sequential decline, falling 0.6%, but registered a stronger year-over-year increase of 3.1%.

Among the few mass market retailers that still report monthly sales, Costco Wholesale Corp. once again outperformed, as net sales rose 6% to $7.99 billion. Comparable-store sales, excluding the negative impact from foreign exchange rate fluctuations and gasoline price deflation, rose 6% chainwide and 5% at Costco’s U.S. warehouses.

Including those negative impacts, overall comp-store sales grew 4%, which was enough to beat the average estimate of a 3.3% increase among analysts surveyed by Thomson Reuters.

Memphis-based regional discount chain Fred’s Inc., meanwhile, experienced a more typical January, as sales adjusted to account for four- and five-week reporting periods decreased 1.1%. On the same adjusted basis, comparable-store results fell 1.8%, versus flat sales a year ago.

"The weather was a significant challenge for us in January," said chief executive officer Bruce Efird in a statement. "It not only disrupted consumer shopping patterns but also resulted in more than 120 store closings during the final week of the month."

Efird added that prior to the last week of January, Fred’s sales were running in the mid-range of management’s forecast, but in the final week, sales fell by double digits, "culminating in a weather effect on comparable-store sales for all of January that is estimated at more than 300 basis points."

For Walgreen Co., bad weather might well have been a factor in lower customer traffic during the month. Nonetheless, overall sales rose 3.7% to $6.39 billion, while comparable-store sales improved 2.9%.

Chainwide front-end sales expanded 2.4% while comparable stores eked out a 1.6% increase at the front end. Although customer traffic in comparable stores decreased 2.2%, the average transaction rose an impressive 3.8%.

Walgreens’ pharmacy sales rose 4.6% during the month, but the company noted that a milder flu season this year trimmed 1.1 percentage points from pharmacy dollar sales.
Fewer flu cases also affected results at Rite Aid Corp., where total sales advanced 1.5% to $1.94 billion, while same-store sales grew 1.8%. Front-end results at comparable stores dipped 1.3%, mainly due to a decrease in sales of flu-related over-the-counter products. The flu season had an impact at the pharmacy counter as well, as prescription count at comparable stores decreased 2.2% because of fewer flu-related scripts and flu shots.
Among other trade classes, sales at clothing and accessories stores rose 1.4% year over year but slipped 0.9% versus December. Furniture and home furnishings stores, meanwhile, experienced a 2.1% drop for January.

Kohl’s Corp., which does not release monthly sales figures, nonetheless stated that its January sales were "significantly lower" than expected, contributing to a 2% drop in its comparable-store sales for the quarter.