Inside This Issue - Opinion
Year off to disappointing start
June 24th, 2013
by David Pinto, Editor
It’s beginning to look like a long summer — at least for America’s mass retailing community.
Those are the initial indications as June gives way to July and mass retailers throughout the nation continue to wait for the rain to stop, the sun to appear and the temperature to warm up.
The season thus far has been marked by the most dismal weather the United States has seen in … well … a long time. Rain, drought, thunder, lightning, tornados in unprecedented numbers and temperatures that barely reach the mid-60s — those conditions have kept consumers indoors and, more to the point, away from those seasonal product assortments that retailers depend on for strong summer sales.
So it is that inventories of such summer staples as sun care products, sports equipment, horticulture essentials, barbecue equipment, toys and, of course, summer apparel sit silently on the shelves while retailers scramble to reduce prices and gin up advertising in an effort, often in vain, to move the merchandise.
The sluggish sales season has thus far affected all retailers, with the result that same-store sales this spring are flat across retail trade classes. As a result, circulars abound with prices seldom seen for such summer staples as sunscreens and barbecue accessories. Even Father’s Day, that late spring perennial that unfailingly ushers in the summer selling season on a positive note, disappointed this year, sales dampened by storms throughout the East Coast and Midwest and serious wildfires in Colorado. As a result, June sales at most retail companies struggled to stay even with those of a year ago — and only the most creative practitioners succeeded in finding ways to stimulate consumer demand.
Outwardly, the most obvious signs of the sluggish start to summer are the bloated circulars now routinely appearing across the country. Not only are they larger, they are crammed with compelling prices for summer merchandise. As a result, the promotional contribution to total sales, especially at high-low retailers, is the highest it’s been in several years.
But the implications for America’s retail companies go far beyond the increased emphasis on promotional merchandise. All indications thus far point to a hugely disappointing start to the current fiscal year. Indeed, retailers across the nation are reporting sales that are flat or only marginally positive — and profits, it is widely reported, for the July quarter will reflect the inordinate reliance on promotions to stimulate sales of summer merchandise.
The good news in all this is that experts are still predicting a turn in the weather, however belatedly, and forecasts for July and August remain optimistic. Another plus can be found in the fact that the heavy emphasis on promotions has succeeded in bringing people into stores across the country — even as those promotions have largely failed thus far in getting shoppers to buy products they don’t as yet need.
The point in all this is that retailing remains the focal point of the American business community, at least as an indicator of its economic health. Yet retailing is widely misunderstood by the nation’s financial and media companies. As a result, momentary slips have been misread as endemic problems, and short-term losses have been misinterpreted as long-term trends. Worse, the media rushes to analyze, or misread, even those momentary setbacks that affect all retailers.
Look, for example, at the coverage Walmart’s recent annual shareholders meeting was subjected to. Admittedly, the retailer is struggling a bit these days. But the world’s largest retailer — or company of any kind, for that matter — is hardly in danger of going broke. Yet the stories that appeared out of Fayetteville, Ark., earlier this month hinted at shareholder revolt and dissatisfaction with the retailer’s chief executive, along with an obsessive emphasis on the still-unfolding investigation into the retailer’s ill-considered Mexican adventure. Missing entirely was a discussion of the retailer’s performance, which, viewed against the competition, was not all that bad.
Still, the “Revolt at Walmart” captured the headlines — while the positive initiatives, both here and abroad, that characterized the retailer in the past fiscal year were relegated to the jump pages, if indeed they got any attention at all.
The story, then, of the year in progress is one of the weather putting an early damper on retail performance — and the impact that weather will have exerted when financial performance figures are shortly released and assessed. However disappointing they may be, they will in no way presage an end to U.S. retailing as we know it.