As the Northeast digs out of its third major snowstorm in the last month and consumers appear mired in a post-Holiday hangover, the question has to be asked – is this just a bump in the road or a sign of things to come?
After a strong Holiday season in which sales rose by the most since 2004, weekly sales have softened for three consecutive weeks as unseasonably cold and wintry weather have kept shoppers out of stores and redeeming less gift cards than in years past. However, January is typically the lowest-volume month of the year (followed by February) and retailers are mostly focused on clearing excess inventory.
“Adverse weather in the East once again curbed discretionary spending, negatively impacting sales,” said Michael Niemira, ICSC director of research and chief economist. “However, January is a low volume month for sales and although it is shaping up to be softer than recent trends because of the impact of weather on discretionary sales, there is little fundamental significance to read into that weakness,”
ICSC notes that the more serious challenge will come from rising gas prices, which are 15% higher than a year ago and the highest since October 2008 at $3.11 per gallon. According to America’s Research Group, 65.% of consumers will slow their spending when gas hits $3.75 a gallon, which is nearly double the 38% who cut back spending when gas hit $4.00 a gallon several years ago. The major areas for cutbacks: eating out at 35.1%, entertainment at 29.9%, travel at 11.0% and clothing at 5.9%.
The unseasonably cold weather has encouraged shoppers to buy more winter merchandise, but Redbook Research analyst Catlin Levis noted “Since most winter inventory is on clearance, this type of business did not necessarily translate into higher margins, but it did momentarily improve sales performance.” Continue reading ‘Retail Rebound Facing Headwinds Early in 2011′
