News Analysis: Accurate forecasts pay off

Canny retailers that anticipated August's poor weather were able to perform well. Rachel Barnes reports.

August was a wash-out. An average of 163mm of rain fell during the month - almost double the normal amount expected by the Met Office at this time of year - making it the wettest August in 50 years.

Was it also a wash-out for retailers? Initial newspaper headlines dubbed it 'armageddon August' on the high street, as figures from trade association the British Retail Consortium (BRC) showed the slowest growth rate in high street sales this year, with a 0.6% like-for-like rise on the same month in 2003, the hottest August since records began.

Explaining this lack of growth, BRC director-general Kevin Hawkins highlighted concerns over interest rate rises, an apprehensive property market and the rain 'knocking the usual seasonal trends for six'.

However, Dr Tim Denison, director of knowledge management at retail analyst SPSL, which produces the Retail Traffic Index (RTI), believes the press coverage has been alarmist. Unlike the BRC's focus on sales, the RTI monitors more than 27m visits to at least 1600 retail outlets across the UK every month.

'Although many will try to view the BRC figures in a "weather context", it is more useful to look at August's performance in terms of a wider timescale,' says Denison. 'The RTI recorded shopper numbers at a five-year high for August, which certainly begs questions of those claiming a cataclysmic dive in consumer enthusiasm.'

According to the RTI, shopper numbers were up 3.4% year-on-year in August, although they were down 2.6% on July, due to the normal seasonal downturn as people go on holiday. SPSL refers to the fall as a 'hiccup' - it had forecast shopper numbers would be down 5.5% on July.

Untapped potential

If footfall is up while sales are flat, it would be foolish to dismiss the links between weather and retail performance. Indeed, the Met Office, which has a division dedicated to retail analysis, claims that up to £4.5bn in additional retail revenue is there for the taking if retail businesses factor future weather conditions into their stock planning.

Met Office research for Safeway last year enabled the grocery chain to react to the unseasonally hot weather before Easter. Its adjusted stock levels and subsequent tailored in-store promotions resulted in a £2m sales uplift.

Other retailers have been less lucky. Last week, Somerfield reported a summer slowdown in underlying sales, due in part to a 0.8% decline in July and early August. Sales of seasonal lines such as ice cream, beers, carbonated soft drinks and barbecue products declined substantially, which the company blamed on the poor weather.

JJB Sports also cited the rain as the cause of its shock profit warning last week, when it estimated that full-year profits would come in 20% lower than expected. And womenswear maker Slimma, which describes its mature customers as 'fair-weather shoppers', said that long spells of heavy rain simply meant its target market didn't go out.

While the weather has resulted in some retailers losing out, it has also produced some unexpected winners. Asda told Marketing sales of CDs, DVDs and electrical products had exceeded those of gardening products and furniture, as wet weather forced people indoors.

Asda's sales of umbrellas were up 45% year-on-year during August. It also had sales increases in more random areas: a 33% lift in sales of light bulbs, as clouds gave the appearance of it getting darker earlier, a 40% rise in mops and buckets, and a 30% increase in tinned soup. Other cold weather food also did well, with mince and meatballs up by 47% and 20% respectively.

Long-range planning

Orders through Asda's home-shopping division were up 20%, marking consumers' reluctance to visit the high street. And it is also currently selling more cold and flu medication than hayfever remedies.

A spokeswoman for Tesco echoed Asda's findings, reporting higher sales of traditional winter foods such as soup and pies. 'We have people who study long-range weather forecasts to make sure we're prepared for heatwaves or unusual cold spells, having the right products in-store at the right time,' says the spokeswoman.

Asda marketing manager David Martin admits that this summer has presented particular challenges. 'One week everyone's going bonkers for brollies, the next week it's barbecues. Our planning teams have had to be on the ball this year and ready to act at the drop of a hat to get the right products in-store at the right time.'

Nick Gladding, senior analyst of economics and forecasting at Verdict Research, believes that retailers need to prepare better for unseasonal weather.

While nobody can ensure 100% accuracy in predicting the weather, forecasting has become good enough to add significant value to planning decisions, he says.

'Large retailers should not underestimate the importance of weather and could benefit from dedicated teams,' he says. 'They need to have an efficient and flexible supply chain to make the most of these conditions. Opportunistic retailers can make gigantic sales.'

DATA FILE

How weather affects retail sectors

Sector Exposure Comment

Food Very high Each category is highly exposed to weather

as consumer tastes change accordingly.

Clothing High Trends change throughout the year to

fit the season.

DIY/gardening High DIY is strong in cold, rainy periods.

Gardening booms in milder weather.

Health & Beauty Medium Sales of certain products, such as suntan

lotion, are affected.

Homeware Low Retailers adapt ranges in-store to fit

with seasonal colour trends.

Electricals Very low Sales are relatively unaffected by weather.

However, tumble dryers are popular in wet

weather and video cameras sell well in

summer.

Furniture Very low Limited correlation.

Source: Verdict Research

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