Reports
last week of a huge retail sales jump gave us all a bit of cheer about
the U.K. outlook. Well, it's Monday, and here's the cold water. A burst
of hot weather last month sent consumers scurrying to the shops for
off-the …
Reports last week of a huge retail sales jump gave us all a bit
of cheer about the U.K. outlook. Well, it's Monday, and here's the cold
water.
A burst of hot weather last month sent consumers scurrying
to the shops for off-the-shoulder dresses, frayed-hem jeans and summer
sandals, producing a 1.4 percent increase in the volume of retail sales
compared with June, the best for that month since 2002.
That's
great news for retailers. It's less helpful if you're trying to figure
out the impact of Britain's vote to leave the EU on the U.K. economy.
Changing shopping habits and swings in weather-related risks
complicate the underlying picture, and we might not get a decent sense
of the true state of the post-Brexit consumer until the holiday season.
To
be sure, weather's often used as an excuse for poor sales. As former
Marks & Spencer Chief Executive Stuart Rose once quipped, "weather
is for wimps." But there are legitimate reasons why the climate can help
or hinder sales.
Big Chill? You Wish.
Milder autumns in the past two years weighed on U.K. clothing and shoe sales
Source: U.K. Office for National Statistics
To start with, consumers are much more spontaneous than they
used to be. The advent of internet shopping, particularly next-day
and same-day delivery, means that when they want new clothes, they want
them immediately. In the past, shoppers would have planned their
purchases, stocking up at the start of the season.
That means
people won't shop for winter coats, for example, until the bad weather
actually arrives. This makes retailers much more vulnerable to swings in
weather conditions, or changes in the timing of bank holidays or school
holidays, from one year to the next.
This year, July's heatwave
came after many retailers, including Next, Debenhams and M&S, had
started their summer sales. So the sales spike from people flocking to
buy new shorts won't bring such a big lift to profits.
Weather Forecast
Shares in U.K. retailer Next partly reflect warnings on weather-related hits to demand for clothing
Source: Bloomberg
And the weather doesn't just affect demand for clothing. DIY
chain Kingfisher said last week that warmer temperatures sent U.K.
sales of seasonal items, such as bedding plants, sprinklers and decking,
up 10 percent from a year ago.
While the effect of the weather
should balance out over a full year, in the short term, it can affect
the timing of spending, and even whether consumers choose to spend at
all.
So where does that leave those looking for a clue about the effect of Brexit on consumers?
The
autumn, with back-to-school and Halloween shopping, could be hard to
read. The last two autumns have been unusually warm, and prompted some
shoppers to hold off from buying new winter coats and cosy cardigans.
Last year H&M was among retailers saying a warm third quarter across
Europe weighed on demand for clothing, including at its British shops.
If
there's a cold snap -- particularly if it comes early in the season --
that could boost demand for outerwear and sweaters, and then sales
figures could look rosy once more. But if the weather stays warm and
consumers stay away from the shops, it'll be hard to tell if that's due
to post-Brexit jitters or to Brits just doing their usual thing of not
buying items until they're needed.
So that leaves holiday
spending as the big test of post-Brexit consumer strength. The so-called
golden quarter, containing the Christmas and New Year periods, is
always an important period: it can account for half of non-food
retailers' annual profit.
This year, the festive season will be
crucial for judging consumers' strength, and even that involves a bit of
a wait -- the Office for National Statistics doesn't publish its
December retail sales data until Jan. 20.
There's even more riding on this year's holiday season than usual.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the author of this story: Andrea Felsted in London at afelsted@bloomberg.net
To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net
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