In anticipation of warmer weather to come, British retailers spent the spring stocking up on T-shirts, swim wear, barbecues and garden furniture. What they got has been record rainfall and soaring sales of umbrellas.
The soggy climate has forced shopkeepers such as Marks & Spencer Group Plc, John Lewis, and Next Plc to discount unsold summer merchandise and has spurred many of them to look for ways to adapt to increasingly unpredictable weather.
Sales for the summer may be “very disappointing,” said Bryan Roberts, an analyst at Kantar Retail in London. “It has been so unseasonal that any semblance of normal trading has gone out the window,” said Roberts.
The lousy summer has compounded the troubles of British retailers already contending with the double-dip recession. The Bloomberg Europe Retail Index, which includes the likes of Inditex SA and Hennes & Mauritz AB, trades at 18 times earnings while the FTSE 350 General Retailers Index of U.K. shop owners trades at 12.6 times. Earnings estimates for companies in the latter index have fallen by 2.3 percent in the past month, according to data compiled by Bloomberg.
Clothing stores in particular have struggled to recover since April, when the wettest weather on record led to declines of 52 percent in sales of shorts and 38 percent in sandals, researcher Planalytics Inc. estimates. In contrast, umbrella sales that month surged 175 percent from a year earlier.
“There are no magic levers, you have to take the pain” caused by unfavorable weather, Simon Wolfson, chief executive officer of clothing retailer Next Plc, said in a phone interview.
To diversify away from products whose sales are affected by weather, Wolfson said, Next is expanding its selection of goods such as bedding, tableware and lamps. As part of that effort, the chain last year opened 14 new locations selling only homewares, for a total of 43 such stores -- about 9 percent of its British and Irish outlets.
Kantar estimates that up to 80 percent of U.K. fashion chains are offering discounts to clear unsold summer inventory at a time of year when stores would normally be bulking up with merchandise for the fall. On average, retailers have 10 percent more items to clear than last year, according to the researcher.
Marks & Spencer CEO Marc Bolland said his company’s clothing unit had been hit particularly hard as it has about 28 percent of the market for clothing made from summery linen.
The unsettled summer means people are “less out, they’re more at home,” Bolland said on a conference call with reporters last month.
U.K. retail same-store sales barely rose in July, according to the British Retail Consortium, as consumer confidence was undermined by the double-dip recession and the euro-area debt crisis. Shoppers prioritized spending on essential items such as food, the BRC said.
In anticipation of a less stable climate over the long haul, the George clothing business of Wal-Mart Stores Inc.’s Asda supermarket chain is seeking suppliers closer to home.
“The weather has been volatile this year and last year, so rather than sitting back and saying it’s tough we’re trying to organize our supply chain and buying process to recognize this is the new norm,” said Andrew Moore, managing director of George. “We’re focusing on shorter lead times so we don’t have a great build-up of stock and we can respond to sales trends rather than predict them.”
The retailer, which relies on Bangladesh and China for most of its supplies, bought its Turkish sourcing division in May. George has made more use of the unit in recent months, getting items such as hooded tops, zipped cover-ups and wellington boots into stores in as little as six weeks -- three weeks less than a year ago, Moore said.
Britain’s largest department-store chain, John Lewis, typically cuts back on Barbour jackets and wellington boots in February. This year it boosted supplies of those goods after the April rains caused demand to double. With the uncertain weather, the chain is also changing the goods it features depending on the forecast.
“If we know it’s going to be a hot weekend we will expand space for picnic-wear and barbecues,” said Andrea O’Donnell, commercial director of the retailer. Still, “there is a lot of risk if weather doesn’t play to your advantage,” she said.
O’Donnell said the company is expanding its online offerings to capture stay-at-home shoppers, with its website highlighting more out-of-season goods such as winter coats in summer.
That strategy should work well with shoppers such as Ulla Helenius. The self-confessed fashionista said she’s buying “loads more” online this summer.
“I’m finding more I want there,” such as Hunter rain boots, an army-style jacket and jeans, said the 27-year-old London retail worker. “I spend half my spare time in Topshop and Zara, but this year they just didn’t have as much as what I wanted. Summer wasn’t here.”