Over the last year, apparel retailers have attempted to reduce excess stock that had accumulated as a result of a change in customer demand from discretionary items like garments to essentials.
However, with fourth-quarter temperatures predicted to begin warm, according to weather tracking firm Weather Trends International, businesses stocking winter clothing and gear may find themselves overstocked by the end of the season.
H&M’s luxury brand Cos has begun to offer a 20% off discount for knitwear and winter goods, including merino wool sweaters and long puffer coats, both online and in stores. H&M CEO Helena Helmersson told Reuters on Wednesday that buyers are delaying purchases of “heavy” seasonal products because the weather is warmer than usual.
Pepco Group (PCOP.WA), a European corporation, also remarked that the arrival of its autumn and winter clothing inventory coincided with sustained record-warm weather in its main Central and Eastern European markets.
“When it’s 26 degrees (Celsius, 79 F) you don’t tend to sell coats,” Pepco’s executive chairman, Andy Bond, said on a conference call with analysts on Thursday.
In recent years, the so-called holiday shopping season has begun as early as October, with many businesses offering deals and discounts throughout the month and into December. Amazon.com (AMZN.O) will hold a second Prime Day on October 10-11, while Best Buy (BBY.N) will hold a 48-hour flash sale on October 10-11 and Target (TGT.N) will have a “Deal of the Day” program beginning in October.
Temperatures in the United States could rise by 2 to 12 degrees Fahrenheit on average between October and December compared to last year, according to Weather Trends International.
“The month from Black Friday to Christmas is much warmer than a year ago, which will result in more excess inventory and steeper markdowns,” said Bill Kirk, CEO and founder of Weather Trends International.
This is likely to hurt merchants ranging from Walmart (WMT.N) to Dick’s Sporting Goods (DKS.N), but it could benefit Costco Wholesale (COST.O) and off-price sellers like TJX (TJX.N), which are more likely to source products locally and can react to seasonal changes sooner.
“If winter clothing doesn’t sell well, that would be a problem for the industry this holiday season and if that turns out to be the case, then we may see a lot of discounting of that merchandise in the early part of 2024,” David Swartz, an analyst at Morningstar Research, said.
Unfavorable weather is frequently a huge issue for retailers because they place orders and ship merchandise for critical seasons far in advance to ensure that there are enough products on the shelves to fulfill client demand.
“The issue with most large volume retailers is that 75% to 85% of their manufacturing is dependent upon a very long development cycle … so once heat or cold begins to affect the overall buying trends they would have already committed on those orders,” said Robert Woods, the founder of Vision Brands USA.
In an interview with Reuters, Kristen D’Arcy, chief marketing officer of apparel store True Religion, said, “What has been a pleasant surprise is continuing to see the short-sleeve T-shirts and the shorts continue to sell really well as a result of the warm weather.”
“Our deepest buys for the season are not in outerwear, which would be the heavy jackets for the very, very cold weather but … in active, which are lighter-weight tops and bottoms, denim of all different varieties … then lighter-weight knits.”
Abercrombie & Fitch (ANF.N) also reported significant demand for “seasonless products” in the second quarter, especially in the men’s category, as buyers choose year-round clothing items and styles.
When merchants try to stock seasonally suitable clothes, but it does not sell, storing such products becomes costly.
According to Simon Wolfson, CEO of British clothing retailer Next (NXT.L), “the difference that weather will make in December will be greater than the difference in how the consumer’s feeling.”