Brief Analysis by Monika Rosen, Chief Analyst at Bank Austria Private Banking:
US retail sector suffering from frostbite

  • Retail sales negatively impacted by excessively long winter
  • Home improvement stores are particularly anxious for spring to arrive
  • Some businesses are benefiting, such as drug stores (flu season!)

Austria is not the only place where the delay of spring is dragging spirits down. The US is also suffering from an excessively long winter, which is preventing consumers from buying spring items such as sunglasses and summer clothing. Home improvement stores and gardening centres are suffering tremendously due to the bad weather. The interest in garden products in America is a hefty 21 per cent lower than in March of last year. Because the actual weather is crucial for the purchase decision, the late start to the season is proving fatal for this segment. To make matters worse, spring is the primary sales season for home improvement stores. In recent years, spring has tended to start earlier, which has helped to kick business into gear.

The cold temperatures are also problematic for the clothing industry, which has well-filled inventories, but cannot find anyone to buy the products. The longer the winter lasts, the smaller the window will be for selling the spring goods. Therefore, significant price discounts are to be expected, which will motivate customers to buy, but will also put retailers’ margins under considerable pressure.

However, not all of the US is suffering from a long, late winter. The western states are enjoying much better weather and warmer temperatures, and, accordingly, the outlook in retail is much more optimistic there. This is once again putting American retailers on the East Coast at a disadvantage compared with those in the west as a result of weather, after Hurricane Sandy already put a major damper on Christmas sales on the East Coast last year. But not everyone is unhappy about the weather. The cold temperatures are benefiting drug stores (which also sell medications in the US), for example, because cold season is lasting longer than usual.

Summary: The US retail sector is an important barometer for the overall state of the economy, as private consumers account for 70 per cent of business activity in this segment. US consumers have had a lot to deal with of late, ranging from higher taxes to increased energy costs. In light of these factors, the US retail sector has proven to be reasonably robust. Although weather does not have a long-term influence on consumer behaviour, it may overshadow the quarterly results of retailers, which are scheduled to be reported at the end of April.

Enquiries: Monika Rosen
Chief Analyst at Bank Austria Private Banking
Tel. +43 (0) 50505 - 40104
E-mail: monika.rosen@unicreditgroup.at