Executives for major clothing retailers like H&M (HNNMY) -) are noticing an unusual pattern that is affecting their bottom line, but the root cause of the problem is something that they can't control.
According to a report from Reuters, unusually warm autumn weather throughout the United States and Europe is hurting sales of items that are usually appropriate for the weather this time of year. Sweaters and winter coats are remaining unsold on racks and shelves, as customers deem the items inappropriate for the kind of unusually hot weather they have been experiencing.
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Data by weather tracking firm Weather Trends International suggests that average temperatures around the United States could rise by 2 to 12 degrees Fahrenheit during the October-December period compared with last year. According to Weather Trends International founder and CEO Bill Kirk, this means “more excess inventory and steeper markdowns,” of which can be great for savvy, value-driven shoppers, but can spell trouble for many big name retailers’ bottom line.
Unusual weather patterns usually becomes a problem for retailers because they place orders for key items for important times like the holiday season months in advance to make sure that customers have what they want. Bigger retailers who employ this model like Walmart (WMT) -) and Dicks Sporting Goods (DKS) -) will see the hit harder, unlike other retailers like member’s warehouse Costco Wholesale (COST) -), which procure products locally and can adapt to seasonal changes faster.
"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," said Morningstar Research analyst David Swartz.
Already, H&M’s more upscale brand Cos has started offering markdowns for knitwear and and outerwear items like merino wool sweaters and heavy puffer jackets, hoping to maintain a level of inventory that would not overpopulate their storage rooms and warehouses.
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However, some apparel companies are equipped to handle such these changes in consumer behavior. Casual lifestyle clothes retailer Abercrombie and Fitch (ANF) -) reported that there is strong demand for what they call “seasonless” clothing, as shoppers gravitate towards pieces appropriate for multiple seasons.
Savvy shoppers already know that the best deal for shorts is in the fall and for sweaters are in the summer, but if the trends regarding the weather continues to hold up, chasing the latest trends in fashion would be the least concern for brands and retailers.
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