News Analysis: Accurate Forecasts Pay Off

Article excerpt

Canny retailers that anticipated August's poor weather were able to perform well. Rachel Barnes reports.

August was a wash-out. An average of 163mm of rain fell during the month - almost double the normal amount expected by the Met Office at this time of year - making it the wettest August in 50 years.

Was it also a wash-out for retailers? Initial newspaper headlines dubbed it 'armageddon August' on the high street, as figures from trade association the British Retail Consortium (BRC) showed the slowest growth rate in high street sales this year, with a 0.6% like-for-like rise on the same month in 2003, the hottest August since records began.

Explaining this lack of growth, BRC director-general Kevin Hawkins highlighted concerns over interest rate rises, an apprehensive property market and the rain 'knocking the usual seasonal trends for six'.

However, Dr Tim Denison, director of knowledge management at retail analyst SPSL, which produces the Retail Traffic Index (RTI), believes the press coverage has been alarmist. Unlike the BRC's focus on sales, the RTI monitors more than 27m visits to at least 1600 retail outlets across the UK every month.

'Although many will try to view the BRC figures in a 'weather context', it is more useful to look at August's performance in terms of a wider timescale,' says Denison. 'The RTI recorded shopper numbers at a five-year high for August, which certainly begs questions of those claiming a cataclysmic dive in consumer enthusiasm.'

According to the RTI, shopper numbers were up 3.4% year-on-year in August, although they were down 2.6% on July, due to the normal seasonal downturn as people go on holiday. SPSL refers to the fall as a 'hiccup' - it had forecast shopper numbers would be down 5.5% on July.

Untapped potential

If footfall is up while sales are flat, it would be foolish to dismiss the links between weather and retail performance. Indeed, the Met Office, which has a division dedicated to retail analysis, claims that up to pounds 4.5bn in additional retail revenue is there for the taking if retail businesses factor future weather conditions into their stock planning.

Met Office research for Safeway last year enabled the grocery chain to react to the unseasonally hot weather before Easter. Its adjusted stock levels and subsequent tailored in-store promotions resulted in a pounds 2m sales uplift.

Other retailers have been less lucky. Last week, Somerfield reported a summer slowdown in underlying sales, due in part to a 0.8% decline in July and early August. Sales of seasonal lines such as ice cream, beers, carbonated soft drinks and barbecue products declined substantially, which the company blamed on the poor weather.

JJB Sports also cited the rain as the cause of its shock profit warning last week, when it estimated that full-year profits would come in 20% lower than expected. And womenswear maker Slimma, which describes its mature customers as 'fair-weather shoppers', said that long spells of heavy rain simply meant its target market didn't go out.

While the weather has resulted in some retailers losing out, it has also produced some unexpected winners. …