Bloomberg News

Europe’s Deep Freeze Takes the Wind Out of Store Sales

March 27, 2013

European Stores Discounting Spring Items to Win Shoppers

Record U.K. rainfall cut the profit of Kingfisher, which owns the B&Q chain, by 25 million pounds last year. Photographer: Chris Ratcliffe/Bloomberg

As most Europeans shiver in the grip of the coldest March in living memory, the region’s retailers are feeling every bit as uncomfortable.

Spring fashions, potted plants and garden furniture -- which normally contribute to sales at this time of year -- are gathering dust as freezing winter temperatures show no sign of dissipating.

Kingfisher Plc, (KGF) the region’s largest home-improvement retailer, has had a slow start this spring, the company said yesterday. Hennes & Mauritz AB, (HMB) Europe’s second-biggest clothing retailer, reported last week that cold weather was among the reasons for a 10 percent drop in first-quarter profit.

“Weather is a massive factor in the fortunes of retailers,” said Bryan Roberts, an analyst at Kantar Retail in London. “Do-it-yourself and fashion are the two that are most vulnerable at this particular point of the year.”

This month is set to be the coldest March across England and Wales in at least 44 years, according to forecaster WeatherOnline Ltd. The U.K.’s average temperature of 3.1 degrees Celsius (37.6 degrees Fahrenheit) for the first 17 days of the month compares with a long-term average of 5.5 degrees, the country’s Meteorological Office said. In Germany, March may be 3 degrees to 5 degrees colder than the average, Deutscher Wetterdienst forecasts.

Forecasters expect the winter weather to continue until Easter, dealing a blow to home-improvement retailers. The long holiday weekend is traditionally among the busiest periods for them as shoppers use the time off to start outdoor projects.

Record Rainfall

“It’s been a tough month for non-food, with DIY and fashion feeling the pinch from the cold weather,” Nick Bubb, an independent retail analyst in London, said in an e-mail.

Kingfisher Chief Executive Officer Ian Cheshire said yesterday that it was too early to tell what impact the weather would have this year. While this March has been the coldest in five decades, last summer was the wettest in a century, he said. Record U.K. rainfall cut the profit of Kingfisher, which owns the B&Q chain, by 25 million pounds ($38 million) last year.

Kingfisher shares have fallen 0.3 percent this year versus an 8.5 percent gain in the U.K. benchmark FTSE 100 Index. (UKX)

Praktiker AG (PRA), a German home-improvement retailer, says revenue is significantly lower this month than a year ago as the cold deters customers from buying garden products and equipment. The company says it’s seeking to boost revenue by offering a storewide discount of 35 percent.

Stark Contrast

Hornbach Holding AG (HBH3), Germany’s third-biggest home- improvement chain, said the spring planting season, which usually starts in March, will be delayed. “The normal schedule is completely distorted,” said spokeswoman Ursula Dauth. Nonetheless, she said that if the weather improves soon Hornbach will likely recoup many of the sales it could lose this week.

The current freezing temperatures stand in stark contrast with this time last year, which marked the warmest March since 1957, according to WeatherOnline.

The cold weather hasn’t just been confined to Europe. An almost weekly series of storms has come across the U.S. since the start of February, dropping snow and tying up air traffic.

For clothing retailers, the cold weather is “really bad” because they won’t be able to sell spring fashions as planned and may be short of winter inventory, said Daniel Lucht, an analyst at ResearchFarm, a market researcher in London.

“The only thing you can do is discount really,” putting profitability under pressure, Lucht said.

Quick Decisions

Next Plc, (NXT) Britain’s second-largest clothing retailer, said last week that the chilly climate was delaying spring purchases and contributing to a “quiet start” to the fiscal year. John Lewis Partnership Plc, the country’s largest department-store chain, also cited “extended winter weather” as it reported a 0.3 percent drop in sales for the week ended March 16.

Citigroup Inc. analysts estimate that H&M’s March same- store sales will decline 10 percent from a year earlier.

Some supermarket chains have had pallets of barbecue equipment and charcoal in stores for at least two weeks, according to Kantar Retail. Others have faced shortages of various products after the weather affected deliveries, the researcher said. Britain’s Met Office says the U.K. has been hit by as much as a foot of snow since March 22.

J Sainsbury Plc (SBRY) “will be pulling out all the stops” to make sure deliveries get through, according to Roger Burnley, logistics chief at Britain’s third-largest supermarket chain.

“Last time we had snow we even had one enterprising driver delivering an online order by sledge,” Burnley said by e-mail.

Salt, Scarves

Sainsbury has put its “cold weather plan” into action to ensure all its stores are stocked with products such as salt and scarves, as well as bread, milk and soup, Burnley said.

Not all shoppers are put off by the cold snap. Margareta Stoeva, a 21-year-old Bulgarian who works as a pianist on a ship, said she’s buying more spring clothes to make herself feel better about the weather.

“When I see the sun I go out and buy a t-shirt or shorts or a skirt,” Stoeva said outside a shoe store in Stockholm. “Then it feels a little more like spring.”

To contact the reporter on this story: Paul Jarvis in London at pjarvis@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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