It never rains but it pours

9th July 2012

JJB Sports are the latest group to blame inclement weather for weak sales. It said in its recent trading update that sales had been hit by England's performance in Euro 2012, but added: "This sales performance has been further exacerbated by the poor early summer weather."

But there have been many other groups hit by the incessant rain. The insurance industry is an obvious victim:

"The insurance industry expects the cost of the bad weather that has seen 18,000 properties receive flood alerts in recent days to run into hundreds of millions of pounds…"At the moment we are estimating low hundreds of millions but that could change depending on when the rain recedes," said the Association of British Insurers. "It's too early to tell at this point as we have to wait for the flood waters to recede before we can estimate the damage.""

Who would have through that cider makers would be among those hit? "C&C, which markets its ciders as drinks to be poured over ice on hot summer days, blamed rainy weather and competition from rivals for contributing to a 21.6 per cent drop in cider sales by volume in the UK." Or mining companies? "Rio warned that wet weather would also hit its next quarter production."

This led Jason Douglas of Reuters to suggest that the weather may well be the straw that breaks the camel's back for the UK economy: "U.K. shoppers are notoriously sensitive to the elements, and hopes for a consumer splurge to lead the economy out of recession have taken a soaking as floods race through many parts of the country and temperatures plunge to unseasonable lows. Retailers are bracing for a poor summer, and prolonged downpours will add to the risk that two consecutive quarters of falling output turn into three, or even four."

Clearly, if the climate change alarmists are to be believed, this could be a real and permanent problem for the UK and other economies. However, before becoming even more gloomy, there is an alternative possibility: that companies use the weather as an excuse for poor performance. Those who suffer most were already the weakest.

Certainly, some companies appear to be able to weather the storm. There are some natural beneficiaries: Agricultural companies can benefit from poor weather, as lower production sends prices higher. Online retailers also tend to do well:

"The big winners from poor weather are online retailers as people stay at home to escape the rain (or snow!), we've also seen big furniture stores such as Sharps Bedrooms benefit from rainy days." Travel groups that spirit people away to sunnier spots also tend to see a boost in sales from wet weather.

But some retailers simply transcend bad weather – Waitrose, for example, found that sales of barbecue meats and bread rolls rose 34% and 20% respectively over the Jubilee weekend despite the bad weather.

The Welsh government says that visitor numbers have remained robust in spite of the rain: "Despite disappointing weather across the UK over recent years, visitor numbers to Wales have remained robust. Last year visitors from other parts of the UK made 9.7 million overnight trips to Wales and spent more than £1.7billion." Perhaps it is simply that no-one plans a trip to Wales for the weather?

This lends some credence to the view that blaming the weather is the last refuge of a failing executive. This retail think tank concluded that retailers were too quick to attribute poor performance to the weather:

"Extreme conditions certainly can have a profound impact on shopping activity in situations when it prevents people from reaching the shops, but retailers are often too quick to call on the weather to explain away periods of abnormal store trading," says Tim Denison, Director of Retail Intelligence at Synovate Retail Performance.

One contributor to the piece goes as far as to say that to avoid ridicule when talking to the City about trading trends, retailers would be best advised not to mention the weather. The report concludes that it is unexpected weather patterns – hot when it would normally be cold, wet when it would normally be dry – that are most disruptive.

The report concludes: "A greater focus on supply chain management and forecasting is only one aspect that needs to be addressed for retailers looking to outwit the weather. A better merchandising and buying strategy will most certainly beat these short-lived weather blips." 

Unlike the rest of us, businesses do not necessarily have to be victims of the weather. They can take a metaphorical umbrella.

 

More on Mindful Money

Should investors give up on the UK?

Rain blamed for dip in UK retail

Let's look on the bright side…

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