The recent abnormally warm weather is playing havoc with retailers as their fall/winter items like clothing and other seasonally themed goods are moving slowly. Colder weather isn’t driving people to shop for them, so it could mean more discounting and earlier sales than planned.
Just as retail trade has been picking up over the last six months, this comes along right before the crucial end of financial year sales season. To keep sales volumes up, retailers may have to resort to bringing down prices, which could impact earnings for the second half.
Weather can affect shopping patterns of any kind of retail store. To get around this potential headache, investors may want to focus on retailers that have less exposure to warm/cold weather changes.
The first choice would be to stick with electronics retailers like Harvey Norman Holdings Limited (ASX: HVN). Apart from rain that may keep shoppers at home, electronics and white goods are the kinds of items that people are buying more of now, especially thanks to the growing housing market. A warm day may even get more shoppers into the store.
Its share price is $3.19 and could be closing in on a new 52-week high above $3.42.
The same goes for JB Hi-Fi Limited (ASX: JBH), the electronics specialty retailer. The company is expecting full year net profit to be 8.3%-10.8% higher than the prior year. By the end of the financial year it expects to have 182 stores, including 22 of its new JB Hi-Fi HOME format stores that also sell white goods and small appliances.
The stock is about $18.14, down from about $21 in mid-April.
Lastly, ARB Corporation Limited (ASX: ARP), maker and retailer of off-road vehicle parts and accessories, may actually be seeing more business from the warm weather because 4-wheel drive enthusiasts may want to take advantage of the extra warm, sunny days at the beach or in the bush.
Apart from its domestic business, it has expanded more overseas with a new warehouse and sales centre in sunny Florida, US. After hitting a low of about $10.50 a share in February, the stock is up almost 20% to $12.56 and finding market support possibly for a continued rally.