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Retailers Hammered by Winter Storm ‘Draco’


When I was running other people's money, I had a rule: If a retailer blames the weather for bad results, sell the stock. Good merchants understand climate volatility and plan accordingly. No exceptions were made and no excuses were accepted.

That is until now. The winter storm that shutdown most flights in and out of O'Hare yesterday and is threatening to do the same to most of the eastern seaboard over the next two days comes at an inconceivably horrible time for retailers. Draco, as the storm is being called, may not be of historic magnitude in terms of storms but it will go down in history for U.S. merchants.

If the retailers feel a bit cursed, it's hard to blame them. Consider:

  • According to a survey from Visa Inc., 73% of consumers still didn't have their shopping done as of December 17th.
  • The same report says those last-minute shoppers intended to spend an average of $304 in the last week of shopping. That's over 1/3 of the $854 that Americans surveyed said they would spend for the whole season.
  • The storm ran straight over Chicago, cancelling and delaying flights throughout the country. It was the first snow of any sort to hit Chicago in a record 290 days.
  • Draco will bring similar pain to the East Coast on Friday, all but shutting down airports on what is expected to be one of the busiest travel days of the year.
  • It's too late to buy online. A good portion of the money earmarked for holiday gifts will go unspent.

The high end retailers with disproportionate concentration on large cities will get hit hardest. A 10% reduction in EPS for chains like Tiffany's or Saks isn't out of the question. More geographically diversified merchants will see much less of an impact though 1% is nothing to sneeze at in an industry with 5% net margins.

For retailers the bottom line is that It wasn't looking like a great Christmas selling season before and it looks much worse now.

The Spirit of Christmas is the only real winner stemming from Draco's wrath. For those who shop late or rely on last minute customers Draco is making for a very dark forecast.