Will Summer’s Arrival Breathe New Life Into Retail?

Here’s to hoping.

The third week of June brought another round of deceleration in retail traffic. This time, traffic slipped 5.3 percent — even including a pre-Father’s Day boost — according to Citi Research analyst Kate McShane and Cowen and Co. analyst Oliver Chen.

While the numbers aren’t exactly uplifting, Chen pointed out that June traffic month to date, down 3.2 percent year over year, is still trending better than May and April numbers, which were down 6.4 percent and 4.6 percent year over year, respectively. The later Memorial Day timing partially helped June, Chen added.

With summer officially underway (as of Monday), analysts now turn their attention to how warmer temperatures will impact retail.

Summer temperatures have finally arrived across the U.S., which should help retailers attempt to end 2Q clean [of excess inventory] for fall,” Chen noted.

UBS Investment Bank analyst Michael Binetti said he also expects near-term weather trends to bode well for footwear and apparel sellers.

On Friday, Binetti said he hosted a conference call with Weather Trends International (WTI) CEO Bill Kirk to discuss his latest weather outlook for the rest of 2016 and the potential impact to retail stocks.

WTI echoed what we have heard a number of companies in our coverage say — that trends have improved since weather warmed up over Memorial Day,” Binetti wrote. “Bill reminded us that the year-over-year Memorial Day lift may not be significant as last year was a hot weekend, but after a very tough start to May, we believe that June has been more favorable for retailers and that 2Q will be more favorable than 1Q.”

Meanwhile, WTI forecasts a very hot and dry July and August, which could translate to a delayed start to back-to-school spending, Binetti noted.

Just when weather trends could start to become a tailwind (e.g., cooler year-over trends in September/October), the distraction of an election cycle and potential for a very active hurricane season add some macro volatility to the fall outlook,” he added.

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