Here’s Why Retail Will Struggle This Spring

Optimism about retail is waning leading up to spring 2017.

Cowen & Co. analyst John Kernan said in a note Thursday that this year’s Easter shift forward on the calendar coupled with volatile weather could create significant headwinds for fashion firms.

It could be a challenging environment for retailers and brands this spring as [Weather Trends International] is forecasting April to be the coldest in 20 years,” Kernan writes. “The weather outlook this spring is not expected to be favorable for spring apparel given significantly colder temperatures year-over-year, particularly at the beginning of the season.”

Meanwhile, Easter shifts 20 days later this year, to April 16 — making 2017 its latest calendar positioning since 2014.

Kernan points out that this will shift some volume from calendar Q1 into Q2 for several firms, including Adidas, Columbia Sportswear, Skechers USA Inc., Under Armour and VF Corp.

Further, as digital growth continues to disrupt brands and retailers’ traditional approach to marketing and selling their wares, Kernan and other analysts call for an uptick in store closures in the coming months.

[The] ongoing and rapid shift in consumer shopping behavior highlights the need for further brick-and-mortar store rationalization,” Kernan wrote. “Brands selling into department stores face headwinds.”

Meanwhile, uncertainty regarding changes in legislation under the new Trump administration, the Border Adjustment Tax (BAT) scenario and ongoing caution on inventory buys in the wholesale channel add fuel to the fire.

“We think BAT creates uncertainty for multinational brands from a tax and FX perspective while consumers could face significant cost inflation,” Kernan noted.

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