Retailer performance, store productivity and consumer spending

Coolest Year Since 1993 Affects Air Conditioner Sales

The first seven months of 2014 have been the coolest in the US since 1993. Many are relieved—no heat waves and cheaper electric bills. But for home improvement retailers and suppliers that rely on sustained heat in the summertime to boost air conditioning sales, times are harder than expected.

After an August 20, 2014 earnings call, Lowe’s announced that its 4.5% rise in full-year sales was unfortunately less than the 5% the company predicted. Blame it on air conditioners and other appliances customers yearn for when temperatures around the US hit 90 degrees or more. While Lowe’s estimations did account for the potential loss in outdoor product sales because of the harsh winter the Polar Vortex brought, the cooler summer provided unexpected challenges for air conditioner sales.

The Home Depot reported similar weather-related problems but found no need to trim its forecast. On its August 19, 2014 earnings call, The Home Depot reported sales of $23.8 billion in Q2, a 5.7% increase from Q2 of FY2013. Same-store sales went up 5.8%.

First, Frank Blank, CEO and Chairman of The Home Depot, announced that though the weather meant that spring came much later than expected, sales from less seasonal items made up for that potential loss and kept sales “in line with our original expectations.”

In fact, Craig Menear, President of US Retail at The Home Depot, said the company experienced a “rebound” once spring finally “broke across the country.” While those employees on the ground were able to respond to the sudden rush in sales once spring arrived, some items did not sell as well as they had in previous years, largely because the summer heat never reached its expected peak high temperature. “We lost some sales in air movement categories due to the cooler summer and in live goods in drought-affected areas,” Menear said, “However, sales in exterior stains, water sealers, grills, seed, soils, mulch and live goods in non-drought-affected areas more than make up for the loss.”

A UBS analyst asked whether the cool summer enabled customers to complete fall home improvement projects, such as painting a house’s exterior, earlier in the season than usual, therefore taking away fall projects and anticipated fall sales. Menear said that the customary planting cycle—planting new seedbeds to expect plant growth in the next spring—holds. He added, “I do think we have benefited from the fact that it did not move from winter to 95-degree heat straight out of the blocks.”

Cool summer though it was, the winter’s expected to be downright frigid, if the Old Farmer’s Almanac’s forecast holds true. Almanac Editor Janice Stillman told the Associated Press that when they said cold, they meant cold: “Colder is just almost too familiar a term. Think of it as refriger-nation.” And if that is in fact the case, home improvement retailers may have to adjust their numbers yet again—this time likely in their favor—to accommodate Mother Nature’s whims—and consumers’ desperation for a good heater.