Sales Run Hot and Cold
Shopping trends are as fickle as the weather, especially for seasonal fashions, products related to outdoor activities or even food products that may imply a seasonal connotation such as ice cream and soup.
In its November WeatherCall Report, Wayne, Pa.-based Planalytics, which specializes in business intelligence related to weather patterns, noted that the unseasonably warm autumn months across the Central and Eastern regions of the United States had negatively impacted many retailers.
“Weather in October was unfavorable for 81% of the publicly traded companies we work with,” stated Scott Bernhardt, COO of Planalytics. “Retailers selling seasonal merchandise such as apparel and shoes continued to struggle through a difficult autumn. A dip toward more seasonable temperatures during the last week of the month helped release some pent-up demand, but it was not nearly enough to make up for sales lost over the preceding weeks.”
The report highlighted that temperatures across the entire eastern two-thirds of the United States were on average 5 to 8 degrees warmer than a typical October and 6 to 10 degrees warmer than in 2006. Demand for sweaters was down 8% from October 2006; sales of fleece products were off 12% and soup sales declined 6%.
Bad news for some is actually good news for others. Warmer temperatures contributed to higher sales at home centers, up 23% over October 2006. Planalytics also reported that restaurant sales saw an 8% increase over the preceding year.
Chris Dull, president of franchise management at New York City-based NexCen, noted that autumn sales were up at MaggieMoo’s and Marble Slab Creamery, the company’s quick-serve restaurants (QSRs) that feature frozen treats.
“September 2006 was cold and raining [in many regions] and in September 2007, when the weather was warm, systemwide sales were up approximately 24%,” he said.
However, cold temperatures, rain and frozen precipitation typically discourage consumers from visiting ice-cream shops. NexCen, which acquired MaggieMoo’s and Marble Slab Creamery in March, is developing a number of strategies to combat seasonal fluctuations. For instance, the company plans to augment its frozen foods with other treats, such as pretzels from recently acquired Pretzel Time and Pretzelmaker. The company is also aggressively seeking to acquire QSRs that feature blended drinks, cookies, doughnuts and coffee. (Additional coverage of NexCen is on page 24.)
Currently there are 197 MaggieMoo’s and 387 Marble Slab Creamery locations in the United States, as well as 23 Marble Slab Creamery stores in Canada. Sales for fiscal 2007 were $55 million at MaggieMoo’s and $97 million at Marble Slab. Gross revenues in 2008 are expected to increase to $67 million and $115 million respectively.
“Ironically, given its colder climate, Canada has proved to be on average our highest-volume market,” stated Dull.
Although there is slightly less competition in Canadian markets, Dull suggested another contributor to its success is the fact that Marble Slab acknowledged when it entered the market that the climate and weather could be an issue.
“In Canada, we targeted indoor locations in enclosed malls where seasonality would not be as much of an issue,” he said. “Also, Canadian shoppers have adopted our take-home business. We haven’t capitalized on take-home products as well as we should have in the United States, but that is a huge growth opportunity for us.”
The take-home ice-cream business is roughly 25% of sales at NexCen’s Canadian business, but less than 12% of sales in the United States. “We hope the ‘Marble Slab Comes Home’ promotion can grow the take-home business to about 25% in our U.S. stores,” continued Dull.
Take-home sales have a dual advantage. First, it is a viable way to promote sales when the weather is less conducive to frozen treats. As Dull explained, consumers are not less likely to eat ice cream; they are just less likely to go out to eat ice cream. Secondly, the take-home business is more profitable because labor costs are reduced and the unit price is higher. For instance, guests may spend $8 on two ice-cream cones, but a single ice-cream pie or cake can run $40.