A:

Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the fourth quarter, or October through December, and peak at Christmas. According to the Census Bureau's Monthly Retail Trade Report, the most seasonal retail markets are electronics, appliances, clothing, sporting goods and online retail. The least seasonal retail markets include automobiles, furniture, gas stations and building materials.

General merchandise stores, such as Walmart, Costco and Target, that sell many types of products tend to see large seasonal swings as well. January and February tend to be the worst months for retail when most consumers are saving after holiday binges and poor weather limits activity.

The Christmas Effect

Christmas is the season of retail shopping and investing. Some retailers see 30-40% spikes in sales just from the beginning of November to the end of December. Companies have adjusted over the years and now have seasonal hiring spurts and overstock their shelves, never wanting to run out for shoppers.

Collaborative Planning, Forecasting and Replenishment

Retail managers have to plan their budgets and their product offerings around seasonal influences. An easy example is a clothing retailer switching from long-sleeve shirts and jeans to short-sleeve shirts and shorts when the weather starts to warm.

This seasonal navigation is sometimes referred to as collaborative planning, forecasting and replenishment, or CPFR. Companies that do this best are rewarded with higher sales, lower surplus inventory and fewer markdowns.

Operating Expenses and Working Capital

The required amount of working capital for retailers increases during peak seasons. This is because operating expenses also go up, such as extra labor, change in store hours, increased customer demands and the introduction of new product lines.

RELATED FAQS
  1. Are there significant seasonal patterns in the electronics sector?

    Examine the consumer electronics sector and learn what typical seasonal sales patterns can be identified for this important ... Read Answer >>
  2. Is the banking sector subject to any seasonal trends?

    Explore the unexpected seasonal trends that can be discerned regarding the banking industry and the financial services sector ... Read Answer >>
  3. Who are Target's (TGT) main competitors?

    Take a look at the battle of discount retailers. How Target is different from its competitors such as Walmart and Costco. Read Answer >>
  4. How important are seasonal trends in the automotive sector?

    Learn more about the automotive industry, including the strong seasonal sales trends for the industry and some of the major ... Read Answer >>
  5. How does government regulation impact the retail sector?

    Learn about the types of federal agencies and regulations that retail businesses have to deal with, including inconsistent ... Read Answer >>
  6. When should I use seasonally adjusted data from the consumer price index (CPI)?

    Learn what seasonally adjusted data is, how it is determined and when it should be used to evaluate the information gathered ... Read Answer >>
Related Articles
  1. Investing

    Consumer Spending As A Market Indicator

    Learn how people buy retail as where they shop can be one of the best indicators for how to predict the coming months of retail economic activity.
  2. Investing

    The Four Rs of Investing In Retail

    In retail, successfully managing ROI and other financial indicators is the key to success.
  3. Investing

    Target Makes a Final Push for Holiday Shoppers

    The holiday shopping season appears on track to be successful for retailers overall, but the battle between individual chains and e-commerce sites has been intense. That competition got the most ...
  4. Investing

    Retail Stocks Poised for Big Turnaround

    Retail stocks have taken a beating in recent years, but they now look positioned for a rebound.
  5. Insights

    Best Times To Go Shopping

    Whether you love it or hate it, we'll tell you when the best times are to go clothes shopping.
  6. Investing

    How Seasons Impact Real Estate Investments

    Here is how the seasons of the year impact the housing market.
  7. Personal Finance

    Sneaky Strategies That Fuel Overspending

    Find out how to avoid six of the worst vender ploys this holiday shopping season.
  8. Investing

    Q1 Retail Earnings Could Collapse 6.8 Percent

    Earnings in the ailing retail industry are on track for their greatest quarterly decline in four years.
  9. Small Business

    Retail vs. Tech: How These Companies Use Working Capital

    Learn about the difference between retail and tech businesses' use of working capital and why working capital varies so widely in the technology sector.
RELATED TERMS
  1. Seasonality

    Seasonality is a characteristic of a time series in which the ...
  2. Seasoning

    Seasoning is the length of time a debt security has been publicly ...
  3. Seasoned Issue

    A seasoned issue is the issue of additional securities from an ...
  4. Seasoned Security

    A seasoned security has been publicly traded in the secondary ...
  5. Seasonally Adjusted Annual Rate - SAAR

    A seasonally adjusted annual rate (SAAR) is a rate adjustment ...
  6. Seasonal Adjustment

    A statistical technique designed to even out periodic swings ...
Hot Definitions
  1. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  2. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  3. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  4. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  5. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center