Industry Consultants Say Early Sales Are Bolstering Poor May Weather

Industry Consultants Say Early Sales Are Bolstering Poor May Weather

rain on flowers weather FEATURE

It’s been a roller coaster of a spring. Consultants Steve Bailey, Ian Baldwin, and Sid Raisch, who remain in close touch with more than a hundred garden stores collectively, report on what their clients are experiencing.

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Steve Bailey Reports Strong Year Through April

Steve Bailey: As of April 24, its been great news for the industry Revenues, even though they’re not the total indicator of financial performance, are up 19.5% year-to-date vs. 2015. When revenues are on the rise, that’s usually a good thing, as long as you manage on the upside. It’s just as easy to lose money while revenues increase and can, in fact, be even easier. Contact me if you would like to understand how to avoid the trap of increasing revenue dollars and a decreasing profit percentage.

Average week-to-week sales have been showing a sizable increase, which has led to a 10.4% increase in average sale year-to-date vs. 2015. Several regions are reporting an increase in average sale in the 30% range, which is enormous. One key to increasing average sale is maximizing the average items per transaction. This is a new measurement suggested by Sid Raisch (see below).

The pattern from the past few years has been for average sale to go up each year, while transaction counts go down. That changed in 2015, with transactions going up along with sales, and it’s happening again this year — a good sign.

Weather In May Is Cutting Into Early Gains

Sid Raisch: While there are regional shining spots, the overall picture has been dimmed in the past week or so over much of the country.

Temperatures have been unseasonably cool, with some areas receiving a lot of rain.

On the bright side, average transaction dollars are up for most garden centers. We’ve been measuring items per transaction, and those numbers have been up. Total sales have been up year to date, until this past week or two. In many cases the early gains have been erased. The good news is that there seems to be no problem with the economy or price increases.

What we don’t know, is how well prepared garden centers were in relation to others. How much better could some have done had they been more prepared?

Here’s the outlook from my perspective:

There are three types of Mothers Day weekend customers –

  1. those buying for Mothers Day,
  2. those buying for personal planting, and
  3. those buying for both Mothers Day and for personal planting.

This year markets that typically peak at Mothers Day may not have yet reached their peak, and will likely do so this coming weekend. This is something that many garden centers have either not experienced or do not remember, although it is normal for further northern markets that typically experience their peak of the season the two weekends following Mothers Day when they are less fearful of the risk of frost.

I believe there is another factor at play this spring, and that is the one of fragmented competition that has increased over the past couple of years as wholesale growers have acted somewhat aggressively to open new accounts, presumably to replace those of garden centers that have closed since the recession began.

The new plant retailers are spread among the full range of other types of retailers – primarily regional chains in categories such as grocery , pharmacy, gas stations, etc. Some of these competitors are undoubtedly trying to shore up sales and margins to make up for those lost by online competition – often from the Internet division of their own companies. These retailers with other core product offerings typically like the opportunity that plants bring them to take advantage of a peak spring season and higher margins compared to their general product mix.

What to do from here? If it were me, I’d align inventory on hand and incoming to expected customer traffic. Correspondingly, I would reduce bench and other display space on a weekly schedule as customer traffic decreases. And I would discharge under performing staff members, then reduce overtime to zero while also beginning seasonal lay-off.

Ian Baldwin Sees An East-West Divide In Spring Performance

Ian Baldwin: Looks like the season took a step backwards east of the Rockies with clients 5-10% down YTD but 2015 was strong at this point. Previously strong, diversified retailers like DeWayne’s in North Carolina, however, are proving to be somewhat weatherproof. (The good just keep getting better). Stores out west have been very strong.

Average ticket is up. I asked around, and I’m told that raised prices aren’t enough to account for the increase. The consensus seems to be that larger items are on the increase — a sign that customers are comfortable spending again. So furniture, large trees, and even 1-gallon and 2-gallon succulents are selling like crazy. You just couldn’t find succulents that large a couple years ago.

Controls, what the industry still calls “chemicals,” are down. And I’m guessing that will continue. I think American are using less chemicals. But other hardgoods like gloves and other things like that, are enjoying strong sales.

Overall, it looks like customers are more comfortable spending, including Millennials, who are undeniably coming into garden centers.