Cool Profits In Summer Of '02

You know you're going through a tough heat wave when a front page headline in The New York Times blares "How Hot Is New York? Take A Whiff," a story that described the aroma of "fetid fish on Fulton Street [Fish Market]." In his July 30th story, reporter Marc Sandora wrote, "Odors get so strong you can taste them. The sidewalk meat smells meatier. The trash outside restaurants is ranker. Even the water that drips from air conditioners has a faint stink."

Well that "faint stink" must smell like Chanel to New York area retailers. Long, hot summer days and nights is a gift from on high for air conditioner retailers. Who cares if two transformers at Con Edison's electrical plants exploded in consecutive weeks last month? (Appropriate first name for an electrical utility, don't you think?) For electronics/appliance retailers, the hot summer weather means cool profits.

Now the weather hasn't been extremely hot uniformly nationwide for the entire summer. But as the page one story in today's issue illustrates, it was hot early enough and late enough for most AC retailers, both large and small, to clean their inventories of air conditioners and, in many cases, make hefty profits in the bargain.

Clean inventories are what air conditioner retailers and suppliers want come early August, where in most cases the AC season is over. That not only benefits AC dealers and vendors, but electronics and computer makers and retailers.

Why? Well for the uninitiated, many AC retailers also sell digital cameras, computers, digital TVs, DVD players, home theater systems, major appliances and the like. With retailers having full cash registers from air conditioner sales, and the added store traffic that AC buyers bring to their stores, they will have the means to go back to electronics and appliance vendors to buy more goods for the fall and holiday selling seasons.

Most of this activity occurred during the financial meltdown of Wall Street, which should have inhibited sales of air conditioners and plenty of types of hardware, if conventional wisdom was correct. While some in the industry are concerned about how Wall Street's hangover could hurt business, most retailers we spoke to in another page one story said sales still remained higher than last year.

However some retailers did report that the sales pace of brown and white goods began to trend a little lower during the past few weeks.

A handful of industry pundits have said several times since last fall that if electronics and appliances are not recession-proof, they are pretty darn close. But this industry and the economy in general do not need any more shocks on the level of Enron, WorldCom, ImClone, et al., as we get closer to the fourth quarter. So far the result has been that The Conference Board reported lower consumer confidence numbers last week. If this dip in consumer confidence is not just a one-time event, but the beginning of a trend, the cool profits of summer will be a distant memory come Christmastime.