Why cold weather means big business for retailers
You just have to step outside to feel the first hints of fall in the air, especially in the Midwest and Northeast. And for a retailer, that translates to the ka-ching of cash registers—a welcome sound after the polar vortex that kept consumers away last winter.
According to Weather Channel Business Expert Paul Walsh, this season is the sweet spot for retailers as consumers are driven to stores to purchase cooler weather gear. “We know for every two-degree drop in September, we see about a 1% increase in sales. It’s good for retailers because it drives early demand and that’s where you get higher margins,” he says.
A cool fall and mild winter
The weather we’re seeing now is heaven for retailers, says Walsh. Walsh is also predicting a mild winter and says holiday shopping lists will reflect that. He says, “The warmer winter means there will be less demand for seasonal items. I think we’ll see an increase in store traffic and more demand for non-weather-related items such as electronics.” And with the rollout of Apple’s new product lines, that is music to Silicon Valley’s ears.
Finally Walsh is predicting a warmer and earlier start to spring - another boon to retailers as they prepare to roll out their Easter apparel next March.
‘The Polar Vortex’
The first quarter of 2014, also known as the “frozen” quarter, led to a dismal GDP number as shoppers stayed home instead of going out to shop. This resulted in the U.S. economy shrinking 2.1% for the quarter. The cold snap actually began right around Black Friday of 2013 and continued through the second quarter of this year. FedEx (FDX), General Motors (GM) and McDonald’s (MCD) were just a few of the companies that blamed the weather for poor performance. According to Bloomberg, earnings of S&P 500 companies rose around 1.1% for the quarter, much slower than the 8.8% increase seen the previous quarter.
60 is the new 80
Cooler-than-usual temperatures this summer won’t hurt retailers either, says Walsh. “At this point, it dosen't need to get warm to trigger cabin fever in the major Midwest and Northeast [markets]. It just needs to get warm-er,” he writes in a report.
When the Polar Vortex ended and warmer weather resumed, said Walsh, consumers ran out to buy summer gear even if the weather didn’t necessarily warrant it just yet.
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