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Cold Snap Taking Bite Out of Retail Sales

Monday, 29 Apr 2013 | 11:33 AM ET
LWA/Dann Tardif | Blend Images | Getty Images

Retailers are feeling the chill from unseasonably cool temperatures in the Northeast—and it's expected to show up in the earnings reports this May.

"The weather has been so volatile and so different than last year," said Paul Walsh, chief meteorologist at The Weather Channel's WeatherFX. The first quarter of 2012 was the warmest in the region in 108 years, but this year the weather is much chillier.

Walsh analyzes how weather affects businesses and consumers, and he expects consumers have been putting off buying warm weather gear, and the slowdown in these sales will likely hurt first-quarter profit margins.

There was some evidence of this when retailers released monthly sales reports for March at the beginning of April. At that point, investors seemed to accept the weather excuse. By May, investors may get more fidgety.

Kohl's, J.C.Penney, and Gap may be among the retailers hardest hit by the cold snap, Walsh said. These retailers have more than 22 percent of their business in the Northeast.

(Read More: Retail Goes Shopping Through Big Data)

Merchant Forecast, which provides financial research for institutional investors, hedge funds and mutual funds, is seeing a similar trend. It finds the cooler than usual temperatures are affecting both apparel and footwear sales.

Its weekly survey, conducted by a team sent out to shopping malls across the country, revealed the Northeast was the weakest region for retail sales in the week ended April 20.

At that point, the survey found the level of sales discounts at a level of "borderline panic." Some of the more aggressive sales were at Ann Taylor, Francesca's Collections and Sears, the researcher said.

"It is our opinion that the window has been shut on most retailers' ability to do full-priced spring apparel business. We will still have pressure on the margins even if the weather turns," said Dan Hess, Merchant Forecast founder & CEO.

(Read More: Prolonged Winter Puts Retail Sales in Deep Freeze)


He added these promotions won't just cover the Northeast. Even consumers who live in parts of the country with more seasonal temperatures will see prices slashed too.

But, unlike Walsh, Hess doesn't think analysts and investors will get too spooked if first-quarter retail earnings fail to impress. He said the poorer numbers could be forgiven if retailers offer a better second-quarter outlook.

While investors may want to reassess their exposure to retail names, consumers may want to chill out—as many retailers cut prices further over the next few weeks.

-By CNBC's Stephanie Landsman; Follow her on Twitter @StephLandsman.

Questions? Comments? Email us atconsumernation@cnbc.com.

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