Holiday Central

Cold weather to drive demand at retail


If that chill in the air has you reaching for your scarf and gloves, retailers have you right where they want you.

Following the fourth-warmest October on record for the U.S., the first winter storm of the season unleashed itself on much of the country this week, with the arctic air expected to continue through next week.

Shoppers during a winter storm in New York
Timothy A. Clary | AFP | Getty Images

While the plummeting temperatures will surely bring a dose of winter blues to those grasping onto the last bit of fall, it's a welcome change for retailers, who are counting on the cold to boost sales of seasonal items such as jackets.

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This particular type of arctic blast is the perfect storm for retailers, because its cool temperatures will drive the desire to spend, but the absence of snow and freezing rain won't keep shoppers bound to their homes.

"I think that this cold weather is manna from heaven for retailers, and it's coming just in time," said Paul Walsh, vice president of weather analytics at The Weather Company, which like CNBC is a unit of NBCUniversal. "This weather is fantastic in terms of really generating early demand for holiday."

Getting shoppers to snatch up cold-weather gear early in the season can be key for retailers. If warm temperatures extend too far past when companies stock their shelves with sweaters and hats, it can lead to unanticipated markdowns.

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This can cause a domino effect in stores, as it's harder to persuade shoppers to buy a nondiscounted item when they can opt for something else on sale, said Edward Hertzman, founder and publisher of Sourcing Journal.

"It's going to be harder to get them to come back and pay full price," he said.

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Three of the big department stores that reported earnings this week—Macy's, Kohl's and J.C. Penney—all cited warm temperatures as a contributor to their weak sales for the quarter. Though this certainly wasn't the only factor, executives at Kohl's and Penney said that once the weather began to cool across the U.S., sales dramatically improved.

Macy's CEO Terry Lundgren also spoke optimistically about the upcoming months, saying the company is "poised to capitalize on a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year."

This cold and wet weather contributed to an industry-wide 14.6 percent decline in retail traffic last holiday, according to ShopperTrak.

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Walsh agreed that the forecast is looking better for holiday shopping, mainly because "the odds just favor less snow." Retailers also stand to gain from what Walsh referred to as "the snowblower effect"—when an initial drop in temperatures reminds consumers of the previous winter's misery, and gets them to stock up on cold-weather items even if things won't be as bad.

Walsh's forecast calls for temperatures to be milder over Black Friday, as compared to both last year and this weekend, "making the arctic blast a key opportunity to generate incremental/high-margin sales."

"It's a great boost going into holiday," he said.