Arctic Blast May Chill Post Holiday Sales

In Industry News, What's New by Jeff PrineLeave a Comment

polarvortexNew York—It’s not only millions of Americans who are filling the chill from the polar vortex. U.S. retailers who have felt the chill in sales for holiday may face a further freeze due to the frigid temperatures and wind chills.

In a report by Citigroup, analyst Oliver Chen wrote that retailers’ fourth quarter results are likely to be hurt by 1% due to the Arctic blast. While January is usually a clearance sale month for retailers, their fourth quarters don’t usually end until the end of January.

But a Boon to Cold Weathergoods?

So in a highly competitive and promotional holiday season, retailers are looking to keep every sale.

Chen said while frigid temperatures and continued strong winds raise the risk of power outages, consumers will be staying home rather than bundle up, looking for sales.

Some argue that even if retailers miss out on a few percentage points in sales due to the winter weather, they likely will make those sales up in the near future—though not in the all-important fourth quarter.

In 2000, The Federal Reserve studied the effects of weather on retail sales and found that, monthly fluctuations in sales caused by weather were smoothed out on a quarterly basis. Every quarter had some impacts, and some were harder to make up than others.

Those sales lost in the end of fourth quarter and into first quarter usually have a noticeable bounce back. “This suggests some tendency to defer shopping when the weather is cold, and then make up for lost time in the subsequent quarter,” The Fed reported

However, retailers whose winter apparel and accessories sales suffered the last two years by a warmer start to winter may see an uptick thanks to the very winter weather.

“In the past, we’ve had these big warming trends,” said Michael Londrigan, dean of academic affairs for LIM College. “Now that we have this cold snap—and it’s in a good part of the Northeast and middle states—that’s going to drive folks to the stores to buy up some outerwear.”