Colder temps, and holiday-season snow, look to lift December apparel sales compared to last year, the latest projections from weather intelligence and analysis company Planalytics show.
Planalytics began sounding the alarm for cold weather on Dec. 1, first anticipating a $107 million sales increase between Dec. 4 and Dec. 10, then a $243 million weather-driven sales boost for the first half of the month.
Now the figure has been bumped up for the month.
“It looks like this December will be the coldest in at least four years,” said Evan Gold, executive vice president of global services at Planalytics. The colder winter comes after a warm November.
In the “buy now, wear now” society that we’re living in, “weather becomes the largest external driver of need,” Gold said. With winter weather setting in, shoppers are once again reaching for items like coats, gloves and scarves. Most of the $350 million that Planalytics forecasts will be generated on the East coast, according to Gold.
Moreover, necessity will prompt shoppers to pay a little more, generating higher margin sales.
“Winter isn’t coming. Winter is here,” said Gold. “Because we’re in a buy now, wear now mentality, customers will spend more money on a coat.”
Last year, was the warmest December on record, notes Gold. Many retailers, including Macy’s Inc. M, +0.07% and Burlington Stores Inc. BURL, +2.52% said the unseasonable weather hurt sales for the season.
J.C. Penney Co. Inc. JCP, +1.53% has said that it switched up its merchandise mix in order to move away from “weather-sensitive categories” like apparel.
Home improvement retailers Home Depot Inc. HD, -0.64% and Lowe’s Companies LOW, -0.67% said outdoor sales actually got a positive jolt from the warm weather.
The Weather Channel says it’s tracking Winter Storm Decima, which will cross the country bringing snow and perhaps even ice and sleet. While retailers want to see some seasonal weather come their way, they don’t want to take it too far.
“Retailers need enough snow to get in that winter mindset, but not so much that keeps people away,” said Gold. “It provides a helpful environment.”
Terry Lundgren, Macy’s chief executive, expressed a similar sentiment when MarketWatch spoke with him over the long Thanksgiving holiday weekend.
“I can’t ask for complete perfection here, but if I could, it would be a light snow at night,” he said at the time.
With weather cooperating, analysts believe stores will move their inventory in a timely fashion.
“Overall Weather Trends International [WTI] believes retailers will be able to clear out winter merchandise at full price and will not have much leftover to sell into first quarter 2017, given a significantly colder winter,” wrote Cowen & Company in a note published Dec. 7.
Even if weather becomes prohibitive, there’s always e-commerce. But that’s not the answer to everything.
“[W]eather can still impact what customers buy thus leaving retailers exposed to potential post-season markdowns if their assortment doesn’t align with customers’ needs,” said Jared Wiesel, partner at Revenue Analytics. “Weather also plays a major role in the customer experience post purchase, as it can have a large impact on on-time shipping rates for goods bought online.”
WTI says “brick-and-mortar retailers with a strong e-commerce platform” will do well given the cold weather and precipitation. Based on this weather information, Cowen believes Wal-Mart Stores Inc. WMT, +0.48% will be a holiday season winner.
Wal-Mart shares are up nearly 18% for the last 12 months while the Dow Jones Industrial Average DJIA, -0.54% is up nearly 12% for the past year.
“WTI cautioned that mall traffic could suffer if there’s too much snow,” Cowen wrote. “In addition, WTI estimates that home heating bills could rise by 5% to 10% versus last year given a forecast of colder weather, though higher heating bills could mean less money in consumers’ wallet to use towards incremental purchases in early 2017.”