Retailers count on the weeks just after Christmas for a final push by customers to pick through inventory that was not sold over the holidays. It is often a period of price cuts as retailers clear out items they do not want to have in stock after mid-January when items for spring start to arrive. While some retailers will rebound from an unexpected drop, some of the nation’s deeply troubled retailers will quickly become more troubled.
Bitter cold has taken hold across much of the United States and now extends as far south as Florida. Accuweather expects temperatures in Jacksonville to drop into the mid-twenties Friday night. While the cold weather has dipped in areas that are usually warm, it has gotten to dangerously low levels across the Mountain and Plains states, into the Midwest and Northeast. The Northeast corridor expects a huge snow storm in the next 36 hours.
The wind chill factor will be below zero in the next few days from Boston and New York across the northern tier of states to Detroit and Chicago.
This broad swatch of states from north to south and east to west has a population of over 100 million people. Many of those people who would jump in their cars and drive to malls will not. The number of people who will shop for new cars will drop as well. Retail sales for January are bound to take a large hit.
The last time the economy was undermined by cold and snowy weather was in 2015. A drop in first quarter gross domestic product (GDP) was attributed in part to poor weather. According to MarketWatch, reporting on April 29 of that year:
Unusually cold and snowy weather probably cut GDP growth by a full percentage point, according to estimates from Macroeconomic Advisers, Goldman Sachs and the White House’s Council of Economic Advisers. Bad weather can depress both consumption and investment, as stores, offices and roads are closed.
Current weather conditions could be like a mirror of those three years ago.
The retailer that may not be hurt by weather at all is Amazon.com Inc. (NASDAQ: AMZN). As a matter of fact, if people shop from home, Amazon may even be helped. Healthy retailers, led by Wal-Mart Stores Inc. (NYSE: WMT), may take hits that could drop same-store activity. Crippled retailers like J.C. Penney Co. Inc. (NYSE: JCP) and Sears Holdings Corp. (NASDAQ: SHLD) will suffer erosion in foot traffic they cannot afford.
Economists may argue that a drop in retail activity and GDP is temporary when cold seizes much of the country. That does not mean the immediate effects for some businesses are not extremely painful. And, for retailers, lost sales are not ones they will get back.