Economy

Is Cold Weather Good News or Bad for Retail?

A blast of cold Arctic air swept across much of the northern part of the country last week, and an even colder shot is due in the next few days. Demand for natural gas to heat U.S. homes is expected to spike, and a lot of U.S. retailers are hoping that demand for cold-weather gear will spike as well.

Like farmers who want just enough rain, but not too much, retailers want just enough cold weather to put consumers in a holiday frame of mind and to remind them that they need to hit the stores to pick up more warm clothes.

Too much cold (and especially snowy) weather may keep consumers snug in their homes, tapping away at keyboards and mobile devices as they buy holiday gifts from home. That would be okay, but one company sucks up most of that spending.

Amazon.com Inc. (NYSE: AMZN) took 40% of all online sales in November and December of last year. As the Washington Post noted: “[I]f the weather pushes shoppers online, it might be funneling them straight to the biggest enemy of many mall stalwarts.”

What’s good for apparel retailers, though, is not necessarily good for other businesses. Restaurants, in particular, face a downturn this holiday season. Weather analytics firm Planalytics raised its earlier estimate of a year-over-year $273 million shot-in-the-arm for brick-and-mortar specialty apparel retailers this December to $350 million.

The firm also reckoned that restaurant business would drop by $1.1 billion compared with last December. Consumers don’t typically eat two restaurant meals to make up for one they missed due to bad weather.

One last effect from this year’s colder weather is likely to be a lot fewer inventory markdowns in January and February on winter clothing. Last year retailers were left with stacks of coats, hats and scarves that saw steep markdowns as stores cleared their shelves to make way for spring gear. That was a boon to shoppers that is unlikely to materialize to the same degree this year.