Jan. 28, 2013 at 10:07 AM ET
Call it the Christmas gift that came late.
The freezing weather that has blanketed large swaths of the country for the past several days is just the catalyst retailers needed to spur demand for cold-weather gear — except that it hit after many of them had already begun post-holiday markdowns.
“It was too late to turn back for retailers,” Marshal Cohen, chief industry analyst at the NPD Group, said via e-mail. He said the cold snap will help sales, but it came “a little late.”
January and February are typically the slowest months for retailers. In 2013, this seasonal trough came on the heels of a holiday season during which consumer spending failed to live up to expectations, rising a lower-than-projected 3 percent.
Thanks to the plummeting temperatures, stores’ cold-weather inventory won’t be languishing on racks come springtime. But the drawback is that they’ll make smaller profits on those discounted gloves, hats and boots.
“Most of the sales that are getting done are getting done on discounts,” said Christian Buss, apparel and softlines analyst at Credit Suisse. “The business is going to get done, it’s just not going to be high-quality business.”
“You make up for some of it in volume,” said Joe Feldman, a senior analyst at Telsey Advisory Group.
Things could be worse, according to Barbara Wyckoff, equity research analyst in specialty retail and apparel for CLSA/Credit Agricole Securities (USA). With last year’s mild winter fresh in their minds, retailers hedged their bets when it came to ordering cold-weather items for this winter, so they have smaller stockpiles to mark down.
The unseasonably warm winter last year helped retailers another way, too. For many people, it’s been a while since they pulled their heaviest clothing out of the closet, increasing the likelihood that items have gone out of style, no longer fit or got lost. Buss said unpredictable winter weather is driving stores to look for more “transitional” merchandise; that is, items versatile enough to be worn throughout the winter.
“The good news for retailers is even though they lose on the margin, they probably already booked that markdown in the fourth quarter,” said Paul Swinand, an equity analyst at Morningstar. Plus, it should help boost traffic. “Generally, weather does bring people into stores.”
Bill Martin, founder of ShopperTrak, a company that analyzes retail foot traffic, predicted that stores can look forward to an increase in traffic after the weather moderates. The people who aren’t rushing out to buy parkas will probably hunker down at home for now, but once cabin fever sets in, they’ll be headed out to the mall as soon as the cold spell breaks.
“January should get maybe a little boost,” Swinand predicted.