A cold spell in December is likely to drive US full-margin cold weather apparel sales

A cold spell in December is likely to drive US full-margin cold weather apparel sales

US apparel retailers should receive a sales boost in the fourth quarter from cold winter weather, while the election risk will also be over, which could release some pent-up demand from consumers on bigger ticket items, analysts say.

Reporting on a meeting with Weather Trends International (WTI), analysts at Cowen & Co say they are optimistic a spell of cold weather in December will boost full-price outerwear sales. 

According to WTI chief executive officer and co-founder Bill Kirk, an early, long and colder winter is forecast, with seasonable, cold weather expected to begin in October.

On the snowfall front, rather than one big blizzard, WTI expects there to be constant flurries which could be beneficial for cold weather-related apparel, footwear and accessories, says Cowen analyst John Kernan. He adds the forecast should encourage higher full price sell through and margin performance in the second half of 2016, compared to last year.

The weather has not been much help to apparel sales so far in the third-quarter, with no cold, wet weather catalyst to drive sales during back-to-school (BTS) shopping. "We worry somewhat on full-price sales for fall apparel in the BTS season as weather hasn't consistently shifted cooler," notes Cowen analyst Oliver Chen.

But WTI expects a cold, wet surge around Columbus Day (12 October), which it says could support late Q3 sales. Given these trends so far, Cowen analysts say they believe summer clearance likely sold well throughout August, and retailers could be entering autumn decently clean on inventories.

"Given WTI's insights, we are most constructive on the start of Q4 as the best weather to benefit apparel retailers," adds Chen. "Combined with more favourable cold weather, the election risk will be over, which could release some pent-up demand from consumers on bigger ticket items."