As widely predicted the dreaded polar vortex is back and it has “seized the Midwest with the coldest weather in a generation.”
These kind of events — if they persist for weeks — can have huge negative impacts on consumer spending and economic activity.
For context, check out this article by Andrew Freedman on the 2014 Polar Vortex event:
But the impact of short spells of bitterly cold weather, in the winter, typically don’t have a major long term impact on consumer demand and retail.
Why? Seasonality. It’s supposed to be cold in winter and retailers and consumer packaged goods companies generally plan for January and February to be, well, wintery.
Where the impact of colder than normal and extreme weather gets dicey for consumer businesses is when it persists for long periods into times where it’s supposed to be getting warmer (i.e. spring). It’s what happened last year.
The extreme and life-threatening cold we’re currently experiencing will certainly have a major short -term impact.
But the key here is short-term.
By this weekend and into next week the forecast is calling for an incredible warm up.
For example the temperature in Chicago is expected to increase 63 degrees (-22F to +41F) between tomorrow and next Monday (2/4).
Even with a continuation of these kind of volatile spells of extreme cold across the eastern half of the country in February, the negative impact on retail is likely to be minimal for the reasons noted above.
On the contrary, a cold late winter this year will likely contribute to strong and high margin early spring sales.
4 Reasons for a Retail Silver Lining this Spring
For most retailers in the U.S. the fiscal year starts in February with the spring quarter spanning February through April.
Along with the third quarter (August – October) the spring quarter is the most exposed to weather volatility and hits to profits.
Again, for context, last April was the 13th coldest in the US in 124 years of history.
That coincided with a very early Easter (week 5 March) and it had the effect of essentially kiboshing the normal first quarter Easter sales stimulus.
So there’s four key reasons the late winter polar vortex this year will likely be a boon for spring retail:
- An incredibly easy weather comparison to last year.
- Cabin fever. There’s still a lot of winter to come and the predictions are continuing to call for periods of very cold weather right into March. When the weather breaks consumers will be breaking out, and spending. It happens every year and it will likely happen 3 or 4 weeks earlier this year.
- A later Easter means a longer pre-holiday selling period with weather conditions that will be much milder than last year. More time to shop due to the earlier break to spring weather means more money in the cash register.
- The weather impact is greater than ever due to the combined effect of better forecasting, mobile access to more accurate forecasts, and the synergistic impact of social media (weather is nearly always a number one topic on social — it even trumps sex).
When you combine all four elements — easy comp, earlier break, later easter and the weather “forecast factor” — it’s adds up to a very silver lining for US retail this spring.