Some Like it Cold

snowboard business suit (1)

December 18, 2017

Start bundling up – meteorologists are predicting an extra cold winter in the United States. Temperatures could drop to negative 30 degrees in some areas (luckily not Atlanta). Let’s take a look at what industries could benefit from these chilly temperatures.

Roughly 40% of total salt sales in the US are used for road de-icing, which means that salt companies are one of the biggest beneficiaries of a cold winter. More than 22 million tons of road salt are used every year to keep just America’s roads free of snow and ice. A severe winter will likely be a major boon for companies like K+S – the world’s leading producer in the salt business thanks to their acquisition of Morton in 2009.

Another industry that might be positively affected by cold weather is tourism. Many will head to the ski slopes to take advantage of any fresh powder, boosting stocks like Vail Resorts over the holidays. Vail Resorts owns four resorts in Colorado, three in Lake Tahoe, and many more across the states and outside the country. Others will want avoid the cold at all costs, and Florida gets the biggest uptick from winter visitors year after year. If the predictions are correct, hotels and theme parks should see an even bigger boost this year.

Online retailers, who are already very well-positioned given the trend away from traditional brick and mortar shopping, should receive an uplift from buyers who prefer to stay out of the cold, and shop from the warmth of their living rooms. Information from online retailing platforms suggest that the products benefiting most from cold weather include home improvement items like appliances and decor, arts and crafts items, wine accessories and music equipment. The COO of one online retailer provides the somewhat obvious explanation that “our data seems to indicate that in cold weather, our customers spend a lot of time at home”. In practice there is a dual commercial benefit to cold weather, people shop online more, and spend more on their homes.

Even more obvious is the conclusion that winter apparel makers will be delighted with the latest winter weather forecasts. Companies that should see success include VF Corporation, who own North Face, known for its coats, and Timberland, famous for its winter boots. North Face has been a dominant brand among outdoor enthusiasts for years, but recently even the average couch potato can now be seen sporting North Face gear.

Pharmaceutical companies like Johnson & Johnson do well in the winter for many reasons. As temperatures drop, sales for its moisturizing products like Aveeno and Neutrogena rise. J&J also benefits from its extensive lineup of flu and cold products such as Sudafed and Tylenol, which sell well in the winter when more people catch colds. It will be interesting to see which industries benefit most from what promises to be the few unusually cold months ahead.

Dan Hall

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