Demand for Winter Clothes Is Heating Up as the Temperatures Drop

Demand for Winter Clothes Is Heating Up as the Temperatures Drop

If you put up with chilly weather during the Black Friday shopping extravaganza, chances are that you may have invested some of your spending cash on winter wear. As folks at the Weather Channel will confirm, it's no secret that current weather conditions have an impact on consumer purchasing decisions. Planalytics, a research firm that provides insight on how weather patterns affect consumer demand, expects that the colder weather will impact sales of knitwear, winter boots, and coats. In fact, the firm predicts that knitwear sales should rise about 30% over the 2012 holiday season and winter boots and other accessories should also see double-digit growth of approximately 16% and 11%, respectively.

Colder than expected temperatures are expected to affect the Midwest, mid-Atlantic, and Southeast regions into early December. According to a Weather Channel forecast, during the early winter Southeast states can expect below-average temperatures. Late in the winter season, the Northeast could experience extended cold temperatures . Based on the weather forecasts in place, how will winter-wear brands such as Uggs, North Face, and Columbia Sportswear be affected?

Uggs - innovation makes the brand popular and resilient
The Uggs brand, owned by Deckers Outdoor Corp. , is a revenue generator for the company. During the third quarter ended Sept. 30, Uggs sales rose 1.3% to $337 million versus $332.8 million last year. The rise in sales resulted from new stores and the launch of new e-commerce sites.

According to Angel Martinez, President, CEO, and Chair of the Board of Directors, the brand showed resiliency last year that was driven by innovative new products and enhanced marketing and merchandising strategies. This year's fall season was led by demand for the brand's expanded collection of casual shoes and boots. The company expects to be well positioned to attract holiday shoppers.

Deckers' full year outlook estimates that annual revenue will increase 8% and diluted EPS will increase 10% over last year .

North Face -- a thriving Outdoor/Action Sports brand
V.F. Corporation owns the North Face brand, which is part of its outdoor and action sports segment. In its third-quarter earnings report, the company reported that revenue rose to $3.3 billion for a 5% increase versus last year. The company's outdoor and action sports, jeanswear, and international and direct-to-consumer businesses drove revenue.

Revenue for outdoor and action sports rose 6% to $2 billion in the third quarter and North Face's revenue rose 3% worldwide, as expected. Direct-to-consumer sales grew by more than 25%. Revenue, however, was flat for the company's wholesale business due to late-in-the-year shipments because of a change in the calendar. The company's 2013 guidance calls for revenue of $11.5 billion and expects that gross margin should approach 48% for an increase of 150 basis points over 2012.

Columbia sees a return to growth in 2014
Columbia Sportswear Company is considered a leader in active outdoor apparel and footwear market. During the company's third-quarter earnings call, management noted a "cautious approach" by their wholesalers in placing orders for winter products. The company is focusing on controlling its inventory levels, along with other costs, to improve sales growth going into 2014.

The company's third-quarter 2013 net income was $54.6 million, or $1.57 per diluted share, versus last year's net income of $64.4 million, or $1.88 per diluted share . As far as the impact of weather on the fourth quarter, the company anticipates "normal weather," and management noted that some parts of the U.S. have experienced colder than normal temperatures. Cold weather in Russia has had a positive impact, and overall the company believes that by maintaining a reduced inventory they are in a good position regardless of weather conditions .

My Foolish conclusion
An extended or colder-than-usual winter season should provide a boost to sales of outdoor and winter-wear brands and positively impact revenues at these apparel companies. Good inventory management will be key in meeting demand, as wholesale buyers try to determine what cautious consumers will purchase throughout the winter season.

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