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December has seen record warm temperatures in the United States. In fact, many parts of the country are experiencing record temperatures. For example, meteorologists expect a stretch of the Eastern Seaboard from Maine to Florida to see the highest Christmas Eve temperatures ever.
In the Midwest, a jet stream of warm air from the South has pushed temperatures in many cities, including Cleveland, to 10-15 degrees above normal levels.
Much of this is due to 2015 being an El Nino year. But that’s not all. This year’s El Nino is projected to be one of the strongest on record, according to the National Oceanic and Atmospheric Administration.
As a result, the warmer-than-normal temperatures may have a significant effect on corporate earnings this quarter. Here are a few of the major winners and losers from the unseasonably warm weather.
Consumers Head Out in Warm Weather
If the unusually warm weather persists, the likely winners will be those companies that benefit from consumers getting out of the house and spending money. Specifically, restaurant stocks like Buffalo Wild Wings (NASDAQ: BWLD) could see increased traffic and sales.
Buffalo Wild Wings is a specialty restaurant. It operates similarly to a sports bar. When the weather turns colder, as it usually does in many parts of the country this time of year, consumers tend to stay home to watch major sports events.
But if the weather stays warmer than normal, consumers will likely be more willing to brave the outdoors. And, American consumers have more disposable income these days due to the recovering labor and housing markets, as well as low gas prices.
In the fourth quarter of 2014, Buffalo Wild Wings grew comparable-restaurant sales, a key figure that measures sales at restaurants open at least one year, by 5%. If the weather cooperates in the fourth quarter of 2015, the company could post even better results this time around.
Likely Losers in Warm Weather
Among the biggest losers from a continuation of the warm weather seen so far this fall, would be companies that make money from the cold weather season. These would include retailers like Kohl’s (NYSE: KSS) that sell winter apparel.
Kohl’s has struggled all year long, and management specifically mentioned unfavorable weather patterns for the company’s lackluster financial performance in 2015. Earnings per share declined 21% over the first three quarters. Kohl’s could really use a spate of cold weather to clear out its excess inventory of winter jackets, gloves and boots.
In addition, utilities are likely losers from warmer-than-average temperatures. When the weather gets cold, consumers crank up the heat to warm their homes. But if consumers don’t need to turn the heat on as much this winter, major utility stocks like Consolidated Edison (NYSE: ED) and Exelon (NYSE: EXC) could be negatively affected.
The Bottom Line
The warm weather is likely a relief to millions of Americans, but for corporate America, the results are more mixed. Companies that offer experiences, such as restaurants and hotels, could see a bump in sales if the warm weather persists. Consumers may be more inclined to get out of the house, rather than stay in due to the cold.
By contrast, companies that profit from the cold weather, such as clothing retailers and utilities, could suffer from higher-than-normal temperatures.
This Is Making Ordinary People Rich
Ordinary people across America are getting insanely rich. Take Gladys Holm. She never earned more than $15,000 a year as a secretary. But by making one simple move, she was able to leave an $18 million fortune to a children’s hospital when she died. There’s many more just like her.