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Well, the weather outside is frightful …
…but to some companies, it has been a financial windfall.
One of the coldest winters in recent memory has been bad for business in many circles. Retailers have struggled to attract customers reluctant to leave the warmth of their own homes. Snow and ice has forced the cancellation of 75,000 flights since Jan. 1 – by far the highest winter tally since the government started keeping records.
Dozens of U.S. companies issued negative first-quarter guidance in anticipation of the toll the “polar vortex” took on their books.
Urban Outfitters (Nasdaq: URBN) had to close 312 stores for a full or partial day due to weather this winter, up from a mere 13 last winter. Gap’s (NYSE: GPS) same-store sales fell 1.1% in January. Zumiez’s (Nasdaq: ZUMZ) January sales slipped 3.3% year over year.
According to Factset, 195 S&P 500 companies mentioned the word “weather” in their recent earnings calls. Not coincidentally, of the 89 companies that have issued first-quarter EPS guidance, 72 of them are negative.
But a few companies have actually benefited from the bad weather.
AutoZone (NYSE: AZO) is one of them. The auto-parts retailer saw a 4.3% increase in same-store sales in the quarter ended Feb. 15. As I found out the hard way after leaving my car at the airport for a week over the holidays, extreme cold weather weakens batteries. When that happens, people need their batteries charged or replaced. And many of them go to AutoZone, the largest supplier of auto parts in the U.S.
Investors have clearly taken notice of AutoZone’s improved winter sales. AZO shares have risen 14.6% this winter, well ahead of the 2.7% gain in the S&P 500.
V.F. Corp. (NYSE: VFC) has also benefited from the polar vortex. It’s the company that owns the North Face and Timberland brands. There are few items pressing enough to convince people to wander out into two feet of snow and sub-zero temperatures for a trip to the mall. But winter jackets and boots are two of them.
V.F. Corp.’s profits increased 10% in the fourth quarter. Analysts anticipate another 6% year-over-year jump this quarter. While it hasn’t gotten the same bump that AutoZone has, VFC have gained a solid 4.2% since the start of winter.
The Walt Disney Company (NYSE: DIS) is a third company that has gotten a boost from the unusually cold winter. In particular, Disney’s theme parks and entertainment wing have benefited. The colder the winter, the more people are inclined to visit warm-weather places like Florida and California – home to Disney World and Disney Land, respectively.
People who can’t afford to shell out a few thousand dollars to fly a family of four to visit an expensive theme park for a week choose instead to take the kids to the Cineplex to watch animated Disney films. Frozen, for example, raked in more than $1 billion this winter, making it the second-highest grossing animated movie ever.
Those factors helped spur Disney to its most profitable December quarter ever, and are a major reason why analysts are forecasting a 15% boost in earnings per share this quarter. As a result, Disney shares have risen 13% in the last three months.
Few people enjoy shoveling snow or temperatures so cold it cripples their car battery. But even a deep freeze can be an opportunity to profit. By investing in companies like the three mentioned above, you can at least heat up your portfolio … if not your extremities.
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