MW Cooler December weather expected to boost sales at Home Depot, Lowe's and more

By Ciara Linnane

Mizuho is expecting management teams to start highlighting rising revenue in the coming weeks

Retailers, including Home Depot Inc. $(HD)$, Lowe's Cos. $(LOW)$ and Tractor Supply Co. Inc. $(TSCO)$, are expected to start highlighting a pickup in revenue in the coming weeks, after the weather turned significantly cooler in December.

That's the view of Mizuho analysts in a note reviewing under-the-radar consumer-spending data points and coming catalysts under lead analyst David Bellinger.

Car-parts retailers, including AutoZone Inc. $(AZO)$, Advance Auto Parts Inc. $(AAP.AU)$ and O'Reilly Automotive Inc. $(ORLY)$ are also expected to benefit.

Temperatures were down 8 degrees in the West North Central region in the week ending Dec. 21 vs. the year-earlier period, according to National Oceanic and Atmospheric Administration data cited by Mizuho. They were down 4.7 degrees in the Upper Midwest, down 2.2 degrees in the Northeast and down 2.7 degrees in the West.

Warmer-than-average temperatures in October and November had weighed on sales of winter items, including warm clothing, boots and outdoor gear. For home-improvement retailers, it also led consumers to push back certain outdoor projects and avoid seasonal products.

The research team also highlighted the Mastercard Holiday SpendingPulse update, a consumer survey that found holiday sales grew a solid 3.8%, driven by strong e-commerce sales during promotional events, including Black Friday and Cyber Monday.

The survey found online shopping up 6.7% from the same period a year ago. The survey measures in-store and online sales representing all payment types. It is not adjusted for inflation, although inflation has had a major impact on the consumer since the pandemic period and has many seeking value at every turn.

"The holiday shopping season revealed a consumer who is willing and able to spend but driven by a search for value as can be seen by concentrated e-commerce spending during the biggest promotional periods," said Michelle Meyer, chief economist at the Mastercard Economics Institute, in prepared remarks.

See: Holiday spending rose 3.8%, with apparel and restaurants strong, Mastercard says

Additionally, the McKinsey Survey, which tracks consumer confidence, increased in the fourth quarter with nearly half of all respondents indicating optimism in the current macro environment.

"Conversely, while consumers remain optimistic, the improvement in confidence is not reflected in their intent to increase discretionary spending, with the share of consumers delaying purchases or trading down remaining high, although improving year-over-year," the analysts wrote.

The SPDR S&P Retail exchange-traded fund XRT was down 2% Monday in a broader rout of stock markets on a volume-thin interholiday trading day. The ETF has gained 9% in 2024, while the S&P 500 SPX has surged 23.5%.

-Ciara Linnane

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December 30, 2024 12:06 ET (17:06 GMT)

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