5 Businesses That Rise As The Temperature Falls

By Jean Folger | October 08, 2010 AAA
5 Businesses That Rise As The Temperature Falls

The winter forecast provided by the National Oceanic and Atmospheric Administration (NOAA) points to below average temperatures for parts of the United States, including most of Alaska, the Pacific Northwest, the Northern Rockies, the Northern Plains, the Western Great Lakes regions and the East Coast northward to New England. The cold weather coincides with the winter holidays, and while many companies expect to see an increase in sales because of the holidays, others may anticipate greater activity due simply to the cold weather. Here are five businesses that typically do well when the temperature drops. (For related reading, see 9 Ways To Save On Winter Bills.)

IN PICTURES: 8 Easy Ways To Slash Your Holiday Budget

Mountain Resorts
While some mountain resorts take advantage of the off-season by offering such things as lift-served mountain biking and scenic chairlift rides, the main event comes during the cold weather months as skiers and snowboarders hit the slopes. The colder the better since many of these resorts rely on both naturally occurring snow and machine-assisted snowmaking to provide adequate snow cover on trails and to extend the season. As long as the weather cooperates and is cold (at least at night), resorts can manufacture much of the snow that is needed to open the trails. From an economic standpoint, however, regular snowfall is best since snowmaking is costly in terms of equipment, labor and energy. Attendance is higher at mountain resorts during cold weather because the snow conditions are good. This means more business for all of the resort's attractions, including lift tickets, ski school, restaurants and lodging.

Winter Wear
"There is no such thing as bad weather, only bad clothing." This Norwegian saying rings especially true during the cold winter months. Companies that manufacture and/or sell winter weather clothing and gear are likely to see increased sales when the temperature drops and consumers prepare for the changing weather conditions. Consumers may plan ahead for average temperatures, but below-average temperatures and higher-than-average snowfall may encourage many people to purchase additional cold-weather clothing and gear, such as warm boots and down jackets.

Home Entertainment
Despite proper clothing and gear, many people prefer to spend extra time indoors during periods of cold weather. For many households, some of this time inevitably involves a well equipped home entertainment system or media center. Of households in the United States, it is estimated that close to 96% have a television, and more of these homes are moving towards high-tech home entertainment centers that integrate television, movies, music and gaming. Cold weather and an excuse to stay inside may promote consumer spending for goods and services related to home entertainment. (You know you love it, now see Why Networks Love Reality TV.)

Natural Gas
Natural gas production is fairly constant year round; however, consumer demand for natural gas increases during the winter months. According to the American Petroleum Institute, 51% or homes in the United States are heated with natural gas. Ten percent or more of the natural gas that is produced during warmer seasons is held in storage until demand increases during the colder months. The colder the weather, the greater the demand for natural gas.

Heating Oil
8.5 million households in the United States, primarily in the Northeastern states, rely on heating oil to stay warm in the cold winter months. Heating oil, along with gasoline and diesel, all come from crude oil. As such, heating oil prices are correlated with crude oil prices. Crude oil refineries have to decide what to produce and when to produce it using calculations based on current and projected supply and demand. As the colder months approach, refineries manufacture about 90% of the heating oil that is needed to meet consumer demand and draw on reserves from earlier production to supply the rest. As with natural gas, the colder the weather, the higher the demand for heating oil.

Cold Weather Welcome
It is hard to get people to the slopes when there is no snow on the ground and it is challenging to unload a huge inventory of down jackets when the weather is warm and sunny. The cold weather drives consumer demand for particular products and services; these are just a few of the businesses that welcome the cold weather because they might expect to see an increase in sales and profitability. (To learn more, see 5 Ways Winter Can Help Your Portfolio.)

For the latest financial news, check out Water Cooler Finance: The Post-Stimulus Slump.

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