Mind the GAP: Why the Retail Turnaround Story is About to Hit a +18°F Wall
Between an Atmospheric River washout in the West and record Southern warmth, the Christmas clearance cycle is starting early.
G2 Weather Signal™ — Flash Report
Paul Walsh · December 21, 2025
Christmas week check-in.
I spent time in stores across the Philly suburbs over the past few days — the kind of on-the-ground read that matters most when the calendar, inventory, and weather are all converging.
The pattern was consistent.
Heavy coats were largely absent. Not featured, not stacked, not fighting for floor space. Whether they sold through earlier or never arrived in depth is almost beside the point at this stage — the signal is the same: that category isn’t driving incremental volume right now.
What was everywhere were sweaters and fleece. Deep racks. Full size runs. And unmistakable markdown pressure.
Promotions weren’t surgical or selective — they were broad, aggressive, and clearly designed to move volume before the calendar turns.
My wife was thrilled to find a deal at Old Navy — a sweater ticketed at $58 marked down 50%, with an additional military discount layered on top. Great outcome for the shopper. Clear signal for margins. Not so great for Old Navy (aka NYSE: GAP).
This is what late-season clearance looks like when winter shows up unevenly — and when the selling window for cold-weather apparel is already closing.
Signal Summary
The Northeast Dividend is Paid: Cold-weighted markets have captured peak holiday margins; the focus now shifts to clearance efficiency.
The Sunbelt Squeeze Intensifies: Record warmth (+15°F to +18°F) across the South creates a significant clearance comp hurdle for BOOT and DDS, as they attempt to anniversary last year’s severe winter weather and historic snow.
Traffic vs. Conversion: While holiday travel remains high, the West Coast “Rain Trap” and Southern heat are decoupling foot traffic from actual seasonal sales.
Inventory Risk: Off-price and mid-tier apparel (GAP, ROST) faces growing markdown pressure as weather misaligns with seasonal assortments.
The Setup
This week marks the final full operating window before year-end closeouts and early Q1 resets. The national signal remains warm—but the real story is regional divergence. What matters now is where weather is misaligned with inventory and demand expectations, particularly for apparel-heavy, off-mall formats.
Last Week Summary: Super Saturday (Week Ending Dec 20)
The Weather: Population-weighted cold delivered the only meaningful seasonal support for the Northeast and Midwest. While the West stayed mild, the Northern tier provided the visual validation and cold floor required to drive conversion on high-margin seasonal gear during Super Saturday.
Select Retailer Impact:
BURL / DKS (Positive): Super Saturday Winners.
Northeast concentration allowed these names to capture peak holiday margins. Field audits confirm DKS effectively sold through Technical Outerwear at full price.
GAP (Old Navy) (Negative): Demand Substitution.
Despite the cold in the Northeast, our audit revealed Old Navy was highly promotional (50% Off + BOGO). Shoppers prioritized Heavy Weather Utility over Old Navy’s mid-weight fashion layers.
From here, the analysis turns forward-looking. The whole outlook—this week, next week, and extended—is free to all subscribers through December 2025. After that, continued access will move to G2 Weather Signal™ — Premium.
This Week: The Christmas Sprint (Week Ending Dec 27)
The Weather: The final sprint to Christmas Eve is defined by a moderating cold regime in the East and an intensifying Heat Dome in the South.
As I’ve noted previously regarding the Columbia Sportswear CEO’s observation, retail stock prices often react to the weather in Manhattan, which currently stays just cold enough to keep sentiment high.
Columbia Sportswear CEO: Our stock price reacts to weather in Manhattan Correlation or causation? I take a look ...
However, beneath that surface sentiment, the regional fundamentals in the South are deteriorating.
Select Retailer Impact:
BOOT / DDS (Critical Risk):
In markets like Houston and Dallas, temperatures in the 70s and 80s in the final days before Christmas are suppressing utility buying for boots and heavy workwear.
ROST / GAP (Execution Risk):
The California Washout. A series of Atmospheric River systems is forecast to drop up to 7+ inches of rain across Northern and Central California through Christmas Day.
Expect a significant traffic disruption in high-volume West Coast markets during the critical post-Christmas cycle.
Next Week Outlook: The January Reset (Week Ending Jan 3)
The Weather: The thermal ridge expands nationally, effectively ending the window for late-season winter demand.
Double-digit anomalies dominate the map, with the South (+18.7°F) seeing a record-level heat ridge and the Northern Plains (+16.6°F) facing a demand void.
While the Atmospheric River risk recedes in the West, the Northwest remains a wet outlier (2.8”).
However, for the majority of the U.S., the persistence of warmth is now the structural constraint on performance.
Retailer Impact:
ROST / BURL / TJX (High Risk): Inventory pressure replaces traffic as the primary headwind. With heavy concentration in the overheated South and West, these off-mall names face a significant misalignment between their heavy-winter assortments and the realized environment.
KSS (The Pivot): The expansion of unseasonable warmth into the Ohio Valley (+13.0°F) and Upper Midwest (+11.2°F) creates a sharp pivot from the support they enjoyed earlier in the month, raising immediate markdown risk for post-holiday clearance.
WMT / DG (Relative Insulation): The essential-category bias and non-seasonal mix provide a buffer against the warm-weather demand void currently hitting discretionary apparel.
G2 Weather Intelligence Focus: BJ’s Wholesale
BJ’s earns the top spot this week because its business model is essentially a play on Northeast suburban density.
While the South and West deal with the heat dome and Atmospheric River, BJ’s has operated in a nearly perfect seasonal window for high-margin hardlines and grocery.
They aren’t just selling technical outerwear—they are selling the energy and food consumables that move when it’s 30 degrees in Boston and Philadelphia.
Understanding the G2 Exposure Index
The G2 Weather Retail Signal™ Exposure Index is a commercially weighted classification system designed to isolate the impact of weather from fundamental business performance.
While generic weather reports focus on raw temperature and precipitation data, our Index filters current and probabilistic weather data through a retail lens.
We evaluate how regional weather anomalies intersect with a retailer’s specific geographic footprint and seasonal inventory mix to determine the net impact on margin and turnover.
The following ratings represent the delta between business as usual and weather-driven reality. By identifying where a retailer’s inventory is structurally misaligned with the current environment, the Index serves as a leading indicator for markdown risk and margin compression well before they appear in quarterly filings.
Exposure Index Definitions
Bullish: Strong alignment between weather and inventory. Weather conditions drive high-margin conversion and reduce promotional needs.
Neutral: Weather is negligible; regional wins are offset by losses elsewhere.
Insulated: Product mix (essentials/consumables) is structurally shielded from weather shifts.
Bearish: Significant misalignment. Adverse conditions suppress demand and increase the probability of markdowns.
Today’s Exposure Index
Extended Outlook: The 6–30 Day Signal (Jan 4 – Jan 20)
Probabilistic Outlook: Persistence of the Ridge The 6–30 day probabilistic maps from NOAA and the European ensembles confirm that the “January Thaw” is evolving into a semi-permanent thermal block.
Temperature (60–80% Probability of Above Normal): The probability of sustained warmth is highest across the South and Central Plains. For BOOT and DDS, this represents a “Duration Trap”—the longer these temperatures persist, the more certain the necessity for aggressive, margin-eroding markdowns on high-inventory categories.
Precipitation (Wetter than Normal - Northwest/Rockies): While the Atmospheric River moves inland, the wet bias shifts toward the Intermountain West. This offers minor “Utility Support” for names like DKS in those specific metros, but it is insufficient to offset the national warmth.
Traders often mistake a “warm week” for a “bad quarter.”
The G2 Weather Signal indicates that the Persistence of the Ridge into mid-January effectively kills the late-season rescue. Retailers who missed their December window (like, potentially, GAP and ROST) are now entering a clearance cycle with zero urgency to move seasonal units.
Appendix —
Regional Weather Data
Source Note: This analysis is fueled by the data engine at WeatherMapping.com. While most of Wall Street relies on lagging national averages, we use WeatherMapping’s regional precision to find the alpha hidden in the local forecast.
Bonus Video —
Last year on this date (+/-), I was live on FOX Weather and simulcast on FOX Business to discuss why I was bullish for holiday sales based on the weather signal. While others were cautious, my approach showed that a delayed start to the 2024 winter selling season had created a “coiled spring” of pent-up demand.
The market eventually caught up to my math.
The NRF confirmed that 2024 holiday sales grew an unexpectedly high 4% to a record $994.1 billion, blowing past every major forecast.
WASHINGTON – Data released today by the U.S. Census Bureau shows that core retail sales during the 2024 holiday season grew an unexpectedly high 4% over 2023 to a record $994.1 billion, coming in ahead of the National Retail Federation’s forecast, NRF said.
You can watch the full video here —
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