• This is a partial transcript from "Your World with Neil Cavuto," July 25, 2005, that was edited for clarity.

    NEIL CAVUTO, HOST: Don't look now, but my next guests say that if the heat wave (search) continues indefinitely, it will take a toll on consumer spending.

    Joining us now, Howard Davidowitz (search), the chairman of Davidowitz & Associates, and senior business correspondent Terry Keenan.

    Terry, end it with you, begin with you. Can you see it having a retail effect?

    TERRY KEENAN, FOX NEWS SENIOR BUSINESS CORRESPONDENT: Well, you know, I shop in any temperature.

    But I think it will over time. Now, Wal-Mart (search) is sticking with its sales forecast. And last time we had a big heat wave, a couple yeas ago, we saw online spending picking up. So, that may, you know, take some of the heat off the retailers. But I think if it lasts for a while, it will have an impact.

    CAVUTO: Yes. I would imagine that cooler weather in stores and malls actually helps them.

    HOWARD DAVIDOWITZ, CHAIRMAN, DAVIDOWITZ & ASSOCIATES: This hot weather affects the mood in a negative way.

    We're going to have a soft back-to-school. Electronics are going to drop $1 billion. We're going to do a little less this back-to-school than we did last year.

    CAVUTO: Why is it going to drop that much?

    DAVIDOWITZ: Because nothing is forever, Neil. Electronics have been driving retail sales three years. Eventually, nothing is forever. That's going to be a big drop.

    CAVUTO: So, this is beyond just heat.

    DAVIDOWITZ: It's beyond just heat.

    CAVUTO: Yes.

    DAVIDOWITZ: But it's a part of the whole picture.

    Look, we're coming off a GDP growth, second quarter, 3.5 percent. That's pretty good. But I'm looking for about 3.2 percent in the third quarter, some mellowing. And I think energy is going to be a part of that.

    CAVUTO: The argument, Terry, has been always been, if people have to shell out more for air conditioning, they're going to shell out less for things at stores.

    KEENAN: Yes, same thing at the gas pump. And now they're going to see their utility bills pick up.

    The other thing that's interesting that has been happening, in a demographic sense, in the last couple of years is, as more people move to the Sun Belt, the back-to-school season starts earlier. So, retailers are kind of squeezed between getting rid of all their summer merchandise and getting the back-to-school stuff out there. And I think, this year, it's going to be an even tighter squeeze.

    CAVUTO: Who is benefiting in this environment, besides air conditioning stores?

    (LAUGHTER)

    DAVIDOWITZ: Well, I think Wal-Mart is going to be a huge winner. And I think the biggest losers are going to be electronics sellers, like Radio Shack and Best Buy.

    (CROSSTALK)

    CAVUTO: Why would Best Buy be included, if it sells air conditioners and stuff like that?

    DAVIDOWITZ: They sell air conditioners, but they make most of their money on electronics.

    CAVUTO: Which you argue is coming down.

    DAVIDOWITZ: Which I argue is coming down. It's a good short, but I look for drug chains that are the most convenient, right in the neighborhood. You don't have to go far. Look for Walgreens and CVS to report explosive sales. They sell water and everything else. And they are closest to the consumer.

    KEENAN: And, you know, it's interesting. The New York Times did this survey where it showed that the more expensive stores are cooler than the less expensive store.

    (CROSSTALK)

    CAVUTO: Have you noticed that?

    (LAUGHTER)

    KEENAN: That's why I go to the more expensive ones, yes.

    CAVUTO: Howard notices.

    KEENAN: But they actually took thermometers into these stores. And Barneys is cooler than Kmart and, you know, Bergdorf is cooler than Wal-Mart. So, it might help some of the upscale retailers.

    CAVUTO: Now, you know where I get those felt matador paintings. That was indeed the case. All right, that was the case.

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