Christmas traditions are better in Europe (Part XVII):

Jólakötturinn is tied to an Icelandic tradition in which those who finished all their work on time received new clothes for Christmas, while those who were lazy did not. To encourage children to work hard, parents told the tale of the Yule Cat, saying that Jólakötturinn could tell who the lazy children were because they did not have at least one new item of clothing for Christmas—and these children would be sacrificed to the Yule Cat.