Posted by: Bill Kirk, CEO
There is a growing avalanche of bad news for overall February 2010 retail industry same-store-sales. Results are announced March 4th – here are 10 reasons why they will likely come in much lower than the +2% to +3% expectations on Wall Street:
1. Snowmageddon! As the chart below indicates, February national snowfall will be off the chart and likely to crush all records for the snowiest February in 115 years. It’s tough to convince consumers to make Spring purchases when snow is all we see. THIS IS A BIG NEGATIVE!
2. The most highly correlated external factor to overall retail industry same-store-sales (SSS) is SNOW with an 84% correlation toward LESS being more favorable for higher SSS. Over the past 30 years, a snowier February results in lower than expected SSS for 82% of cases. THIS IS A BIG NEGATIVE!
3. A cold/wet/snowy February average SSS are +1.3% over the past 30 year’s vs a warm/dry/little snow February which brings much higher SSS of +6.7%. THIS IS A BIG NEGATIVE!
4. There were 21 days this February with significantly more snow than last year and the most snow before Valentine’s and President’s Day in decades. Nearly 70% of the country was covered in snow (49 of 50 states) prior to Valentine’s Day – the most on record. THIS IS A BIG NEGATIVE!
5. The Consumer Confidence Index is the 2nd most correlated external factor to retail industry SSS at 73%. While February consumer confidence came in at 46, much lower than the 55 predicted, it is down from the 56 in January. 90 is considered a good economy. THIS IS A BIG NEGATIVE!
6. The next most correlated factor is temperature (46%) with warmer being better. February 2010 is on pace to be the coldest since the 1970s (30+ years) with a 5.2F drop from last year. Every 1F colder can cost retailers up to 0.7% in lost sales. THIS IS A BIG NEGATIVE!
7. A stronger than expected January (we had that in 2010 with the +3% gain) is followed by a weaker than expected February in 63% of cases over the past 30 years. THIS IS A NEGATIVE!
8. Unemployment is at +9.7% this February vs +8.1% a year ago. THIS IS A NEGATIVE!
9. Gasoline prices are up +39% vs a year ago at $2.66 a gallon vs $1.91 gallon. THIS IS A NEGATIVE.
10. THE ONE BIG POSITIVE? Very easy comparisons to last year February SSS results which were the worst in 30 years at -4.3% according to data from ICSC. If it wasn’t for this easy comp, February 2010 would be a complete disaster; even with the easy comp results are likely to be much lower than expected!
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Bill:
After your persuasive post on the downward expectations on February SSS sales due to snowmageddon conditions, I’ve been checking the SSS reports released today (from ICSC and others) which seem to indicate a 4% increase for the month, which is actually higher than the 2-3% Wall Street expectations. Is this correct? If so, given your excellent track record, is this just one you missed this time?
Thanks for your input,
Charlie Hall
Charlie,
Good morning. Retailers for the most part were all well above expectations but many did comment that the record snow cost them 1% to 2% in lost sales. Bottom line, they overcame 9 major hurdles but they were up against the easiest February comp ever last year which was -4.3% so the +3.7% gain captured most but not all of last year’s huge losses. The expectations for March have been set very low at +2.5% by Wall Street but with the first major Spring surge of warm weather late month around Easter, retailers are poised for a blow out month with exceptional sales gains well above expectations. Why? Because they’ve had two back-to-back really bad March sales in 2008 = -2.3% and last year -5.1% due in large part to cold/snowy weather around Easter the past two years. Net-net we missed this one but Wall Street was surprised by the prior 2 strong months so we’re still up on the street!
Bill
Thanks Bill! That helps to clarify — I appreciate your follow-up comments greatly.
Charlie