U.S. AUGUST 2010 SUMMARY:  More of the same with the long, hot Summer continuing for much of the country.  It was the hottest August in 15 years and driest in 4 which is a big negative for back-to-school and early Fall categories.  While the Eastern half of the U.S. baked, it was actually the coldest August in over 20 years for California as their very cool Summer continued (see regional summary chart below).

While a warm August is historically favorable for overall retail same-store-sales (SSS), it’s not favorable when the prior months were so hot leaving little Summer merchandise left to sell.  This had consumers flocking to the beach, lake or pool with few, if any, triggers to put them in the Fall mindset and will likely lead to retail industry sales coming in on the low end or below expectations when results are announced Thursday.  There were 5 tropical systems in August (1 Tropical Depression, 2 Tropical Storms, 2 Major Hurricanes) but only Earl was threatening the U.S. late in the month with little impact to the retail calendar August.  A day-by-day summary of August compared to last year is depicted in the national summary chart  below.

U.K. AUGUST 2010 SUMMARY: The warmth and sunshine of July quickly faded in August, mainly for the southern U.K., as temperatures trended the coldest in 3 years. Rainfall totals tied 1999 for the 3^rd wettest retail August in 18+ years with southern and eastern England and Wales seeing the greatest change towards wetter year-on-year weather. Flash flooding was reported across England and Wales following several heavy rain events with rainfall rates around 2.5cm per hour in some areas. Drier weather could be found to the north, in Scotland and in Ireland. Cooler y-o-y conditions persisted throughout the month with all 4 weeks of the retail August trending colder than last year.

Cool, rainy and windy conditions made the final full month of Summer feel more like Autumn and helped to spur demand for Autumn categories, especially in England and Wales. The weather was very favorable for sales of jeans, lightweight jackets and boots as consumers got into the Autumn mindset.  Open air shopping centres and outdoor categories would have struggled this month in the southern U.K. as very wet weather kept consumers indoors. The week prior to the Summer Bank Holiday was the coldest and wettest of the month which was detrimental for Summer consumables and clearance like cold beverages, picnic foods, outdoor leisure and DIY  items.  Meanwhile, drier y-o-y weather in Scotland and Ireland was excellent for outdoor categories. Initial reports indicate a rise in consumer confidence for the retail month of August, which will help to boost overall retail sales, although confidence remains well below the long-term average. Autumn-like weather was another positive for the month as it got Autumn seasonal categories off to a healthy start. Easy comparisons to last year will also help overall U.K. retail sales to come out on the positive side.

G-20 AUGUST 2010 SUMMARY:  It was the warmest in 7 years and 2^nd wettest in 20 for the G-20 countries as a whole.  Turkey and Russia showed the greatest changes toward much hotter weather with record heat while Argentina showed the greatest change toward much colder Winter weather.  The big winners from the heat across much of the Northern Hemisphere were the beverage companies who can get a 2% bounce in sales for every 1F warmer year-over-year.  There was some cold weather in Central Europe benefiting early Autumn category sales but overall back-to-school, back-to-work and early Autumn category sales suffered.  The extreme heat also created spikes in wheat and corn prices while extreme flooding in Pakistan caused sugar and cotton prices to spike as well.  See global summary temp/precip maps below. Overall global tropical cyclone activity was near a 30-year low but the Atlantic basin was clearly becoming very active with 5 systems developing.

U.S. Summary Report

U.K. Summary Report

G-20 Summary Report

Posted by:  Bill Kirk, CEO

A couple of years ago I was fortunate to be on General Schwarzkopf’s TV show on CNBC when he asked a good on the spot question…”When will you launch a consumer web site and share your year-ahead forecasts with everyone?”  Well that answer is finally NOW!

Yesterday at 3:59.59 EDT Weather Trends International launched:

 http://beta.weathertrends360.com/

WTI’s has a long track record of delivering hundreds of millions of dollars in ROIs to our big customers over the past 8 years for better business in any weather – now ANYONE can plan vacations, golf outings, weddings or just a back yard BBQ with a little less weather risk. 

 So, register today it’s FREE.  Give us an e-mail we’ll give you the world.

Warmest Regards,

Bill

P.S.  Here is some of what you’ll see on the inside: hour 1 to day 360 forecasts along with some cool global animated forecasts for things like a 1-15 day snowfall forecast everywhere in the world!  Oh boy, kids everywhere can now plan their snow days look out Mom and Dad!   Enjoy.

Posted by Bill Kirk, CEO

Retailers should cherish the +3.0% same-store-sales (SSS) gains in June as the rest of Summer school, back-to-school and the first semester are going to prove VERY CHALLENGING FOR RETAILERS!!!  Here’s why:

So far in 2010, retailers have been up against very easy sales comparisons to last year when retail industry SSS averaged -4.5% – the worst ever.  So, the +3.8% pace so far this year is pretty good but not great since the +9% in March, when the Easter weather was the best in 20+ years, skewed the average.  But in the months ahead, those soft comparisons to last year become much more difficult with a +0.2% SSS trend last year in Q3 (Aug – Oct).  The simple math suggests we’re headed for flat to negative SSS trends in Q3 2010 and that’s before we factor in all the other hurdles below.

The next BIG TEST is the weather.  Last year, the nation had the coldest back-to-school/Fall season in 7 years with the Northeast the coldest in 12 years and some early, big, snow storms in October across the U.S.  This helped retailers post the much higher than expected sales gains in Q3 as consumers flocked to buy seasonal must have items to brave the elements.  The weather/sales pattern is more similar to 2006-2007 when we went from a cold Fall in 2006 (retail sales strong at +5.5%) to a very warm Fall and retail sales stumbled to just +1.8%.

Unlike last year, this Spring-Summer has been much hotter across the U.S. pushing Summer seasonal sales up earlier than last year when Summer heat didn’t even arrive until August in the East after the coldest June/July on record for parts of the Northeast.

The chart below shows WTI’s projections of a continued much hotter year-over-year pattern through early November!  Consumers have already bought all the air conditioners, fans, shorts, t-shirts and sandals they need, so now it’s all about a weather trigger to end the Summer mindset to spur those Fall purchases.  Other than a brief blip in September, the quarter ahead will prove to be very challenging weather wise.

So what else could possibly go wrong for retail sales this Fall – maybe a mid-term election year!  Ordinarily, presidential election years bring higher risk to Fall retail sales, but seldom does a mid-term do the same unless the economy is weak and consumer sentiment is weak.  A hot October with a hot election spells “F” for October SSS as we would expect the “CNN effect” on this year’s election to create some uneasiness.

Now lets throw in some disruptions to store traffic from an active hurricane season.  As the blog posts below suggest, WTI and everyone else expects a parade of storms and land falling hurricanes from middle August to October.  WTI research suggests land falling hurricanes can cost the industy 1/2% to 1% in total SSS.  We had no impacts last year, so this will be a more disruptive Fall.  The only winnners in a Summer-Fall like this might be the home centers that benefit from an extended outdoor season.

What about consumer confidence?  Historically, the consumer confidence index correlates to a pretty respectable 42% relationship to July retail industry SSS – higher confidence, higher sales…lower confidence lower sales.  Since this index is again plunging  back to 2009 levels, things don’t look good for July. But this index shows less and less importance through the Fall with the correlation falling to 30% in August, 12% in September and 4% in October as the weather is the main driving factor to retail sales.

Gas prices don’t historically have much impact on retail sales unless they’re over $4, but this too is up 10% over last year, so it certainly doesn’t help put anymore money in consumer’s pockets.

The cooling season has been record setting for parts of the country with the Northeast off to the hottest Summer in decades.  Residential cooling bills are up 30% to 150% further impacting discretionary income.  Northeast consumers are just about to get those first shocking bills in the mail!

So what do consumers have to say about spending this Fall?  According to Marketing for Moms, a June 2010 survey suggests they’ll cut back by 12% on back-to-school items this year, especially on clothing.

All in a all a “D-” might be wishful thinking this back-to-school/Fall season!