Posted by:  Bill Kirk, CEO

U.S. JUNE 2010 SUMMARY:  It was the 2^nd hottest June in 18+ years for the nation as a whole with 82% of the U.S. trending warmer than a year ago along with 1,506 record high temperatures.  The Northeast had the greatest change toward much hotter weather benefiting strong double and even triple digit sales gains for items like AC, fans, auto batteries, irrigation, pest control, summer apparel, cold beverages, sun care, etc.  In the West it was a different story with the coldest June in 11 years for the Northwest along with the wettest conditions in over 18 years putting a damper on Summer category sales (see regional summary chart below):

Memorial Day week was by far the best of the holidays with the warmest holiday in 18+ years driving strong demand for must have seasonal items.  Every weekend day in June trended more favorable than a year ago for the nation as a whole.

The tropics heated up early with the earliest hurricane (Alex) in 15 years.  South Texas was within a 100 miles of this hurricane bringing flooding rains to parts of Texas and winds as high as 66 mph. 

Overall, the weather was a huge plus for retail industry same store sales (SSS) which came in at +3% according to ICSC.  Luxury did the best at +8.8% followed by Department Stores (folks flocking to the malls to escape the heat) +5.9%, Clubs +4.0%, Discounters +2.0% and the laggards Drug Stores +0.8%.  While consumer confidence plunged to 52.9 in June (down from May), it was still slightly better than last year when the index stood at 49.3, so this was a neutral factor for retailers.   Gasoline prices were also a neutral factor at +4% higher than levels a year ago.  The big positive was the very easy comparisons to last year when Retail Industry SSS were the worst ever at -5.1%.

U.K. JUNE 2010 SUMMARY: June trended as the 3^rd warmest in 17+ years for the U.K. Temperatures during the first 2 weeks of the month trended warmer than LY, while the last 3 weeks of the month turned cooler y-o-y.  Although warmer than normal, the mild temperatures of the final 2 weeks of June 2010 were no match for the blistering heat wave experienced during the end of June 2009, thus, the cooler y-o-y trends.

For the 3^rd month in a row, precipitation trended both drier than normal and last year as this was the 4^th driest retail June in 17+ years. Although drier conditions benefit footfall and outdoor products, this was not good news for the rising threat of a drought, particularly in North West England where precipitation has been the least in 17+ years for the first 6 months of 2010.

Although the 1^st week trended warmer than LY, the week actually began on a cool and soggy note, putting a damper on categories like picnic foods, grilling, pool supplies, sun care and Summer apparel over the Summer Bank Holiday weekend. Late week warmer y-o-y weather stuck around into the 2^nd week which should have provided a boost for warm weather categories. The week prior to Father’s day trended both cooler than LY and normal, dampening demand for Summer related products, however, a warm-up by the weekend was favorable for last minute gift purchases for Dad. Although temperatures turned milder for the final 2 weeks of the month, demand for volatile hot weather categories like air conditioners, fans and car batteries likely saw a dip as temperatures were not as scorching hot as LY.

G-20 JUNE 2010 SUMMARY:   It was a warmer month across much of the Northern Hemisphere, but cooler for the start of Winter across much of the Southern Hemisphere.  Russia had the greatest change toward much hotter weather driving demand for consumables.  Rainfall was excessive for the month across the G-20 with widespread flooding in SE China, SE Bangladesh, Southern France and NE Brazil.  Drought was most extreme in Israel where conditions are the driest in 90 years and the driest in 20 years across Thailand.  The drought in Thailand is having a major impact on crop yields and rice production which is expected to be well below average.  The collapse of El Nino is now giving way to a La Nina event (cooling of the Pacific Ocean) which continues to keep overall global tropical activity well below average – lowest levels in 30 years.  However, the two areas with much warmer Ocean water temperatures are off the U.S. Gulf/Atlantic coastline and across Indonesia.  This will create very favorable conditions for an active season in those regions.  The maps below show temperature and precipitation trends vs last year.

U.S. Summary Report

U.K. Summary Report

G-20 Summary Report

Posted by:  Bill Kirk, CEO

In middle May, many retailers downgraded their same-store-sales (SSS) projections into the flat to negative category as sales were suffering due to the record cold out West – COLDEST IN 20+ YEARS.  About that time, the weather turned for the better with hundreds of record hot temperatures going into the Memorial Day weekend in the South and East which made a really bad month an OK month. 

Results?  Retailers posted gains of +2.6%, in line with ICSC’s expectations.  The Clubs did the best with gains +8.7%, Luxury retailers +5.0%, while Drug Stores were the laggards at -0.7%.   This was a classic example of how many retailers downgraded their expectations to -1% but then just a week later post gains of +3% to +9% showing just how vital a role the weather plays in retail sales!  No advance look at the weather and it’s influence on retails sales = REACTION vs. using a  forward look at the weather and adjusting plans accordingly = PROACTIVE.

Below is a day-by-day summary of how May trended vs. last year for the nation as a whole (click on image for larger view):

The chart below is a regional summary for the month overall (click on image for larger view):

The maps below show the global temperature and precipitation trends (click on maps for larger view):

U.S. MAY 2010 SUMMARY REPORT – click here

U.K. MAY 2010 SUMMARY REPORT – click here

G-20 MAY 2010 SUMMARY REPORT – click here

Posted by: Bill Kirk, CEO

April Retail Industry Same-Store-Sales (SSS) were announced yesterday and they came in at +0.8% according to the International Council of Shopping Centers (ICSC) tally of major retailers.  This was above expectations of -3% to 0% yet Wall Street took this as BAD NEWS in light of the strong gains the past few months (+9% in March, +3.7% in February, +3.0% in January, +3.6% in December).

More amazing was the good old weather excuse for lower sales!  It’s 2010, and believe it or not ACCURATE weather trends can be forecast weeks, months and year-ahead.  Hundreds of larger retailers and suppliers are already being PROACTIVE vs REACTIVE when it comes to using weather as a strategic planning tool vs the good old fall back EXCUSE for lower than expected sales!  Below is WTI’s year-ahead forecast verification for the critical March-April timeframe (click on image for a larger view).  Some retailers blamed the colder weather at the end of April for lower sales but little mention of the 2,481 record hot temperatures helping sales at the beginning of the month…HMMMMM…or the 100 record high temperatures late in the month in the East and the hottest April ever in New York City.  For a detailed summary of how favorable weather was overall in April see WTI’s historical business-weather summary report (LINK HERE).

Here are some of my favorite weather quotes and profound predictions on things that would never happen but did.  Today folks still believe what Mark Twain said moons ago “Everyone talks about the weather but no one does anything about it”…but soon, just like the predictions below that were ultimately proven to be wrong so too will the myth that businesses can’t do anything about Mother Nature!

“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication.  The device is inherently of no value to us.”  Western Union internal memo 1876

“Heavier-than-air flying machines are impossible.” Lord Kelvin, President Royal Society, 1895

“Everything that can be invented has been invented.” Charles H. Duell Commissioner US Office of Patents, 1899

“I know half of my advertising was wasted…I just don’t know which half!”  John Wannamaker, Wannamaker Department Stores 1905

“ One of the few certainties in retailing is that some of the merchandise bought enthusiastically in the wholesale market, where it looks eminently saleable, will, when it reaches the store, prove stubbornly unsalable.  But despite the inevitability, buyers, like the rest of humanity, are reluctant to admit and address their errors.  They find endless excuses for the slow sale of merchandise: the WEATHER’S still too hot; the WEATHER is still too cold; Easter’s late this year; Easter was early this year; It hasn’t been advertised; the ad was lousy; the ad ran on the wrong day or wrong newspaper.”  E.A. Filene 1910 

“Stocks have reached what looks like a permanent high plateau.” Irving Fisher, Professor of Economics, Yale University 1929

“I thin there is a world market for maybe five computers.”  Thomas Watson, Chairman of IBM 1943

“There is no reason anyone would want a computer in their home” Ken Olson President & Founder Digital Equipment Corp. 1977

“ 640K ought to be enough for anybody.”  Bill Gates 1981

“Weather and Climate-sensitive industries account for one-third of the U.S. GDP or 4 trillion dollars”  Conrad C. Lautenbacher Jr. U.S. Department of Commerce 2002

“Long range weather forecasting is dart board science” Paul Knight, Professor Penn State University (Quote from the ABC 20/20 show that documented WTI’s long-range capabilities) 2008

“Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make.”  Ben Bernake, Federal Reserve Chairman 2009

“Warp speed ahead, Scotty we need more power, Captain, I’m giving her all she’s got”  My TV counterpart Captain James T. Kirk.

Contributors:  Rich Woolley, VP Operations; Michael Ferrari PhD VP Commodities; Bill Kirk, CEO

Following a lackluster Hurricane Season in 2009, the 2010 season looks to liven things up with a more active than normal season. Weather Trends International’s proprietary hurricane forecasting model anticipates 16 named storms (4 Major Hurricanes, 4 Hurricanes and 8 Tropical Storms) this is much greater than last year’s 9 named storms.

WTI identified 4 distinguishing tracking indices that will influence the outcome of this year’s hurricane season:

1.Cool Gulf of Mexico water temperatures will suppress activity early in the season but waters warm in August increasing activity.

2.Upper level wind shear will suppress activity early in the season but this will abate by middle August allowing systems to develop more frequently.

3.El Nino (warm sub-tropical Pacific) will weaken allowing Atlantic activity to increase for the later half of the season (middle August – late October).

4.Much less Sahel dust from West Africa (a plus for mid season development).

The three years with similar atmospheric and oceanic conditions to 2010 which were incorporated into the WTI model to forecast patterns and tendencies of tropical systems this year.   These similar years were 1998 (best fit), 2003 and 2008.  While the beginning of the season (starts June 1st) will be rather quiet, expectations are for the season to become more active in mid to late August. Once the storms start to develop there will be several key areas to watch for possible land falling hurricanes this year. 

WTI expects the parade of activity in the tropics to really accelerate in late August through early November. The possibility exists for 1 to 2 active storms per week during this period with a significant number of Cape Verde storms that form close to the Cape Verde Islands off the west coast of Africa and then become hurricanes before reaching the Caribbean. These Cape Verde storms will pose the biggest threat to coastal North Carolina which WTI has highlighted as a high risk area this hurricane season.

The Gulf of Mexico will be another area to watch for storm development later in the season with the highest probability of impact on the western coast of Florida, the Mississippi Delta or the central Texas coastline.  The risk to oil drilling platforms in the North Central Gulf of Mexico and production facilities along the Gulf Coast is higher than average. Currently, the coastal waters off of the eastern United States and the Gulf of Mexico are running several degrees Celsius below normal. Although the coastal U.S. waters are cool, the temperatures across the tropical Atlantic from Africa to the Caribbean, are warmer than normal. These warmer waters will help to feed energy to any early season storms that may form, but these storms will struggle to maintain strength as they encounter shear and colder waters closer to the U.S. As El Niño erodes this summer so too will the shear in the Atlantic and cold waters will begin to warm. A neutral ENSO is expected to be in place by late August, which is why WTI anticipates the season to blossom in late summer.

In 2006 a major pattern change in the Pacific Ocean very likely contributed to plummeting hurricane activity across the globe.  This 32-year Pacific Ocean cycle called the Pacific Decadal Oscillation (PDO) cycle is a long term ocean temperature shift from warmer ocean temperatures to colder.  This current cold PDO phase is more similar to that of the middle 1940s to the middle 1970s.  It’s not a coincidence that when the Pacific was in the warm phase (1970s to 2006) so too was the planet and tropical activity. 

But now that we’re in the start of the cold cycle its very evident that the Pacific is having an impact all across the globe with colder global temperatures the past few years, larger polar ice caps in years, less tropical activity across the globe.  However, the Atlantic Basin is still in the middle of a warm ocean phase (AMO) so active seasons are still possible for the U.S. in the coming years.  While a season like 2005 and the early 1990s is unlikely in 2010, there will be an uptick in activity as the weakening El Niño will allow more development than the past 5 years.

2009 SUMMARY: Last year WTI had forecast a near average season in 2009 with the forecast of 10-13 mainly  “fish storms” that would stay off the East Coast due in large part to a moderate to strong El Niño. The last hurricane of the 2009 season was Ida which occurred very late in the season (November 4th-10th) which demolished 80% of homes and schools in Nicaragua but no casualties reported. In El Salvador, at least 124 deaths were reported due to flooding rains and there was one death in the United States along the Mississippi River attributed to the storm. Ida made land fall as a weaker Tropical Storm near Mobile Alabama and was the first November hurricane in the Gulf of Mexico since 1985.  Overall there were 9 systems – most very weak Tropical Storms. Visit www.MYskeye.com for in-season hurricane alerts and tracking information.

Posted by:  Bill Kirk, CEO

After three very disappointing Easter periods the past few years with record cold and snow, retailers are about to lay a golden egg this holiday weekend (the most important period in Q1). 

The weather will be nothing short of exceptional with the NORTHEAST having the most ideal conditions – warmest and driest in 20+ years for the Easter weekend.  The last time Easter weather was this ideal was in middle April 2006 when 1,543 record high temperatures were set across the country – this year is even better in the Northeast!  In 2006, Easter weekend temperatures in the Northeast averaged 73°F, 2007 38°F, 2008 46°F, last year 57°F and this year near 80°F!  This will result in strong double and even triple digit sales gains over last year for Spring seasonal items like Easter seasonal categories/candy, fans, garden items, grills, deck stains, car wash/wax, bug sprays, allergy medications, suncare, apparel, sandals, cold beer and beverages, outdoor BBQ grilling food categories, ice cream snacks and more.

Across the rest of the country the holiday weekend (Friday – Sunday) conditions are still favorable for the Eastern half of the U.S., but a bit colder/wetter in the West.  Here’s the regional summary:

 SOUTHEAST:  Warmest in 4 years (average high temperatures 81°F) and 57% drier than last year.

 SOUTH CENTRAL:  Warmest in 4 years (average high temperatures 75°F) but on the damp side with the threat for widespread thunderstorms.

 NORTH CENTRAL:  Warmest in 4 years (average high temperatures 62F) with some rain South.

 NORTH ROCKY MOUNTAINS:  11 degrees colder than last year but a little drier than last year – Sunday is the nicest day.

 SOUTH ROCKY MOUNTAINS:  Cold start but warmer finish by Sunday.

 SOUTHWEST:  Coldest in several years but a warm up by Sunday.

 NORTHWEST:  6 degrees colder than last year and the wettest in 5 years so this is the least favorable region this weekend.

Nationally, the 5-week retail calendar March is on pace to be the warmest and driest in 3 years with the least snowfall in 20+ years (snowfall down 61% vs last year).  Retailers are coming off the worst March ever last year when retail same-store-sales (SSS) were down 5.1% according to ICSC’s tally of retailers, so the combination of easy sales comparisons and exceptional Easter weather will bring a lot of golden eggs when retail sales are announced April 8^th!  Expectations on Wall Street are +3.0% to +3.5% while WTI expects retail industry SSS gains to be much stronger at +4.5% to +6%.  The 4^th straight better than expected month for retailers!