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.

Forecast path of tropical disturbance

The first in a series of tropical disturbances coming off the coast of Africa is expected to strengthen into a tropical depression in the next 24-48 hours before becoming tropical storm Colin.  The system is forecast to head west northwest over the next 4-5 days, after that time frame there is little guidance as to where the storm will head.  The timing and strength of a high pressure that is expected to form over the eastern United States will be a major player in determining the path of the storm. Those with interests from Miami through Baltimore should pay close attention to the storm as it moves west over the Atlantic.

A Parade of Disturbances Moving Off Africa

In the wake of this first disturbance are two other strong tropical waves that have just come off of Africa.   Environmental conditions are favorable for development later in the week and like the first system, it is too early to tell the exact path and the intensity of the system(s).

Please check back with Weather Trends for more updates during hurricane season.

As we enter into August, we also enter in to the prime season for tropical storms/hurricanes in the Atlantic Ocean Basin.  Weather Trends predicted earlier in the Spring that August will begin, what looks to be, a very active hurricane season, and current computer models seem to support this forecast.  Several disturbances are set to come off the Western Africa coast and enter the abnormally warm Atlantic waters east of the Lesser Antilles.

A broad area of high pressure over the Central Atlantic which has helped to keep activity down thus far this year will begin to break down allowing more storms to form.  Locations in on the East coast and in some areas on the Gulf of Mexico coast should keep a close eye on the progression of any storms that form.

As these systems develop please turn to www.myskeye.com, as well as our twitter and facebook pages, for updates on the strength and path of the storms.

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!

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

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

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.

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.

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!