G2 Weather Intelligence

Mucho El Nino

Mike Halpert, deputy director of the Climate Prediction Center.  Hosted by Dave Iverson.

A thoughtful and balanced discussion on El Nino.  Listen in if you've a got a few minutes to spare.

Thanks to Angelo Quagliata for forwarding this to me.

- Paul

Train Versus Tornado

June 2009 Comparable Store Sales - Now To Find Quality of Earnings

Following is Richard Hasting's (Consumer Strategist for Global Hunter Securities) take on June retail sales in the US.

Click here for a copy of the full report which includes detailed company-level statistics as well as input from G2 Weather.

 
June 2009 Comparable Store Sales: 
Estimates Getting Easier – Now To Find Quality of Earnings

Summary:

June 2009 retailer comparable store sales reflected a variety of influences, with some retailers surprising with strong sales such as TJX, while others especially teen-oriented specialty apparel retailers struggling. We cover the day’s data in detail in the PDF available online here.

Highlights:

Department stores and off-price results slightly better than expected. We like to bundle department stores and off-price retailers into the same data pool due to similar merchandising and brands. Results in June 2009 indicated slightly better than expected results at certain department stores and better-than-consensus results at TJX Companies (TJX) (led by the MarMaxx division) and Ross Stores (ROST). Earnings quality in off-price retailing is much more transparent than department stores, thus we like the off-price retailing actual results today for earnings quality through at least Q2.  

Teen unemployment an issue. We cited teen unemployment in our June 2009 Comp Store Sales Preview (released earlier this week). Since we have every reason to believe it is likely to worsen, then we would be cautious on this subgroup going into the critical Back-to-School buildup. We make reference especially to the developing trend in the difference between the current month’s comp % and the fiscal year-to-date comp %. These widened sharply at Hot Topic (HOTT) by 10.2 percentage points, and at covered company, Buckle (BKE, a GHS Research covered name) where the spread widened by 5.6 points. We would be monitoring Aeropostale (ARO) carefully in the next two months to see if this spills over to ARO. 

Target (TGT) raising Q2 guidance but quality of earnings is an issue. Target missed comps estimates of -5.8% with a -6.2% actual comp and then raised Q2 guidance “through better than expected gross margin rate and continued expense discipline in our retail segment.” Our understanding of “gross margin” includes our understanding of supply chain; that suppliers are a major opportunity to reduce cost of goods sold. We therefore are inclined to interpret this as something other than product-specific margin growth – especially since TGT did not mention specific product lines as a source of margin expansion, and concurrently cited “expense discipline” thus reinforcing our concerns about quality of earnings.

Weather’s impact to remain an issue perhaps through September. Conversations this week with Business Weather Consultant, Paul Walsh of G2 Weather Consulting, suggests that the unfavorable weather that hit the Northeast the hardest during May and June could persist through September 2009. Please refer to his additional remarks on Page 13.

Consumer weakness hitting the entire intermarket system. We would not stop at comparable store sales as an end in itself: the consumer’s overall weakness restrains energy prices, thus hitting other markets and other stocks in other sectors. Sector rotation strategies remain problematic for as long as this effect remains. Refer to our look at the XLY/XLP ratio and gas prices on Pages 17-18 of this report

 

June 2009 Retail Sales Swamped by the Weather; July Outlook Similar

 
Demand for summer seasonal merchandise was down significantly in June 2009 across the three largest population centers in the US — the northeast, midwest and west coast markets.

Hardest hit was the northeast where persistent rain (>20 days during the month) and abnormally cold temperatures (coldest in 10 years) led to a dramatic year-over-year decrease in demand for summer seasonal items.  For perspective as to how dramatic the impact was on summer-time businesses, the Long Island Press described the sales environment this way: 

“For seasonal business owners on Long Island, it is the weather that affects the balance sheet, and June 2009 was the collapse of Enron, the housing market and Bernie Madoff all rolled into one.”
 
The Bottom Line: Long Island’s Economy Needs Sunny Skies, June 25, 2009

From a sector perspective, the biggest negative impact will be on specialty apparel, department stores and, to a lesser extent Mass merchants.  The big box home center retailers (HD and LOW) will benefit from the generally great growing conditions in the northeast which are compelling purchases of relatively inelastic lawn and garden care merchandise.

The extreme heat in the southeast was, on a macro scale, a neutral to slightly negative impact on the month as the correlations to heat and sales in June in those areas are negligible and there may some negative traffic impacts.  

For July, the persistent pattern of seasonally cool and wet conditions will continue in the northeast and Midwest and abnormal heat will continue in the south and southwest.  These conditions will continue to put price and margin pressure on apparel retailers -- as they struggle to overcome the weak demand environment with price incentives -- and will continue to fuel demand for home center/lawn and garden retailers.

Communicating Climate Change Part 3: Can Democracy Survive Complexity?

Communicating Climate Change Part 2: Media and Climate Change

How to Turn Green into Green ($)

Communicating Climate Change Part 1: Hedging our Bets

From Discover magazine, following is Part 1 of a series of 5 video interviews of Stephen Schneider.

About Stephen:  he is a senior fellow at the Woods Institute for the Environment at Stanford University.  He assesses ecological and economic impacts of human-induced climate change to identify potential political and technological solutions. He has been a principal member of the Intergovernmental Panel on Climate Change (IPCC) since 1988. In 2007 he joined four generations of IPCC authors, including Easterling, in receiving a Nobel Prize for their groundbreaking work.

Spend 2 or 3 minutes and listen to each snippet -- fascinating and thoughtful perspective on communicating the climate change.

Sex, Drugs and the Weather Channel?

"...the network’s advertisers prefer viewers who are awake."

Not sure if this is a direct result of the NBC takeover or if the folks at TWC are just "ready to rock" but, per a Friday story in The Atlanta Constitution,  The Weather Channel is ditching the elevator music and replacing it with rock and roll.

Here's the story:

Weather Channel turns to rock

By Jeffry Scott, The Atlanta Journal-Constitution, Friday, July 03, 2009

The drippy smooth jazz that for years has played in the background of the Atlanta-based Weather Channel’s “Local On the 8s” segments has been replaced with soft rock songs people can actually hum instead of going numb.

“I think we’ve been doing an injustice to our viewers playing, for the lack of a better word, elevator music on the segments for all these years,” said Geoffrey Darby, the cable network’s new executive vice president of programming, Thursday.

The old sound was so popular, the network released a CD of “Weather Channel Smooth Jazz” that went to No. 1 on Billboard’s Current Contemporary Jazz Album Chart. But all that smoothness let the programming slip too far into the background. This wasn’t great for the audience or the network’s advertisers who prefer viewers who are awake.

“People would have it on but they wouldn’t be watching and they wouldn’t be listening,” said Darby, who pushed for the change after joining the network in February. “We wanted music that would get their attention —- and this has.”

Now, instead of hearing Spyro Gyra in the background while the announcer is intoning the latest local update (“Sunny and 75”), listeners hear tracks from the Rolling Stones (“Can’t You Hear Me Knocking”).

Darby said the new sound can’t be thematically intrusive. So don’t expect the Doors’ “Riders on the Storm” with the next tornado alert.

And don't expect  Iggy Pop and the Stooges' classic, "Search and Destroy." 

Then again, if ratings slip, who knows?

Rock on, Weather Channel!

Photo courtesy of Lidal-k

In New York City, Number of Killings Rises With Heat

"What can you expect from a town that's shut off from the world by the ocean on one side and New Jersey on the other."  O. Henry, Gentle Grafter: A Tempered Wind (1908)

Following is the companion piece to the July 3rd article  In New York City, Fewer Murders on Rainy Days.

The bottom-line in New York:  the most dangerous time to be in the city is during summer-time heat waves.

The most dangerous place:  Brooklyn.

At G2 Weather, our focus is on the influence of the weather and climate on consumer (aka human) behavior and business.

These articles from the Times are stark examples of the fundamental impact of the weather and seasonality on the most basic and destructive human trait -- violence and murder.

Extended excerpt below. 

Read the article in its entirety here:  In New York, Number of Killings Rises With Heat.

A young boxer was shot dead outside a Bronx bodega at 3:30 a.m. on a Saturday last August. Weeks later, a 59-year-old woman was beaten to death on a Saturday night on the side of a Queens highway. On the last Sunday in September, violence exploded as five men were killed in a spate of shootings and stabbings between midnight and 6 a.m.

Seven homicides in New York City. None connected in any way but this: They happened during the summer months, when the temperatures rise, people hit the streets, and New York becomes a more lethal place.

There were more homicides in September than in any other month last year: 52. Next highest was August, with 51. Variations, of course, exist. There were 48 homicides last March, for instance.

Still, the prime time for murder is clear: summertime. Indeed, it is close to a constant, one hammered home painfully from June to September across the decades. And the breakdown of deadly brutality can get even more specific. September Saturdays around 10 p.m. were the most likely moments for a murder in the city.

Read the article in its entirety here:  In New York, Number of Killings Rises With Heat.

Heading to New York this summer?

Fuh getta about it!