G2 Weather Intelligence

November Retail Surprise? Colder Weather and Cheaper Gas a Key Factor

 

Ordinarily, the weather influence on holiday sales is masked by holiday gift-giving and the impact on total spend is negligible. 

This November may be different.   

With analyst's expectations in the cellar, even bad results will seem like upside if they are less terrible than expected.  The bar is set extremely low.

There are four reasons that we may see merely bad (but not terrible) results next week when retail sales are released:

1.  Pent-up demand following the deferred spending environment in October

2.  Gas prices continue to drop providing a de facto stimulus to consumers.  So far, over $1 less per gallon than the same period last year.

3.  Sustained cold weather across the heavily populated metro areas in the east driving demand for inelastic purchases of seasonal apparel and related non-discretionary merchandise.

4. Late month (prior to Black Friday) stock market rebound and perceived momentum/confidence from the Obama economic team announcements.

As noted in my post in October (Discount Retailers to Benefit from Steep Drops in Gas Prices and Temperatures ), the discounters, dollar stores, and clubs all continue to be  positioned to win in this environment. Wal*Mart and Sams Club in particular remain the leaders in this "climate."

For the rest of the retail sector -- where anything short of total collapse may look pretty good -- we might be in for a (short-lived) surprise on the upside. 

  

Why Did God Create Economists?

... to make weathermen look good. 

The video below (Peter Schiff Was Right) went viral over the last month and is, so far, responsible for over 600,000 views on YouTube.

Peter Schiff was amazingly prescient and courageous as he correctly and passionately foretold (last year) the impending financial meltdown and recession.

Even more amazing to me is how passionately wrong Ben Stein and the other "experts" were.

This is a relatively long video but it's worth watching. 

Pay particular attention to the Fox Business segment with Ben Stein where he predicts (I'm paraphrasing here):

1.   "stocks will be a heckuva lot higher next year" and,

2.   "the sub-prime crisis is just a blip"

Water: Our Diminishing Resource

Water.

It's the foundation of our way of our life, our economy, and our health. And it's a diminishing resource.

According to some reports, at least 36 states will face water shortages within five years because of a combination of rising temperatures, drought, population growth, urban sprawl, and waste. 

On a global scale, water scarcity issues go beyond  economics and have direct impact on global security and terrorism. 

Global climate change will continue, and current efforts to control it will not bear fruit until around 2030, he said. Significant water and possibly food shortages could result.

Limited water and agricultural land could "add a kind of competition to the international system that we haven't seen for a very long time," Fingar said. Water "will have to be on the agenda" of political leaders.

                   - Official: Terrorism, water shortages likely, AP, November 18, 2008

To put it into perspective, acccording to Lester R. Brown in a keynote address at a Water Conference in Stockholm:

World water use has tripled over the last half-century. Seventy percent of all the water that is withdrawn from rivers or from underground sources is used for irrigation. Twenty percent is used by industry, ten percent for residential purposes. Forty percent of our food supply now comes from irrigated land, which now plays a disproportionately large role in the world food economy. The demand for water has tripled since 1950 and is continuing to rise as we add 80 million more people each year.

While the demand continues to rise, the basic amount of fresh water supply provided by the hydrological cycle does not.

And finally, to bring the point home in terms of time (now) and space (the US southwest and California)  note the very detailed article from yesterday's Salt Lake City Tribune:  The government projects that Drought deepens strain on a dwindling Colorado

The drought gripping Utah, Southern California and the rest of the Southwest this century shows no sign of ending. Scientists see it as a permanent condition that, despite year-to-year weather variations, will deepen as temperatures rise, snows dwindle, soils bake and fires burn.

That's grim news for all of us in the West, perhaps most especially for the 10 million residents along the northern stretch of the Colorado River -- Utah, New Mexico, Wyoming and Colorado -- whose water rights are newer, and therefore junior, to those in Southern California, Nevada and Arizona.

Making matters worse, the Colorado -- the 1,450-mile-long lifeline that sustains more than 30 million souls and 3.5 million acres of farmland in seven states, 34 tribal nations and Mexico -- is in decline, scientists warn.

More to come on this issue. 

Photo Courtesy of Ozyman

Business Sucks Sale!

 

Its not that the economy is bad, its just different.  Requires a new kind of thinking.  Note how this Canadian retailer is communicating with their customers:  

          Tired of negativity?

Lost some money in the market?

Pick up your spirits with some new clothes.

Not weather or climate related, but a great example of the kind of business creativity that will lead to success in 2009 and beyond.

Photo courtesy of my friend Jonathan Rand. 

Coffee Merchants Praying for a Cold Christmas

 

Cold weather sells coffee. 

High gas prices,  economic uncertainty, and summer weather all combined to deal a body blow (Starbucks 4th quarter profit drops 97%) to coffee merchants.

A ray of hope:  dramatically lower gas prices and the potential for a colder than normal winter in the heavily populated east coast markets (where Starbucks must have a least a ga-zillion locations).

Interesting article from yesterday's Houston Chronical (Blending coffee and frugality):

Consumer cuts are plaguing large companies as well. Coffee giant Starbucks Corp. reported that its net income fell to $5.4 million in the most recently completed quarter, down from $158.5  million during the same period last year. That comes after it closed 600 U.S. stores earlier this year.

But coffee vendors hope the cooler weather will boost their sales. With summer temperatures sometimes hitting the triple digits, some consumers skip their coffee break.

“You have to get through that seasonal downturn,” Gonzalez said. “Summer in a coffee shop is pretty tough.”

O’Brien said she is hopeful winter will boost sales.

Wind Farms Changing the Weather: The Really Big Butterfly Effect

 

From the department of unintended consequences, a new study suggests that wind farms can effect the weather:

The wind energy industry has become pretty used to scare stories over the years, ranging from critics claiming turbines shred up local bird life to fears they disrupt radar signals. But now the sector is facing one of the most bizarre accusations yet, that wind farms could mess with the weather.

Researchers at the University of Maryland claim to have developed a computer model that shows that giant wind farms could reduce wind speeds and even affect the direction of storms.

The scientists, Daniel Barrie and Daniel Kirk-Davidoff of the University of Maryland, told the Discovery News web site that they had modelled the impact on weather patterns of a hypothetical wind farm stretching all the way from Texas to central Canada, and from the Great Lakes to the Rocky Mountains.

They found that such a wind farm would slow wind speeds by 5.5mph and 6.7mph and effect the formation of storm systems across the northern hemisphere, potentially knocking them hundreds of miles off course.

"This is the butterfly effect, right?" Kirk-Davidoff told the web site. " It's just that we have a really big butterfly."

For the full article, click here.

What next ... 

Photo courtesy of Vintage Red (Flickr.com)

Deloitte 14th Annual UK Christmas Retail Survey: "Before we can talk about retailing we should mention the weather ..."

 

"Know the weather and victory will be total."

In the military (the Army in particular) the weather and its expected impact on the battlefield always leads formal intelligence ("G2") briefings.  Following the weather brief, the intelligence officer provides an analysis based on the latest news and analysis from the battlefield and beyond. 

I was very encouraged to see the Deloitte Christmas 2008 Retail Survey follow the same template.  A live example -- although somewhat rudimentary --  of the use of weather intelligence (G2 Weather) in their assessment of the retail "battlefield" during the upcoming holiday season.

For a full copy of the report and to view the presentation, click here.

Impact of Weather on Fantasy Football Performance

Interesting and useful (if you're a football fanatic and/or a fantasy football aficinado) analysis on the impact of weather on specific aspects of fantasy football point scoring.   

From an article (Lab Test: The Weather) posted yesterday in fantasysharks.com.

Following is how you interpret the values in the grid:

In football there are too many variables and not a lot of data, so use this ranking table carefully. Every 1 represents a change of about 5%, relative to what the player does normally, so just a 1 or 2 won't usually be significant. Like all fantasy football metrics, I suggest only using the strongest measured effects (+/- 3) in your regular decision making, and the lesser effects only in the closest decisions if at all.

  And, some general rules of thumb:

The Shrinkage Factor - In case you missed that Seinfeld episode, when you're cold, your blood vessels narrow and muscles contract to conserve body heat, which means less flexibility and thus less agility. These effects are especially pronounced in the extremities, which means we could find problems relating to the hands in particular.

Rain outside - It's no secret that rain and snow can make a football hard to hold and see, and dirt difficult to run on.

Rain inside - Up in the sky, when warm air meets cold, we often get rain. When you step outside of your warm home in winter, basically the same thing happens: The cold air you breathe meets the warm air in your body, creating moisture. Great for fish, bad for us. This is worse if you're breathing fast, because the air has less time to warm as it passes. If the air is humid, there's also a bit less breathable air. This points to slower play and tests of endurance.

Freezing and Melting Points - We homo sapiens sapiens (yes, we're twice as wise as those other homo sapiens) are substantially made of water. Any performance drop-off should probably be most pronounced somewhere below freezing point, 32° F, 0° C, or a sizzling 273° Kelvin, as you prefer. Hot or cold, our body tries to maintain a steady temperature of about 98.6° inside and 91° on the skin. Add on 10° for all the running, and even slightly summery weather in the early season could cause problems too.

Advantage: Fat guys - Football is mostly a winter sport, the fat under your skin keeps you warm, and some of these guys are downright twiggy. Lean muscle is also particularly rich in water. Whatever cold downside we find, it could be more pronounced in the guys who are skinny or especially low in body fat.

Diversity, you betcha! - All moose aside, the U.S. hosts a diverse range of climates. Just look at the top universities in NFL alumni, and between Notre Dame in northern Indiana and U.S.C. in Los Angeles alone, you've got a temperature difference of up to 55° during football season. With players from all over the country and parts of Europe, there are trends in individual regions, teams, and players. There's too many to cover them all here, but I strongly suggest you look at performance history for any players headed for fantasy playoff matchups in the North before it's too late.

So, for tomorrow night's Thanksgiving night game in Philadelphia between the Arizona Cardinals and the Philadelphia Eagles:

Temperature (wind chill) 34 to 36 degrees.  LIght wind/no snow.

Weather impact?  Neglible

Impact of an aging Donavan McNabb?  Use your best judgement!

 

 

 

The Wimpification of America

 
People in the snow., originally uploaded by Sarah Lovett.

Great article from yesterday's New York Post:  Wimpiness not just a weather thing 

The wimpification of America is making great strides, as evidenced by the burgeoning trend of being scared of the weather.

It's November, a few weeks before the official start of winter. As part of the natural order of things, the leaves turn color and fall off the trees, the temperature drops, the seasons change.

Last week it turned cold, real cold. It was invigorating for the first 10 minutes, then a bit painful to be out in it.

But I just thought, hey, it's November. Time to put on the gloves.

I turned on the news that night, and the anchor team went right into the lead story.

Yikes!

It wasn't the economy, or the MTA sticking it to subway riders, or murders that took place in the city that day, or the pirates off Africa seizing oil tankers, or the Iraq War, or even the Obama family's puppy.

The big, most important story was the weather. It was cold, and it was going to stay cold.

The anchors on Fox 5 were warning at the top of their lungs that it could drop below freezing at night, and there would be wind chill factors, and there might be SNOW!

Reporters and weathercasters on TV are compelled to make stories as interesting and dramatic as possible.  Recall this classic video:  My Favorite Weather Video.

The downside effect of this kind dramatization of the media message is that people actually watch, listen, and believe the stories they see on the news.  Arguably, at least part of the "irrational" economic fear, uncertainty and doubt we've been experiencing can be linked to the 24 hour coverage of the "financial meltdown" on cable television.  

Weather Consulting in South Korea -- A Growth Industry?

Not sure I like the way the job is described (Odd Jobs Sprouting) but an encouraging sign none-the-less for those of us providing weather consulting:

Weather consultancy is already popular these days, as the weather is more volatile than ever. There are several weather-related institutes already for organizations planning big events or companies producing products related to weather.

More companies are planning weather-related events, such as giving out vouchers on the first day of snow and the necessity of weather risk management is growing, which means brighter days for consultants in the future, the KEIS said. 

For my Korean readers -- Hangul spoken here.