The Impact of Weather on Retail Sales in Spring 2009 and the 2009 Hurricane Season Forecast

Paul E. Walsh  Managing Principal    G2 Weather Intelligence, LLC  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

G2 Weather Intelligence LLC  Helping companies make more  money by systemaBcally planning  for the inﬂuence of weather on  consumers and business  © 2008 G2 Weather Intelligence, LLC.  All  Rights Reserved  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Weather’s Impact on Consumers  •  Weather is a fundamental yet  oHen overlooked driver of  consumer demand  –  ParBcularly during the high  margin spring transiBon season  •  Results in unexpected upside/ downside volaBlity in same‐store  sales results  •  Easier to measure and predict than almost any other inﬂuence  on consumer acBvity  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Retail Segment Exposure in Spring   Oﬀ‐the‐Mall Specialty Retail  •  Mall‐based Specialty Retail  •  Home Centers  •  Mass Merchants/Club Stores  •  Department Stores  •  Restaurants/C‐Stores  •  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Retail Segment Exposure in Spring   •  ConsideraBons  –  Merchandise  Assortment  –  Geography  –  Fiscal calendar  –  Prior month  –  ExecuBon skills  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

High Impact Weather Parameters  Temperature  •  Primary “strategic” demand indicator  –  Departures from normal and prior year are key  –  Impacts large populaBon centers and geographies  –  Correlates strongly to sales of seasonal merchandise  –  Predictable at seasonal (year ahead) Bme scales  –  PrecipitaBon/Snow  •  Weekend, dayBme events the biggest impact  –  Traﬃc hindrance primarily  –  High impact but not as widespread as the impact of temperature  –  ImpacZul events are not as predictable at longer range Bme scales  –  Hurricanes  •  –  Traﬃc and demand generator  –  Biggest and most widespread impact the result of hurricane predicBons vice landfall  –  Media coverage ahead of storms results in a net plus for Home Centers (HD/LOW),  Mass (WMT), and grocers; results in a net negaBve for mall‐based retailers    © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Weather Inﬂuence March Sales  Example of the inﬂuence  •  of temperature on retail  sales  Old Navy same store  •  sales change compared  to the change in a  naBonally weighted   Cooling Degree Index  (weather source:  NOAA)  Increased cooling  •  demand correlates to  increased demand for  spring apparel  –  ~40% correlaBon   © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Weather Inﬂuence on April Sales  Example of the inﬂuence  •  of temperature on retail  sales in April  NaBonal temperature  •  change against the  average comp store  sales of a basket of  53  retailers (source:  Global  Hunter SecuriBes and  NOAA)  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

March 2009 (as of 3/18)  Courtesy of AccuWeather  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

April 2009 Forecast  Courtesy of AccuWeather  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

2009 IniBal Hurricane Outlook Consensus  Consensus outlook from all  private forecasters:  •  Below the 10‐year average  and 2008  •   Above the long term  average  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Summary ExpectaBon    •  Generally favorable weather against a very diﬃcult 2008  spring season  •  Befer physical climate overlapping an improving consumer  environment  –  Obama SBmulus (intangible and tangible beneﬁts)  –  Lower year‐over‐year gas prices  –  Pent up demand following the spending slowdown during  the “cold” winter of 2008/9   •  Weather a net posiBve in Spring 2009  –  Stars aligned for stronger than expected retail sales through May 2009  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

Paul Walsh, G2 Weather Intelligence LLC  Paul.Walsh@G2Weather.com  Direct:    +1.917.463.4238  Mobile:  +1.610.246.0623  Blog/Website:  www.G2Weather.com  “Changing the  way business  thinks about  the weather”  © Copyright 2009 All Rights Reserved, G2 Weather Intelligence, LLC 

The Impact of Weather on Retail Sales in Spring 2009 and the 2009 Hurricane Season Forecast

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