The Impact of Weather on Consumer Demand

Weather and Consumer Demand Overview

Our Mission

We help companies make more money by systematically planning for the influence of weather on consumers and business

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Weather and Consumers

•  Weather is a fundamental yet often overlooked driver of consumer demand

•  Results in unexpected upside/downside volatility in same-store sales results

−  Particularly during the high margin spring transition season

•  Easier to measure and predict than almost any other influence on consumer activity


•  Off-the-Mall Specialty Retail •  Mall-based Specialty Retail •  Home Centers

Retail Sectors Impacted

•  Mass Merchants/Club Stores •  Department Stores •  Restaurants/C-Stores


Weather Considerations

•  Weather impact on consumer behavior a factor of:

−  Merchandise Assortment −  Market/Geography −  Demographics −  Spending power −  Fiscal calendar −  Prior month



•  Temperature –  Primary “strategic” demand indicator –  Departures from normal and prior year are key –  Impacts large population centers and

geographies –  Correlates strongly to sales of seasonal

merchandise –  Predictable at seasonal (year ahead) time

scales

•  Precipitation/Snow –  Weekend, daytime events the biggest impact –  Traffic hindrance primarily –  High impact but not as widespread as the

impact of temperature –  Impactful events are not as predictable at

longer range time scales



•  Hurricanes –  Traffic and demand

generator

–  Biggest and most widespread impact the result of hurricane predictions 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 negative for mall-based retailers


Weather Impact on March Sales

•  Example of the influence of temperature on retail sales

•  Old Navy same store sales change compared to the change in a nationally weighted Cooling Degree Index (weather source: NOAA)

•  Increased cooling demand correlates to increased demand for spring apparel

–  ~40% correlation


Weather Impact on April Sales

•  Example of the influence of temperature on retail sales in April

•  National temperature change against the average comp store sales of a basket of 53 retailers (source: Global Hunter Securities and NOAA)


Contact Information

Paul Walsh, Managing Principal

–  Email: [email protected] –  Direct: +1.917.463.4238 –  Mobile: +1.610.246.0623


Business

The Impact of Weather on Consumer Demand