“Climate and climate sensitive industries, directly and indirectly, account for one third of the country’s GDP,” said the National Oceanic and Atmospheric Administration (NOAA) before the US Congress about 20 years ago. By today’s standards, that’s $9.5 trillion affected by climate change. Since 1980, there has been 396 weather disasters it cost over $1 billion in the US alone, with a total cost of $2.8 trillion and 16,499 deaths as a result.
While hurricanes, tornadoes, floods, tropical storms, droughts and wildfires make headlines for these multi-billion dollar disasters, it’s the day-to-day weather that has the biggest impact on retailers and producers of seasonal products, from Wall Street to Main Street. You’ve probably heard that if the world is one degree warmer in the next few decades, it’s the point of no return when it comes to Earth’s climate. But many businesses cannot act on that information, as it lacks the necessary clarity to make the daily decisions that retailers, seasonal producers, financial services, agriculture, pharmacy and Main Street must make when planning their business for the coming year.
How much inventory is needed next year if it’s cold, hot, wet or dry, affecting the seasonal items we buy every day? When should you launch a promotional or advertising campaign to target when consumers are most likely to need these seasonal products? Weather is a big part of that planning process.
Wall Street needs growth in any business, but often, the weather is an excuse for lower than expected results, creating excessive inventory levels, unscheduled markdowns or poorly timed advertising and promotional events. Here’s an excerpt from Home Depot’s Q2 2024 earnings report from CFO Richard McPhail: “Weather depressed sales, again, in the latest quarter. Spring is the biggest selling season for home improvement retailers, including Home Depot. However, customers have delayed shopping outside because of the cold and intense weather in many parts of the country.”
Home Depot store sales were down 2.8 percentbelow Wall Street expectations by 1 percent, and the stock price fell from $395 to $325. With a market cap of 388 billion, it accounts for a significant loss of value due in large part to wet weather. Was wet weather really to blame for the $839 million drop in quarterly sales? In this case, yes. In April 2024, the US had its wettest in 26 years, 26 percent wetter than average. This doesn’t sound like much, but it clearly hurts Home Depot and many other publicly traded companies, right down to the small businesses on Main Street.
But today, more and more companies are working, not stuck, on the ever-changing climate when it comes to planning for the coming year. Annual business forecasting sounds like an impossible task, but is it really? It is when you use the tools of meteorologists, which is an ever-changing physics-based approach to science. But you can attack the problem in a different way, with the mathematical method of the 24-figure weather cycle to predict weekly weather trends in meaningful metrics such as temperature and precipitation throughout the year for every mile of the earth.
How does this technology work to help large and small companies plan for the coming year? It starts by analyzing years of real Point of Sale (POS) data from major retailers of over 10,000 seasonal items, the things you and I buy every day.
Did you know that for every 1F cold in the winter, there is a 2 percent increase in coffee sales? Jeans and cold medicine also move by 2 percent per colder degree in winter, while clothing increases by an average of 4 percent per colder degree, and your energy bill increases by about 5 percent with each colder. Auto batteries fail at an average rate of 7 percent in an average cold winter, and flexible categories like electric blankets go at a 24 percent rate in the coldest December. Now, apply these findings to weekly forecasts for the coming year that have less error than a short-range 2-week forecast, and you have real business intelligence to help companies manage the weather.
Here’s the weathertrends360 forecast for the week of Christmas 2024, which shows the country trending 11 degrees colder than last year, the coldest in seven years, with amazing sales gains for all the things we need to brave the elements.
Let’s see for ourselves how accurate this is 79 days from now.
