Statistically Speaking: Does Severe Winter Weather Impact a Retailer’s Bottom Line?

January 16, 2019  by HFBusiness Staff in Business Strategy, Industry   

It has long been assumed that when it comes to winter weather and retail sales, it all evens out in the weeks or months to come. And often it does.  But periods of extended winter weather can also impact profit in unexpected ways. The location of a winter storm, strength, duration and timing, are all factors that determine its impact on store traffic.  Winter storms over weekends are especially adept at killing consumer shopping. And a winter storm in Buffalo is not the same as a winter storm in Charlotte.

All winter snowfall impacts retail sales and major cities in the northeast, especially, are equipped to clear roads and keep commerce moving. In preparation for this article, however, Statistically Speaking chose FEMA data to distinguish when a winter event is severe enough to impact local commerce in a major way. The Federal Emergency Management Agency examines each severe weather event and determines if it warrants Federal assistance. If so that event becomes either an “Emergency Declaration” or a “Major Disaster Declaration”. Often Emergency Declarations later become Major Disaster Declarations.

Since the winter of 2000-2001 through 2017-2018, FEMA has declared almost 90 broad weather events as major winter disasters impacting over 800 cumulative Metropolitan Statistical Areas during the period. (Table A and Table B). 

The winter of 2002-2003 is in the record books as the worst snow storm season over the last 18 years with seven major storms, including the Blizzard of 2003 in February, impacting 22 states and 92 MSAs. While 2009-2010 only had five major winter storms, they were spread out over 22 states and 69 MSAs. The winter 2013-2014 was one of the coldest on record in the Midwest and February 2015 set records as one of the coldest Februarys in many major Midwest and Northeastern cities.  The January 2016 blizzard was a crippling and historic blizzard that produced up to 3 feet of snow in parts of the Mid-Atlantic and Northeast. Finally things began to warm up with the winter of 2015-2016 recorded as the warmest winter on record by the National Oceanic and Atmospheric Administration. Last year recorded only three major winter storms, impacting three states and 11 MSAs.

The economic impact of winter storms is often judged by how many storms hit a retailer in a given winter.  Table C shows that in the winters of 2004-2005 and 2009-2010, 16 and 19 markets respectively were hit by more than one storm strong enough for a FEMA declaration.

As expected, the Northeast is generally the hardest hit area with major winter storms that have been declared disasters by FEMA. As shown in Figure 1, the top seven markets with the most frequent and harshest winters occur in Massachusetts, New Hampshire, and Maine. The Worcester market, covering Massachusetts and Connecticut, and the Rockingham County-Strafford market in New Hampshire have both had nine years of major winter storms with 10 total storms since 2000.

Surprisingly, multiple markets in Oklahoma have been pummeled by winter storms over the past 17 years. Oklahoma City, Lawton, Tulsa, and Enid have all had seven years of major winter storms qualifying for FEMA aid, along with the Fort Smith, AR-OK market.

January and February are generally thought to be the strongest winter months, but Table D shows that actually December leads the way since 2000 with the highest occurrence of major winter storms at 29, followed by January with 22 and February with 16.

As Table E shows, 205 MSAs were impacted by major winter storms in December from 2000 to 2017.

Do Furniture Stores Recover Lost Winter Sales in the Second Quarter?

Are we able to estimate the actual dollar impact of disastrous winter weather on furniture sales? FurnitureCore, Inc., the research arm of Home Furnishings Business summarized proprietary furniture store sales data from retailers participating in its FurnitureCore.com portal. The FurnitureCore study looked only at retailers located in a FEMA declared winter storm disaster area since 2000 concentrating on storms in the first quarter of the year. The final study included data from 44 furniture stores representing 764 store locations and $13 billion in retail sales 2001 to 2017. From this study, two questions emerged:  (1) Were retailers able to recoup sales declines from severe winter weather in a short period of time, and (2) was there evidence of any long term effect on annual sales?

According to this study, on average, first quarter sales in markets with harsh winters were 4 percent less than years where winter weather was less severe. In addition, for the most part those sales were recouped that year, but it took two quarters to do so. By the fourth quarter sales were stable.

This build up in sales from the loss of revenue in the first quarter during harsh winters is also illustrated in the changes in percent of sales by quarter comparing markets in FEMA declared disaster years versus normal winter weather years. In harsh winters, the first quarter takes on about 1.1 percent less annual revenue than other less severe winters. (Table F).

This doesn’t sound too significant on paper, but to add relevance, if the seven Northeastern states were the only ones impacted, the region would be down around $53 million dollars in furniture and bedding sales during the first three months of the year.

Less clear in the FurnitureCore analysis is statistically sound results on whether demand for furniture is made up over time. But according to research by the National Retail Federation in conjunction with Planalytics, a business weather intelligence firm, if severe weather keeps people indoors for a considerable time, profit lost in some product categories is never recouped. In the case of home furnishings, the weather delay sometimes gives the consumer time to reconsider the purchase or divert funds to a different purchase.

Slower sales in the winter season can also often lead to discounted sales in the spring, further impacting profitability. The flip side of the coin is that it is often easy to blame the weather for a winter of slower sales rather than focusing on the key marketing and operational issues.

But there are other opportunities some retailers miss as a direct result of slow winter sales, one of the most important being an increase in a retailer’s website traffic. Often the consumer stuck at home in an extended weather situation spends time visiting the retailer’s website and electronically perusing the store’s products. When this occurs, the use of web analytics to collect, measure, and analyze this increased traffic can give a retailer specific insight into the consumer’s product interests.