Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

It's Official: The Weather Excuse Is Dead

By

February shows that it's time for CEOs to stop blaming the weather for poor results.

PrintPRINT
On February 13, 2010, something highly unusual happened here in the US. Every state except Hawaii had snow on the ground. The Washington, DC area blew past its snowfall record for February by the tenth day of the month, and the New York City area hit a new high by the end of the month.

People stayed home. The government shut down for days on end. The weather was becoming a grave threat to an already paralyzed economy.

But a funny thing happened. Retail sales for February were surprisingly strong. More than three-quarters of the retailers who announced results yesterday exceeded expectations. Macy's (M), Target (TGT), Gap (GPS), and Limited Brands (LTD) all saw sales rise more than planned over the same month last year. It was the strongest growth the sector has experienced since November 2007.

The news this morning was even better. Although many economists were bracing for higher unemployment numbers during February due to the extreme weather conditions, the Labor Department announced the opposite. The unemployment rate held steady at 9.7% versus the 9.8% forecast. Payrolls, which were expected to fall by 68,000, fell by only 36,000.

People actually went out in the snow and bought stuff. Employers didn't cut everyone loose because of the snowflakes. The unimaginable even occurred: People bought cars. American ones! (Thanks, Toyota (TM).) Ford (F) saw sales rise 43% during February, while GM was up 11.5%.

Sorry, corporate America. You can no longer blame the weather for your poor earnings results.

Of course, many analysts are wondering just how strong February would have been without the weather. If you can't blame the clouds for crappy numbers, you can blame them for preventing the numbers from being even more impressive.

A quick search in the SEC filings returns pages and pages of results for "weather." Some companies, of course, do have reason to blame it. Anyone dependent on agriculture will certainly see shifts in business with changing meteorological patterns. Inclement weather also takes its toll on theme parks and resorts.

But all too often, executives shuffle out the weather excuse when explaining their poor results to investors.

"Unfortunately as you all know, exceptionally severe weather and snow in the central and eastern portions of the US have negatively impacted February sales trends at Wendy's and throughout the industry," Roland Smith, CEO of the Wendy's/Arby's Group (WEN) told investors this week after reporting a shortfall in revenue last quarter.

Apparently we were okay to go to Target but the snow was just too blustery around Arby's.

Glenn Renwick, CEO of the insurance giant Progressive (PGR), resisted the temptation to blame the skies, but admitted it's an excuse: "I tend not to fall back on the excuse that a winter month has bad weather but it does look like January was a little bit out of the norm and probably deserves some adjustment."

It's snowing out. Better not make that call to switch from Geico.

The weather is apparently even impacting consumers' urge to store things. "It's a little hard at this juncture, it's February, we're not into the rental season and we've got a significant number of markets impacted by the severe weather so basically from Chicago east and from Charlotte north, the move in move out numbers and kind of what's happening, the rates are a little distorted because of the severe weather," said Ron Havner, CEO of Public Storage (PSA).

It snows in winter, rains in spring, and hurricanes sometimes wreak havoc in the late summer and early fall. This is no surprise to most of us. Why should it consistently be so shocking only for those companies who need to justify their disappointing numbers?

It shouldn't.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE