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S’no Problem: Winter Storms Won’t Cause Long-Term Woes for Businesses

By Daniel B. Kline - Feb 16, 2014 at 7:39AM

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Bad weather may be bad for business, but it's not a sign that the economic recovery has faltered.

Blame the snow.

U.S. retail and food services sales for January decreased .4%

"We're off to a disappointing start to the year," Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC told Bloomberg. "The weather clearly had some impact."

The declines likely occurred due to the winter storms that struck the East Coast, including storms that affected business in southern states not used to handling bad weather.

"Today's data unequivocally show that the unusually cold winter weather is weighing on economic activity. Consumer spending has literally frozen," said Harm Bandholz, chief economist at UniCredit Research in New York told Reuters.

The worst hit

Grocery stores sales -- likely driven by people in the Northeast states stocking up in advance of the storms -- were up 4.8%. But for retailers where spending is more discretionary, the numbers went in the other direction. Electronic and appliance stores took a 4.9% hit in January while furniture stores were down 2.1%.

It's bad, but, it means nothing

Weather may have led to the poor retail numbers, but bad weather that does not do major, lasting damage is a short-term negative, not a sign of underlying economic weakness. If you can't leave your house to buy a latte at Starbucks because of snow-covered roads, nothing changed about your desire for the pricey beverage or your ability to afford it. You just lost your ability to buy it in the moment.

"It's still too early to conclude that the soft patch is a more ominous sign of a more meaningful slowdown in the economy," Jim Baird, chief investment officer at Plante Moran Financial Advisors told Reuters.

Consumers seem to agree as a Thomson Reuters/University of Michigan's Consumer survey showed consumer sentiment improved in February, buoyed by signs of increased hiring, though worries heightened about a decline in future income. Households with incomes below $75,000 were among the most optimistic, "with expected gains in employment more than offsetting declines in after-tax incomes due to the end of the payroll tax cut," survey director Richard Curtin said in a statement.

No major problem for UPS, Fedex

Despite the storm that hit much of the northeast the day before Valentine's Day -- a storm whose effects lingered in the morning of the actual holiday, UPS (UPS 1.50%) expected to have a huge holiday. The company estimated it would ship an estimated 118 million flowers for Valentine's Day. And though there were flights delayed and airport problems around the country, UPS did report some service delays Feb. 13, but the company reported only scattered delays on the holiday.

That is likely due to the efforts of the UPS Global Operations Center in Kentucky, which has a team of five meteorologists that work with the national weather service to work around storms.

"UPS meteorologists work very closely with flight dispatchers and contingency coordinators who fine-tune the air system based on weather issues every day," said UPS's Jim Cramer on the company's website. "It gives every decision maker in the network the opportunity to position his or her part of the operation for success."

FedEx (FDX 0.62%), the other major shipping company in the United States, issued warnings across the East Coast, in case deliveries had to be delayed, but no major service disruptions were reported by the company.

A bad day for florists

Snow, ice, and cold on Valentine's Day was bad news for florists on the East Coast as walk-in business lost on the holiday is not likely to be made up on subsequent days.

Darryl Rallis, 49, a third-generation wholesale flower vendor in New York, told Reuters he had sold a quarter of the flowers he normally sells on Valentine's Day, typically the year's biggest single day sales for florists, according to the Wholesale Flowers and Florists Association.

1-800Flowers (FLWS -1.22%) has an overall policy of not guaranteeing holiday delivery no matter what the weather is. 

"The floral and gift business experiences an increased volume of orders during major holiday periods, such as Halloween, Thanksgiving, Christmas, Valentine's Day, and Mother's Day. While we ordinarily can guarantee delivery on the exact date you choose for delivery, the high volume of orders we handle during major holidays prevents us from guaranteeing delivery during those weeks," the company posts on its website.

The company, however, is not heartless and did make plans to (sort of) meet its customers needs for Valentine's Day 2014. Yanique Woodall, a spokeswoman for 1-800Flowers, told Consumer Reports that the company monitored the weather and delivered many arrangements early as a result.

A bad month, not a bad economy

While the stormy winter has hurt certain business -- especially ones that would have had a huge sales day on Valentine's Day, the bad weather is just bad luck. A few storms may disrupt the economy and cause a short-term loss, but long-term damage is unlikely.

The long-term news could even be more positive as storms might delay a major purchase such as a car or an expensive television, but it is not likely to cancel them. Restaurants won't make up the lost business (at least not quickly), but if people had intended to spend in January but were snowbound, that spending should occur once the snow melts.

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Stocks Mentioned

United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$208.05 (1.50%) $3.07
FedEx Corporation Stock Quote
FedEx Corporation
FDX
$234.87 (0.62%) $1.45
1-800-FLOWERS.COM, Inc. Stock Quote
1-800-FLOWERS.COM, Inc.
FLWS
$9.74 (-1.22%) $0.12

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