VOL. 127 | NO. 10 | Monday, January 16, 2012
Balmy Winter Brings Plenty of Economic Surprises
JONATHAN FAHEY | AP Business Writer
NEW YORK (AP) – Out of a relatively balmy winter have sprung some economic surprises. People have more cash in their pockets because they aren't turning up the thermostat. Airlines don't have to de-ice planes or battle blizzards. And shoppers are finding great deals on coats and boots.
But there are also disappointments. Merchants are stuck with unsold shovels and snow blowers. Drugstores say customers aren't buying cold medicine or getting as many flu shots.
The weather has been so mild that at some hardware outlets, rakes are flying off the shelf, and grass seed is outselling ice-melting salt.
"I haven't seen this mix of sales since I can remember," said David Ziegler, whose family owns nine Ace Hardware stores in the northwest Chicago area. "They're buying rakes ... just because it's warmer and people are not holed up."
This winter has been remarkably tame, especially in regions accustomed to a three-month tussle with freezing temperatures, snow, sleet and ice. In the Northeast, only four Decembers in the last 117 years have been warmer, according to the National Weather Service.
The weather feels especially gentle after two straight seasons of bitter cold and heavy snow. And it will take much more than Friday's relatively moderate snowstorm in the Midwest and Northeast to change that.
For Rocco A. Guadagna, it's been a lazy winter. He owns a lawn care and snow-removal company in Buffalo, N.Y. Because he charges an upfront fee for an entire season of plowing, he's getting paid even though he's hardly had to do any work.
Last year, his plows went out 42 times, more than usual. This year, he went out Friday for just the second time. But he doesn't think customers mind paying for something they barely use.
"Ninety percent, when they pay me, they say 'I hope I never see you,'" he said.
He's not the only one saving money. The weather and low natural gas prices have combined to push down home heating costs for the 51 percent of American households that use gas.
A typical bill this winter will be $700, a 3 percent drop from last year and the fourth straight year of declines, according to Mark Wolfe, executive director of the National Energy Assistance Director's Association.
Jim Cusick, a state employee in St. Paul, has been able to run his radiators less and catch up on an out-of-control home heating bill aggravated by the big, drafty old house where he lives with five of his six kids.
Because of last winter, Cusick said, he owed his utility more than $3,000 in back payments. As of this month, he said, his negative balance is down to $650.
"It's a bummer for the kids. They miss the skating and stuff," Cusick said. "But if winter stays mild, life will be better."
Airlines are enjoying savings, too. During storms, they often lose money because of refunds, delays and added costs for labor and expensive de-icing fluid.
United Continental Holdings Inc., the world's largest airline, said December snowstorms in 2010 hurt its fourth-quarter profit by $10 million and wiped out $25 million in revenue from fares and fees.
Not this season though. There were about 7,000 flight cancelations in the U.S. in December, down from 29,000 the year before, according to FlightStats. On-time performance improved to 79 percent, from 66 percent the year before.
The weather is a mixed bag for stores that offer outdoor gear. Henry Carter, co-owner of 9th Street Cycles, a bike store in Brooklyn, N.Y., said sales of winter equipment have been slow, but bike sales have been surprisingly brisk. And customers are riding more. So instead of the occasional cleaning or adjustment, the repair shop is busy will full tuneups.
"That's usually the stuff of summertime," he said.
For retailers, the weather has been a challenge and an opportunity. They want the weather to be cold, but not too cold. They hope for a few snowstorms that inspire people to buy coats and snow blowers, but not blizzards that keep shoppers inside for days.
So, while more people are out shopping now, they're not buying the bulky winter merchandise. And since they can't sell it, stores have to discount it heavily, which eats away at profit.
Now, instead of clearing out what's left of the cold-weather stuff to make room for spring supplies, they have mounds of winter things for sale at rock-bottom prices.
Coats are the biggest headache. They take up a lot of space, and they are expensive, so big markdowns hurt the bottom line more. Stores are discounting coats by 70 percent on average, and many are slashing prices on entire coat departments.
"Stores can't get rid of the outerwear fast enough," said Scott A. Bernhardt, chief operating officer of Planalytics Inc., a research firm that uses weather patterns to advise stores what they should buy to sell to customers.
Barbara Paschal of Muncie, Ind., recently got a coat at Sears for $48, marked down from $120. Still, she's holding off on buying gloves for four of her three teenage sons.
"There's no reason to buy gloves," said Paschal, noting the temperature is around 40 degrees. "If we get snow, then I will get the gloves."
Drugstore operators Walgreen Co. and Rite Aid Corp. both say the warm weather has hurt sales of cough, cold and flu products compared with last year. They are also giving fewer flu shots and filling fewer prescriptions.
Walgreen administered about 5.3 million flu shots between August and December, down from 6 million over the same period in 2010. In December, prescriptions for cough, cold and flu treatments were down 1.5 percent at established stores.
The temperatures have even stifled good-natured winter humor.
Ellen Shubart, who volunteers for the Chicago Architecture Foundation, recently started guiding a tour of the city's underground walkway system downtown called "Warm Walk, Cool Architecture."
The jokes she devised about gloves, boots and hats have been falling flat.
"We planned it with the idea that it's going to be cold outside," she said.
Associated Press writers Anne D'Innocenzio, Samantha Bomkamp and Marley Seaman in New York City; Carolyn Thompson in Buffalo, N.Y.; Barbara Rodriguez in Chicago; and Patrick Condon in St. Paul, Minn., contributed to this report.
Jonathan Fahey can be reached at www.twitter.com/JonathanFahey
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