Hurricane Sandy, strengthening rapidly after crossing the warm Caribbean Sea, slammed into southeastern Cuba early Thursday with 110 mph winds that cut power, damaged homes and blew over trees across the city of Santiago de Cuba.
The storm has a 70 percent chance of smacking the Northeast and mid-Atlantic next week with gale-force winds, flooding, heavy rain and maybe even snow, forecasters said adding, it has all the earmarks of a billion-dollar storm.
(Read More: Strengthening Hurricane Sandy Slams into Cuba)
For investors, understanding how the weather (both actual and predicted) may affect sales and earnings provides key insights into how a business will "weather" an earnings period or same store sales expectation.
While skeptical investors often sneer at the "weather excuse" whenever retailers mention weather as a cause of missed expectations, the reality is the weather does have a significant (and measurable) influence on the timing of sales of seasonal items.
This is particularly true during the fall and spring transition months.
For Hurricane Sandy, the computer models have become more steadfast in their predictions of a large, perhaps historic storm strike in the heart of the U.S. Northeast population center.
The impact of the storm on businesses could be tremendous – lost sales traffic, sustained power outages, coastal flooding, major tree loss and property damage, etc.
The impact on October sales, however, may actually be positive.
The reason? Timing.
The "unprecedented" Snowtober storm last year took a big bite out of October retail sales as the brunt of the storm fell into the October reporting period. According to the International Council of Shopping Centers (ICSC) October 2011 retail sales rose at the " …slowest pace since March 2011."
One of the reasons – the weather.
(Read More: No Halloween Trick - The Return of the Perfect Storm?)
As quoted by the ICSC, both TJX and Macy's reported that the weather impacted sales negatively in October, with the Snowtober storm resulting in a major haircut in store traffic on the last Saturday of the fiscal month.
For Sandy, it looks now like the major impacts of the storm will occur in the Northeast on Monday or Tuesday. That's fiscal November for most retailers.
The effect of the media reporting on the approach of the storm will result in a much stronger traffic comp to last year on the final Saturday of the fiscal month (and quarter) as consumers head to the stores to stock up and prepare for the onset of what looks to be a fiscal November event.
Of course, what benefits October takes away from November but, in the near term, the timing of the effect of Sandy may result in a stronger upside than expected when same store sales numbers are released next Thursday.
Sector Snapshot - Sandy and the Retail Stocks
- Wal-Mart Stores Inc.
- Target Corp.
- Macy's, Inc.
- Dillard's Inc.
- Gap Inc.
- Abercrombie & Fitch Co.
- Saks Incorporated
- Kohl's Corp.
- American Eagle Outfitters, Inc.
- J. C. Penney Company, Inc.
- Costco Wholesale Corporation