Hurricane Irene: a mixed bag for retailers

AP News
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Posted: Aug 29, 2011 6:56 PM
Hurricane Irene: a mixed bag for retailers

Hurricane Irene's impact on retailers is similar to its effect on various states. Some got hit hard. Some didn't get hit at all. And although there are billions of dollars in losses, it will take time to fully assess the damage.

Home-improvement retailers, drugstores and grocers fared well as people from the Carolinas and up and down the Eastern Seaboard snapped up emergency supplies like water, batteries and sump pumps. Meanwhile, sales at department stores, clothing chains, movie theaters and hotels slumped during what is typically an important back-to-school shopping weekend for many of them.

Overall, some estimate that the retail industry lost about $1.3 billion in revenue over the two-day period, or 25 percent of what it normally would have made over the weekend. More will be known about how retailers fared on Thursday when more than two dozen major chains, including Target Corp. and Macy's, report their monthly sales from July 31 through Saturday. But the full impact of the storm may not become completely apparent for many weeks later.

"You've got the triple whammy of the hurricane coming through a very populated area, on a weekend instead of a weekday, during back-to-school shopping," said Jonathan Marek, a senior vice president at Applied Predictive Technologies, which helps restaurants and retailers predict whether new programs will drive sales. "That's a particularly bad combination."

The hurricane hit smack in the middle of the back-to-school season __ the second-biggest shopping period of the year__ and the weekend was the last one before many students go back to school. Even before the hurricane, there were worries that consumers were too spooked by stagnant wages, rising costs for food and clothing, high unemployment and recent stock market volatility to spend. Now, after many shoppers along the East Coast bought $599 generators, batteries and other emergency supplies, the question is whether or not they'll be willing to open their wallets again for clothes and school supplies.

"If you were forced to spend $300 to $500 to do a repair on your home, those are dollars lost to discretionary spending and could be taken from the back-to-school business," said Ken Perkins, president of Retail Metrics LLC, a retail research firm.

Richard Jaffe, retail analyst at Stifel Nicolaus, estimated that 25 percent of last week's sales volume was lost for the 21 department stores and clothing chains he follows, including Kohl's Corp. and Gap Inc. That's bad news for retailers since the last week of August accounts for 30 percent of the month's sales. Jaffe also said the storm could also hurt stores' profit margins for September because many merchants will be forced to discount more heavily to get people in stores.

"With an expected inventory buildup this year due to the storm, we believe Labor Day weekend will be even more promotional than usual," Jaffe wrote in a report published Monday.

Baltimore-based Shoe City, which sells trendy footwear for teens in 29 locations, already said it's likely to offer discounts for its online customers in the next week or so after a slow weekend. Sean Conner, director of e-commerce for the chain, said on Monday that a handful of stores were still closed, and online sales were weak too as millions of people lost power and couldn't turn on their computers.

"It definitely hurts business when stores are not open," said Conner, who declined to comment on how much sales dropped. "I just don't think we'll get it all back."

Ginger Reeder, a spokeswoman at Neiman Marcus Group, which operates stores under its namesakes as well as Bergdorf Goodman, said she can't predict whether the company will "make up any loss" it may have experienced over the weekend. Bergdorf Goodman, located on Fifth Avenue in New York City, closed for the entire weekend, while five of the Neiman Marcus stores in D.C., N.J. and Virginia, closed on Sunday.

The damage to retail sales may be particularly bad in New York City, which is a fashion hub where some retailers make up to 10 percent of their annual revenue. Many restaurant and stores were closed the entire weekend there in part because companies were worried that workers would have trouble getting to work because the city's public transportation system was shut down from noon on Saturday until Monday morning as a precaution. But business wasn't bad for everyone.

For some, like drug stores and grocers, the boost in sales came primarily in the days before the storm. Walgreens, which had a little more than 100 stores closed as of Monday, said top selling products before the hurricane included water, batteries, flashlights, weather radios and non-perishable food like bread.

For home improvement merchants, the storm gave a boost to sales that's expected to continue as people rebuild and clean up.

Steve Holmes, a spokesman at Home Depot, the nation's largest home improvement chain, said that in the days before the storm shoppers were buying generators, batteries, plywood and water. Now, they're buying chain saws and cleaning supplies, like trash bags and humidifiers. He declined to comment on sales but said "demand is high" for the products.

"Our teams have kept moving products to stores to replenish," he said.

Even some small stores and specialty retailers had a windfall over the weekend. Steve Reis, owner of Fantastic Kids Toys, said sales rose 50 to 70 percent above what they normally are on Friday and Saturday at his Upper East Side location as people snagged board games and arts and crafts to keep their children occupied. Reis closed his store on Sunday, but he said those lost sales were more than offset by the two days preceding the hurricane.

Reis said the hurricane "was good for my business" because "people were buying anything to keep their kids busy."

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AP Retail Writer Christina Rexrode in New York contributed to this report.