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Hurricane Irma Threatens to Outstrip Harvey in Retail Impact

WWD

By: Sharon Edelson with contributions from Evan Clark

The storm could provide a one-two punch following Harvey.

As Hurricane Irma barrels toward Florida and grows in strength, it threatens to hit retailers even harder than when Harvey flooded Houston just two weeks ago.

Some big chains, including Wal-Mart Stores Inc., are expecting to close more stores than they did in Texas and consumers are primed to react quickly, given the wall-t0-wall hurricane coverage and forecasts that Irma will soon grow to be a potentially catastrophic category five storm.

Evan Gold, executive vice president for global services at Planalytics, which tracks how businesses are impacted by weather, said Harvey erased an estimated $1 billion in retail sales. (That represents the actual sales lost, not purchase that were moved up or deferred in the face of the storm).

“Irma by comparison is a larger storm in terms of physical size,” Gold said. “It’s a stronger storm and it’s taking aim at Florida. It has the potential to impact a larger swath of land.”

Gold said consumers often go through “hurricane amnesia,” forgetting about past storms and not reacting to incoming threats until the last minute. But with Harvey so fresh in the mind, and the total fallout still being tabulated, he said consumers appear to be stocking up now. That pattern could accelerate with more hurricane headlines as Irma hits Puerto Rico Wednesday.

Irma could cause life-threatening winds, storm surges and rainfall hazards to northeastern Leeward Islands Tuesday, the Virgin Islands and Puerto Rico today, according to the National Hurricane Center. Hurricane watches were issued for the Dominican Republic, Haiti, the southeastern Bahamas, and Turks and Caicos on Tuesday.

Irma could directly impact the Bahamas and Cuba as “an extremely dangerous hurricane later in the week,” the National Hurricane Center said.

Coming so close on the heels of Hurricane Harvey, a category four storm that caused record-breaking flooding in and around Houston, the resources — both financial and human — of some retailers and shopping centers could be strained by Irma. The storm’s negative impact to the economy has been pegged by Accuweather at $160 billion, making it more costly than Hurricanes Katrina and Sandy combined.

“Right now, we’re looking at a potential impact to 400 stores” due to Hurricane Irma, a Wal-Mart spokesman said. That’s far more than about 125 Wal-Mart, Sam’s Club and Neighborhood Market stores, which were closed for several days due to Harvey.

The procedures for preparing for Hurricane Irma are “very similar to Harvey, where we put in place an emergency center,” the Wal-Mart spokesman said. “We have an emergency center activated for this one [Irma] as well.”

“We’re working with our operations team on the ground as people are preparing for the storm,” he said. “We’re making sure we have the products people need — water, flashlights, batteries and fuel cans. To help out with the Florida water situation, we’ve mobilized 800 truckloads of water. Once again, we’re monitoring and tracking the storm. We’re hoping for that hard right turn in the Atlantic.”

This wouldn’t be the first time Wal-Mart has dealt with two major hurricanes almost back-to-back. Hurricane Katrina, the 2005 category five storm, was considered at the time to be the costliest weather event in the country’s history, with an estimated $75 billion in damage to New Orleans and the Mississippi coast. Katrina was followed two weeks later by Rita, another category five hurricane that devastated parts of southeastern Texas and southwestern Louisiana, and significantly impacted the Florida Keys.

“We’re able to communicate with the people in the Texas region,” the spokesman said, “and we’re moving into preparation mode for Irma. With the emergency operations center in place, we’re able to speak to both regions.”

A Target spokeswoman noted: “We have more than 120 stores in Florida and are currently anticipating the vast majority of them to be in the path of Hurricane Irma. This week, we’re providing stores with additional supplies that we know our guests need to stock up on, including water, batteries, flashlights, toiletries, camping supplies, cleaning supplies and non-perishable food. We’ll continue to push as many products to our stores as we safely can before the hurricane hits. We anticipate that Target stores will close this weekend and will provide a store closure list once it’s available.

“We’ll work to reopen stores as quickly as possible, and have supply chain teams preparing to restock needed supplies as quickly as we can after the storm passes,” she said. “Target has a long-standing commitment to supporting our team and communities before, during and after disasters.”

A Kohl’s Corp. spokeswoman said of Hurricane Irma, “We are monitoring it at this point in time.”

A J.C. Penney Co. Inc. spokesman said: “Our teams are currently monitoring Hurricane Irma for any potential impact to J.C. Penney. We’ll continue tracking the storm’s projected path over the coming days and take all precautions to ensure the safety of our associates and store locations. As with Hurricane Harvey, should Irma impact the communities we serve, the Golden Rule Relief Fund — a program that provides aid to associates experiencing financial hardship caused by unforeseen situations such as natural disasters — will be available to assist associates in need.”

After Hurricane Harvey, the J.C. Penney Company Fund committed to a $500,000 grant to the Golden Rule Relief Fund, and as of last week, associates had contributed an additional $25,000 to assist fellow employees, the spokesman said.

“Disasters don’t destroy demand, they displace demand forward or back in time or online, just as homeowners in Florida are now stocking up before Irma arrives,” said Craig Johnson, president of Customer Growth Partners LLC. “Houston saw a shortfall in August retail sales of $1.6 billion, some 15 percent below normal monthly sales of $10.5 billion. With most stores open by Aug. 31, the shortfall is already reversing out.”

Online sales continued wherever consumers had connectivity, and will normalize as soon as homeowners return to their residence and any last-mile delivery issues are resolved. Even if only 200,000 automobiles of the 500,000-plus vehicles damaged by Harvey are replaced at a blended average of $27,000 each, $5.4 billion in sales will be generated in the coming weeks, Johnson said.

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