By: Maria Halkias
Back-to-back hurricanes two weeks apart and in two major retail markets have created a big disruption to retail operations at a time when stores are trying to turn around their businesses.
While pre-storm shopping surges benefit Wal-Mart, Costco and Target, partly offset by store closings, other apparel and mall retailers will have a harder time recapturing lost sales, according to Cowen & Co. analyst Oliver Chen.
It’s been a rolling process of stores closing and opening from Texas to Florida and Puerto Rico, and as of Monday, in Georgia and South Carolina.
Hurricane Irma’s negative impact on consumer spending at stores, eating out and on entertainment — including time at Disney World which closed for only the fifth time since it opened in 1971 — amounts to $2.75 billion, according to Planalytics.
In Texas, the weather analytics firm forecast Hurricane Harvey’s negative impact on consumer spending is about $1 billion.
“A lot of this discretionary spending isn’t going to come back,” said Evan Gold, executive vice president of Planalytics. “Once you’re back at your coffee shop or restaurant, you aren’t going to buy two cups or two meals.”
Simply put, Chen said, retailers that sell necessities such as food and water and home improvement items are better positioned versus retailers that sell discretionary fashion that’s not “deep value” priced.
Dallas-based Neiman Marcus started closing its seven namesake stores, five Last Call stores and a distribution center in Florida on Thursday, and they remain closed. Monday it closed two more stores in Atlanta.
In Houston, Neiman Marcus at the Galleria and two Last Call stores reopened on Sept. 1 after being closed a week. About 45 employees have varying degrees of damage from flooded homes and cars to a complete loss in Houston, a Neiman Marcus spokeswoman said.
On Thursday, Plano-based J.C. Penney closed 48 stores in Florida. In Puerto Rico, Penney closed six stores last week and all have reopened. Eight more Penney stores closed in Georgia and South Carolina on Monday.
“It’s absolutely the right thing to do. No one is thinking about buying a dress during these times, they’re trying to keep their families safe,” said Sarah Engel, chief marketing officer at Dynamic Action.
Two weeks ago, Penney closed 23 stores in Texas. All have reopened with the exception of one damaged store in Victoria, which is scheduled to open later this month.
Penney is doubling its staff in Houston and hiring 2,500 people who may need jobs. The jobs come with a 25 percent employee discount that may help many Houstonians who have to build back their lives after Hurricane Harvey.
Major mall operator Simon Property Group said it’s reopening nine of its 23 malls in Florida on Tuesday and others are expected to open on Wednesday.
Discretionary funds will be going to pay for repairs and things that need to be replaced, Gold said. “We’ve seen it with Superstorm Sandy and big snow storms over the years. That spending doesn’t come back.”
Stores step up
While mall and store closings mean a financial hit, the industry has scored some points by showing how it’s part of the fabric of every community, Engel said.
“Sure, the industry didn’t need this financial blow right now,” Engel said. “But the industry has been stepping up, and it’s the neighborhood store that’s helping its neighbors.”
Stores stayed open long enough to help customers prepare and closed early enough to let employees go home to take care of their own families, she said. Now stores are working to ship to the markets pulling inventory in from other states to get to the areas that need it.
Through Harvey and Irma, retailers have sent the right message to their employees and their communities, Engel said. In Texas, San Antonio-based grocer H-E-B and Wal-Mart were aggressive with their relief efforts.
On Monday, Wal-Mart committed up to $10 million in additional support for 2017 U.S. hurricane relief efforts, bringing its total contribution to $30 million.
Even companies that aren’t as wealthy as Wal-Mart, namely Neiman Marcus and J.C. Penney, have offered financial help.
The J.C. Penney Foundation and J.C. Penney Company Fund have together pledged more than $850,000.
Neiman Marcus has made a $50,000 donation to the Houston disaster relief funds. It renewed its $250,000 annual donation to the American Red Cross. Its employees and customers have raised $50,000 on its website.
“We continued to stay focused on the safety of all our associates affected by the recent hurricanes,” said Mimi Sterling, Nieman Marcus vice president.