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US retailers to take US$1bn sales hit from Harvey

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By: Beth Wright

As Hurricane Harvey – downgraded to a tropical depression on Wednesday – moves away from Houston, Texas, and across northeastern Louisiana and northwestern Mississippi, early estimates suggest the economic impact for lost sales in the consumer/retail sector total US$1bn, with shopping malls and apparel stores due to take a big hit.

Harvey is the first Category 4 Hurricane to make US landfall since Charley in 2004, which had an impact of more than $15bn. But business weather intelligence company Planalytics says Harvey is poised to have the same, if not larger economic impact, and is likely to be a Top 10 – if not Top 5 – storm in these terms.

“Right now we are pegging our economic impact for lost sales in the consumer/retail sector at $1bn, primarily due to the extended duration of the event combined with the size of the overall market/impacted area (4% of GDP),” says Planalytics.

The company adds its initial estimate represents revenue that is lost and will not be “made up” later.

While all major businesses will be impacted, the firm says restaurants will take the biggest hit with department stores and specialty apparel chains also expecting negative impacts to traffic and sales as consumers focus on making ‘need based purchases’.

Retailers with a large percentage of their total store base in Harvey’s impacted areas include department store groups and retailers such as Dillards, Stage Stores, Cato Corp and Hibbett Sports.

Following major weather events such as this, the economic impacts are felt in the coming weeks and months as consumers and businesses look to repair or rebuild based on their own individual situation, Planalytics adds.

In addition, the firm notes the near-term economic impacts will be felt outside Texas and adds the event could also result in less spending on apparel and back-to-school items in the near-term.

Tushar Patel, chief marketing officer of Dallas-based commerce platform Kibo, believes the aftermath of Hurricane Harvey’s devastation is sure to be a major challenge for retail.

“Countless brick-and-mortar stores have been destroyed or badly damaged, along with the inventory they held. This could take years to rebuild in some areas. Multi-door retailers with storefronts and warehouses outside of the affected area will need to quickly switch gears, turning off affected Texas locations from e-commerce fulfilment (ship-to-store or in-store pickup), and move fulfilment of these orders to stores and warehouses outside the devastated area. With this agility, hopefully retailers can somewhat lessen and disperse the impact of this terrible event.”

He adds that as the area rebuilds, retailers can continue to utilise their e-commerce capabilities with ship-to-home options, until their stores are fully rebuilt.

“Pop-up stores within larger retail locations that were not impacted is another area retailers could consider to maintain their business. The advantage of the omnichannel retail world we are in is that retailers do not need to be out of business when one channel is affected by a natural disaster like Harvey.”

Meanwhile, with Texas being the biggest cotton producer in the US, a report from Reuters has suggested an estimated $150m worth of cotton, and some 300,000 bales, have been lost.

A report published by The Wall Street Journal earlier this week said trucking fleets, railroads and shipping lines were re-routing cargo and setting up alternate supply lines, quoting an 80% drop in the number of Houston-area trucking runs requested on Sunday, according to the most recent data from DAT Solutions, an online load board.

The city’s airports, however, are understood to be slowly re-starting operations with the first commercial traffic in three days as a result of the water now starting to recede in some parts of Houston.

An update from the Port of Corpus Christi Authority yesterday said it was continuing its post event recovery efforts and that the Corpus Christi Ship “Hurricane Harvey has significantly impacted the entire Texas gulf coast with the petroleum refining centres of Corpus Christi, Houston, Port Arthur, Beaumont, and Lake Charles Louisiana either completely shutdown or significantly scaled back operations,” the update said. “It is estimated only 25% of the refining capacity in the region is operational.”

However, nearly 100% of power to the refiners has been restored and the Corpus Christi refineries are ramping up operations in an effort to serve the rest of the Texas first responders and consumer needs.

The devastating hurricane has been blamed for at least 47 deaths.

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