Inside This Issue - News
In Sandyís aftermath
November 12th, 2012
NEW YORK – The aftermath of Hurricane Sandy is expected to shift consumer priorities in the crucial holiday shopping season.
The result could be weaker-than-expected sales for department stores and specialty apparel stores, particularly in November, as consumers spend more at discount and home improvement stores.
Citigroup Inc. analyst Oliver Chen has written in a research note that the storm may reduce November same-store sales by as much as 3%. Chen also predicted that store traffic in areas affected by the storm could be down as much as 40% in the first week of November, which typically accounts for 22% of the month’s sales.
"We expect Hurricane Sandy’s impact on the East Coast to be mixed," Citigroup analyst Deborah Weinswig told the Bloomberg news service before the late-season hurricane made landfall. "The storm will disrupt last-minute Halloween sales and mall traffic but drive stock-up trips to the discounters."
Initial estimates suggest that damages from Sandy will top $20 billion, according to Planalytics Inc., a business weather intelligence company. That would rank it as one of the nation’s costliest storms, more expensive than 2011’s Hurricane Irene, which had estimated damages of $15 billion.
Planalytics says three major factors contributed to Sandy’s impact:
• The size of the storm. Sandy stretched over 900 miles, ensuring that it affected a large area.
• The population impacted. Approximately one-third of the U.S. population was impacted by the storm.
• The duration of the storm. The hurricane began impacting the Southeast on October 28, made landfall on the New Jersey coast on October 29, and did not dissipate until October 31.
At presstime, Sandy’s confirmed death toll was 113, with victims in nine states along the Eastern seaboard, stretching from North Carolina to New Hampshire.
New York and New Jersey were hardest hit, with 48 and 24 casualties, respectively.
Millions of people lost power because of the storm, and thousands lost their homes. Gasoline was in short supply in many areas, and transit systems throughout the Northeast were crippled.
Stores too were affected. Walmart initially closed 294 discount stores, Sam’s Clubs and distribution centers throughout the region, although the company reported that all of its facilities had reopened by November 5.
Walgreen Co., which operates nearly 1,400 stores in the area affected by the storm, at one point had to close 750 outlets. By noon the next day the number of stores closed had dropped to 530, of which about 300 lacked power. Other stores were shuttered due to evacuations or staff transportation issues, the company said.By November 5 all but 13 stores in New York and New Jersey had reopened.
Costco Wholesale Corp. director of finance and investor relations David Sherwood said during a conference call that several of clubs had to close due to power outages, but added that those closures should have only a marginal impact on November sales.
Whole Foods Market Inc. temporarily closed about 50 stores in Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and Washington D.C.
Rite Aid Corp. said that 790 of its stores were closed at the height of the storm, and that eight stores suffered substantial damage.
The company said it expected comparable-store sales to suffer in November, after getting a boost in late October as consumers stocked up on batteries, water and other supplies before the storm’s arrival.
Planalytics also expects the storm to affect holiday sales as consumers are forced to spend on home repairs and other supplies needed to recover from the storm. Such spending will likely force many to rethink their holiday shopping budgets, the firm’s analysis contends.
“Retailers, particularly those selling discretionary items (apparel, accessories, etc.) who are already facing lost sales due to store closures and decreased foot traffic, may need to reduce prices and promote more heavily to drive consumers into stores, particularly in impacted areas,” a report by the firm contends.