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Retail Executives See Spring As Time of Renewal For L.A.

<CS:BOLD>NEW YORK -- The first signs of hope following Monday's earthquake in Los Angeles began to surface among senior retail executives Wednesday -- not in California, but at the National Retail Federation convention here.<BR><BR>In Los Angeles,...

NEW YORK — The first signs of hope following Monday’s earthquake in Los Angeles began to surface among senior retail executives Wednesday — not in California, but at the National Retail Federation convention here.

In Los Angeles, however, manufacturers and economists are troubled about severe transportation problems that will impede not only consumer traffic, but could indefinitely stall the flow of goods from suppliers to retailers.

Retail executives here said they see a rebound beginning in the spring — the kind of economic turnaround seen in south Florida after Hurricane Andrew in 1992.

They noted that construction jobs will be created and disposable income is expected to grow in the next few months, giving retailers something to look forward to.

“In 60 to 90 days, we’ll see a lot of dollars being spent,” said Joseph Levy, chairman of Gottschalks, based in Fresno, Calif. The chain has two stores in the earthquake area, in Palmdale and Palm Springs, that were shaken, not severely damaged, and are operating.

“Short-term, retailing will stagnate because it will be hard for people to get around,” Levy said. “Long term, there will more disposable income giving retailing a shot in the arm, particularly in home improvement areas.”

“This may be a stimulus to the economy, unfortunately in a perverse way,” said Howard Eilenberg, senior vice president, Frederick Atkins, retail marketing and merchandising organization. “It may also be a stimulus for people to move out permanently.”

Leonard Lauder, president and ceo of Estee Lauder Cos., called the earthquake “a temporary setback” for residents and businesses. “Things will rebound and people will be buying everything,” he said.

Even cosmetics. After Hurricane Andrew trounced south Florida in August 1992, Lauder’s sales in that area rose 25 to 30 percent the following November and December, Lauder said.

“This is a terrible disaster, but it could work to our advantage,” said Donald Fisher, chairman and chief executive officer of The Gap Inc. “People are not going to be traveling very far [to shop] and we have stores almost everywhere.”

The Gap was forced to close 24 stores in the area due to damages and power outages. However, the units are covered both for earthquake and business interruption insurance, Fisher said.

“We’ve tracked retail sales after several major disasters — hurricanes Hugo and Andrew, and the Midwest floods,” said Isaac Lagnado, principal of Tactical Retail Solutions, a consulting firm. “In each case, business has boomed after the event. The money that will pour into the region, from insurance or the government, could be just the jump start the economy needs.”

David A. Cole, chairman and ceo of the consulting firm Kurt Salmon Associates, said, “In the grand scheme of California’s problems, the earthquake is minor. The riots, the Rodney King trial, defense budget cutbacks and taxes all have had a greater economic impact on the community and inspired more fear. Issues of crime and personal safety create more fear than a one-time event like an earthquake, which might not happen again for another 50 years.”

Joseph E. Antonini, chairman and ceo of Kmart Corp., said 17 Kmart stores were closed because of the temblor, and all but four had reopened by Wednesday.

“It’s basically a matter of restoring power to the four that are still closed,” he said, noting that business was normal at the reopened stores. Kmart donated $150,000 to the Red Cross and has shipped extra diapers and bottled water to its stores.

A J.C. Penney Co. spokesman said 23 of its 26 stores in the area suffered some damage, but 15 were reopened by Tuesday. Two were expected to open Wednesday and one more today. Five units, including four department stores and a catalog outlet store, are closed indefinitely. The spokesman said that he did not believe the stores had earthquake or business interruption insurance, and that damage was still being assessed Wednesday.

“Many stores in the L.A. area have business interruption insurance, which guarantees them a profit for the period they have to remain closed,” said management consultant William Ruben.

Barry Sacks, chairman and ceo of Chorus Line, a junior firm in Vernon, said, “We all depend on the transportation system to get our goods in and out. Inconveniences from freeway construction will affect us for over a year. Things will not happen overnight. People’s buying power will also be affected, especially those who have lost their homes.” Sacks is living in a hotel, after his home in Bel Air was damaged and lost water and power.

At Guess Inc. in downtown L.A., January and February deliveries will be delayed two weeks, according to Maurice Marciano, chairman of the $700 million sportswear and jeans firm.

Marciano explained that employees are unable to get to work and, in many cases, their houses have been destroyed. Ten Guess stores were closed in the L.A. area.

“We can’t even get into our stores in Northridge, Encino and Topanga Canyon,” said Marciano. “We are anticipating that Bullock’s, Robinson-May and Broadway stores in the area will also cancel our goods.”

Marciano projected the company’s manufacturing and retail losses at $2 million.

“I think the main concern is transportation,” said Peter Linington, executive vice president of Barclay’s American in downtown Los Angeles. “Shipping will be disrupted with the 5 and 10 freeways being out of commission. This will cause major problems. Also, the economic impact on the Northridge area will be felt. Construction companies, on the other hand, will benefit.”

Jack Kyser, chief economist for the Economic Development Corporation of Los Angeles, said, “Within a couple months we’ll see an increase in bread and butter construction, residential and retail. We’ll also see an impact in the apparel industry as people replace lost items, such as clothing. How soon it happens depends on how soon insurance companies settle their claims.”

However, he added, “It’s a kick in the face for tourism, as it was in San Francisco after the ’89 quake.”

The quake was certainly ill-timed for Summer Market. Avrom Geneles, an owner of multi-line showroom Screaming Accessories, at the New Mart, said, “We have suffered enough here, with riots, earthquakes and fires. How much more can we take? We’ve been punished enough.”

In the West Side and Beverly Hills areas, business is slow. On Wednesday, Beverly Center, Westside Pavilion and Santa Monica Place stayed closed. The open-air Century City Shopping opened.

Beverly Center, the highest profile mall in west Los Angeles, will not reopen until Friday or possibly later, a spokeswoman said. The mall’s parking structure was damaged.

Broadway units are expected to stay closed today, in Northridge, Sherman Oaks, Topanga, Santa Monica, Panorama City, Baldwin Hills and the Beverly Center in Los Angeles. Baldwin Hills may reopen Friday, while Panorama City and Beverly Center may be closed until next week.

–With contributions from the Los Angeles bureau