Hurricane Irma, one of the most powerful storms in U.S. history, is expected to exact an even steeper price from retail than initially projected, due to its sheer size and the record number of consumers it will affect.
Planalytics said Irma’s negative impacts on retail are estimated at $2.75 billion, up from an earlier $1.45 billion estimate.
“We expect helpful pre-storm surges in grocery, home centers and mass merchants — Wal-Mart, Target, Costco. This will be partially offset by closures given the strong possibility of store and water damage and the resulting lost sales,” said Cowen retail analyst Oliver Chen. “We are hopeful that retailers have been using weather forecasting to pre-position inventory needs and accelerate inventory flow in distribution centers.”
Chen said that, among the retailers he covers, those most exposed to the Southeast were Movado Group Inc. (with 34 percent of its store base in the region), Ross Stores Inc. (25 percent) Michael Kors Holdings. (24 percent), Signet Jewelers (24 percent), American Eagle Outfitters Inc. (22 percent), L Brands Inc. (20 percent), Hudson’s Bay Co. (20 percent) and Coach Inc. (19 percent).
“Spending in discretionary categories such as apparel and accessories could be unlikely to substantially rebound and store closures will yield lost sales — American Eagle, L Brands, J. Jill, Gap Inc. and department stores,” Chen said.
And after the storm passes, Chen said supply chains could be disrupted across the industry, interrupting the business of retailers selling seasonal goods, such as Lululemon, Gap and Macy’s Inc.
Coming on the heels of Hurricane Harvey two weeks ago, which had $1 billion in impact on retail in Houston and Louisiana, the one-two punch of Harvey and Hurricane Irma “[represents] a very large percentage of U.S. retail,” said Instinet analyst Simeon Siegel. “It’s a pretty scary thing to contemplate.” Siegel said the double weather events leading to fears about “holiday spending within impacted areas appear fair, but blaming hurricanes for a weaker Q4 may end up proving a ‘convenient’ excuse for companies that had risk to their hockey-sticked guidance anyway.”
The storm, which already flattened islands in the Caribbean and ravaged Puerto Rico, Cuba and the Bahamas, is focused on the west coast of Florida, where Irma will bring tropical-storm-force winds of up to 130 miles an hour, possible tornadoes and a dangerous and destructive storm surge. Florida alone ordered 6.5 million people to leave their homes.
But the storm is expected to have a wider impact than Florida — and perhaps than Hurricane Harvey, which hit Texas and parts of Louisiana last month. Irma is expected to continue its destructive path on a northwest track impacting Georgia, Alabama, South Carolina, North Carolina and Tennessee. Already, the storm has caused chaos on highways to Atlanta, which were brought to a standstill by cars full of Florida evacuees. Alabama and North and South Carolina all declared states of emergency.
Students at the Savannah College of Art and Design learned that the start of classes was postponed for a week after Hurricane Irma was upgraded to a category five storm. “Due to the magnitude of the storm, the decision was made to postpone the start of the fall quarter,” the college posted on its web site, noting that Irma is “coming almost exactly a year after Hurricane Matthew caused closures in Atlanta and Savannah.”
“All of Florida is under the gun. People have been evacuating for days due to the wind gusts and storm surges. We’re talking about 20 million to 30 million-plus people under the cone,” said Evan Gold, executive vice president for global services at Planalytics, referring to the cone of uncertainty on weather forecasting maps.
One of only three category five hurricanes in U.S. history and the only one to sustain category five status for three consecutive days, Irma has shown enormous stamina and resilience.
Irma’s course was initially moving toward Miami and Fort Lauderdale, but the storm shifted west on Friday and was tracking toward Tampa and Orlando. Miami was well-prepared, Naples and Tampa, thinking they’d dodged the storm, weren’t. Shelters in and around Naples were overwhelmed by the nearly 17,000 people who showed up.
Throughout the state, more than 75,000 people rushed to shelters, with more than 400 shelters open, mostly in schools, churches and community centers.
Irma expected to bear down on Tampa and St. Petersburg Sunday evening, with the most severe weather anticipated at around midnight, including wind gusts of up to 120 mph, with sustained winds of 100 mph.
“It’s really just getting started,” Gold said. “It’s not a good situation overall for the retail sector. Disney World has been closed for two or three days. The majority of business is not coming back. The long-term impacts will be felt for a while. People will restore their property first. There could be a holiday spending threat.”
About 1.5 million people were without power in South Florida on Sunday. Downtown Miami and beaches were empty as tourists and residents stayed away. Florida Gov. Rick Scott’s warnings about a life-threatening storm surge headed for the Florida Keys and Miami last week were heeded, as were Bal Harbour Mayor Gabriel Groisman’s warnings, which prompted 650,000 Miami-Dade County residents to leave their homes in Miami Beach.
Bal Harbour Shops, the upscale open-air shopping center in Bal Harbour, Fla., was closed. “Saks Fifth Avenue is closed,” said an employee who wasn’t at the location. “The store hasn’t decided when it will open yet. I don’t think there’s any power.”
The Webster’s two stores, on Collins Avenue in Miami and Collins Avenue in Miami Beach, were both closed. In d
“Target has closed 116 stores and three distribution facilities in the area for the safety of the Target team and guests,” a spokeswoman said. “This includes stores in Tampa, Orlando and Savannah, Ga. So far in the Carolinas, there is a store closing in Bluffton, S.C. After the storm passes, Target will work to reopen stores as quickly as possible. We anticipate reopening some stores as early as Monday. The decision to open stores will be made on a case-by-case basis.”
Wal-Mart Stores Inc., which operates 400 Wal-Mart, Sam’s Club and Neighborhood Stores in the affected regions, said it’s raising its commitment by up to $10 million in additional support for 2017 U.S. hurricane relief efforts, bringing its total commitment to $30 million. The world’s largest retailer and the Wal-Mart Foundation will make donations of at least $1 billion in cash and product donations to support relief for Hurricane Irma victims through organizations working in Florida.
“The eye of the storm just crossed over Naples,” a Wal-Mart spokesman said. “It’s heading north. We have no update on when stores will reopen. If power is completely gone, we can’t look into the stores [electronically]. The whole stretch across the southern portion of the state has no power.”
A Macy’s spokeswoman said, “Macy’s is closely monitoring the situation by location as the safety of our customers and associates are our top priority. All Macy’s Inc. distribution centers and stores in the state of Florida are currently closed through Monday, which includes 55 Macy’s, five Bloomingdale’s, three Bloomingdale’s the Outlet and four Bluemercury stores. Macy’s associates in Puerto Rico are all safe and our stores did not experience significant damage. In fact, Macy’s Ponce and San Juan locations have resumed to normal store hours. We are committed to helping any affected associates or Macy’s communities, just as we did with Hurricane Harvey.”
A Hudson’s Bay Co. spokeswoman said, “Our first priority is the safety of our associates and customers. All Saks Fifth Avenue, Saks Off 5th and Lord & Taylor stores in the impacted area are currently closed. Our thoughts are with those affected by the hurricane.”
Simon Property Group, which operates 23 shopping centers in Florida, listed The Falls in Miami, Boca Raton Town Center in Boca Raton, Dadeland Mall in Miami, Sawgrass Mills in Sunrise, Fla., and Tampa Premium Outlet in Lutz, Fla., among others as closed on its web site.
“Fashion is the one that will feel the pain,” said Marshal Cohen, chief economist at The NPD Group. “Retail was already hard-pressed and challenged. We didn’t see any growth this year. [Irma] could impact 3 percent to 5 percent of all apparel sales. If you take 4 percent to 5 percent declines on top of flat or negative growth, it’s not good. On the replenishment side, if people lost personal items, they’ll need to rebuild their wardrobes, but that’s longer-term.”
Gold said Irma will be a net-negative for shopping malls, specialty apparel retailers and department stores. “You’re stopping commerce for several days,” he added. “There’s another storm brewing in the Atlantic. We’re not out of the woods by a long shot. The fallout from Irma will be significant and could linger for some time.”