NEW YORK — Hurricane Wilma paralyzed business in much of Florida on Monday, leaving uncertainty as well as hope after nature’s wrath.
As rain and winds as high as 125 mph pounded the state, smashing windows and causing widespread flooding and power failures, many retailers were anxious, though preliminary reports of minimal damage to stores were somewhat encouraging. They awaited more feedback about the storm’s impact and expressed concerns that shopping, other than for necessities, would not immediately be a high priority. For many retailers, Florida is the biggest or among the top three markets in store count.
Analysts expected Wilma would hurt sales on a local, but not a national, level. And several risk-modeling firms said the overall damage would be in the range of $2 billion to $9 billion, well below the $50 billion estimated for reconstruction in the aftermath of Hurricane Katrina in August.
Michael Gould, chairman and chief executive officer of Bloomingdale’s, cited home repairs as uppermost in the minds of consumers in the short term.
“I think the business will come back, though consumers do have issues to take care of,” Gould said.
After four hurricanes hit Florida last year, “the customer certainly came back,” he said. “People were aggressive…We got back about 75 percent of it…But Florida customers are very resilient.”
Some retailers reported stores in Tampa and Orlando reopened Monday afternoon after the storm quickly passed across the state. Miami, Fort Lauderdale and West Palm Beach appeared hardest hit.
Federated Department Stores kept 36 Macy’s and five Bloomingdale’s closed Sunday and at least part of Monday, according to spokesman Jim Sluzewski. Sears Holdings reported that Sears had 23 full-line stores and Kmart had 34 stores closed Monday; some units were scheduled to open Monday, weather and road conditions permitting, said spokesman Chris Braithwaite.
Generally, retailers said this week in October is not a particularly major period for shopping, though Gould said Bloomingdale’s had a couple of big things planned, including an Oriental rug event at the Boca Raton store.
And Kmart was counting on some steady Halloween shopping, Braithwaite said, adding that aside from the holiday, the week was not expected to be unusual. Neiman Marcus also said this would otherwise have been a typical business period for the luxury chain.
Florida is the retailer’s second-biggest state in store count, after Texas. In Florida, Neiman’s operates eight stores, including two Last Call clearance centers. All were closed Monday except those in Orlando and Tampa.
“We don’t know where they will be tomorrow,’’ said spokeswoman Ginger Reeder. “We just have to see how today plays out. Right now, we think everything is OK. ”
Taubman Centers Inc. kept four Florida shopping centers closed Monday: Wellington Green in Wellington, Waterside Shops in Naples, Mall of Millenia in Orlando and Dolphin outlet center in Miami; only Millenia was expected to reopen Monday.
“There were minimal damages, some trees down, nothing significant,” said director of communications Karen MacDonald. “We expect [all four malls] to be open” Tuesday.
Chico’s headquarters in Fort Myers, Fla., had been closed since Thursday in anticipation of Wilma, and many of the employees evacuated. Chico’s stores in areas affected by the storm were closed Monday, and many got hit by power failures. Chico’s has more stores in Florida than any other state — more than 75, including Chico’s and its White House/Black Market division. Saks Fifth Avenue also has more stores in Florida than any other state, 11, including three outlets.
Wilma is the eighth hurricane to hit Florida in the last 15 months and this year followed Katrina and Rita, which devastated the Gulf Coast states of Louisiana, Alabama and Mississippi, crippling oil production and forcing up gasoline and natural gas prices.
On the broader retail market, analysts said Wilma was not likely to have much affect.
Jim Rice, a retail analyst at Susquehanna Financial Group, doesn’t expect a huge impact on retail sales from the record number of hurricanes this year.
“The biggest impact so far, nationwide, has been gasoline prices because of the damage from Katrina,” Rice said. “But most retailers’ operations are spread out, and that means no one is getting hurt too badly.”
Over the past three weeks, according to data from the Energy Information Administration, the average price of gasoline dropped after soaring from the impact of Katrina. However, the average price of gas is still up about 34 percent, year over year.
There have been concerns that the higher fuel costs could hurt consumer spending, especially at the lower end of the market. But it appears that retailers will likely follow the lead of Wal-Mart and Best Buy, which promised to get more promotional.
“As for holiday, I don’t expect there will be any disasters coming up,” Rice said. “The hurricane season has about run its course and home heating probably won’t come into effect until after the holidays. Holiday will be somewhat soft. It will be very promotional. And that’s why sales are going to be OK. I also expect to see some financial deals to be advertised, such as no interest or payments until 2007. So that and other promotions will keep the consumer interested.”
Richard Hastings, retail analyst at Bernard Sands, also said there would likely be little effect from Wilma. “Katrina’s impact was isolated to the Gulf area and, to a lesser degree, in remote coastal areas. [Wilma] will really have no national impact on retail sales. The holiday outlook is upbeat, but very promotional, perhaps more so than since holiday 2002,” he said. “If [fuel] prices keep going up, that’s a problem. If the price levels off, people can adjust. Based on the cost of crude oil right now, prices at the pump have [begun to] level off. And as long as those gasoline costs stabilize, people can resume their spending.”
Hastings said some consumers have moved to fixed monthly payments in regard to home heating costs, which helps them avoid sticker shock in January, February and March, when heating bills rise.
“The job market is good, and there’s no inflation on imported goods like apparel, electronics and toys, which is good for holiday sales,” Hastings said. “There is tons of wiggle room in the industry. The retailers can drop prices and still make money. There might be a bit of margin pressure, but retailers can make up for it in spots, such as reducing the total hours worked as part of overall payroll costs.”
Hastings said there was concern about severe weather conditions and potential flooding in the mid-Atlantic and New England regions from Wilma. This could affect October same-store sales. And while consumer confidence seems to be on the wane, judging by September’s report, Hastings said consumers are still shopping.
In the next few weeks, analysts expect retailers to adjust their earnings outlooks.
Archstone Consulting, in its 2005 Holiday Forecast, predicted a sales gain for the retail sector of 3 percent to 5 percent over 2004, with high-end apparel and luxury goods getting the biggest increases. Because of the expectation of higher fuel costs, particularly at the gas pump, Archstone said retailers should expect a boost in online and catalogue sales, a gain of at least 6 percent to 8 percent over last year. The firm also predicted in its holiday forecast that gift cards would be a strong category for holiday.
“The 3 percent to 5 percent [range] is decent, relative to last year,’’ said Michael Unger, a director in Archstone’s consumer product goods and retail practice. “It is ho-hum, a letdown from last year, and some retailers might have already started to downgrade their holiday forecasts. But apparel should see a 5 percent to 7 percent growth [rate] this holiday season.”