THE ANTHRAX ANXIETY: LEGISLATION IN LIMBO, RETAILING EYES FALLOUT
WASHINGTON — Fresh reports of anthrax exposure in New York and Washington on Wednesday, including the closing of much of the Capitol Hill complex, left the industry facing further consumer angst and pondering the impact on retail sales.
The unprecedented action by Congress also put into limbo pending legislation on an economic stimulus package and trade promotion authority for President Bush.
On Capitol Hill, the number of incidents of congressional staff being exposed from a letter sent to Senate Majority Leader Tom Daschle (D., S.D.) grew from one to upward of 30.
This prompted the House to adjourn and the Senate to soldier on in a scaled-down fashion through today. Both chambers expect to reconvene on Tuesday. In Manhattan, anthrax was reported to be discovered in the Third Avenue offices of Gov. George E. Pataki, which were then closed.
In both locations, no further incidents of infection by the bacteria were reported. Officials in Washington did not suspect that contamination had reached beyond a Senate office building a block from the Capitol where anthrax was found Monday at Daschle’s office.
In explaining his decision, House Speaker Dennis Hastert (R., Ill.), said he ordered the House chamber and nearby offices closed and examined as precautions, “so we don’t have any anthrax spores floating around.”
The House adjournment meant today’s planned vote on a $100 billion economic stimulus package was put off and hasn’t been rescheduled. Hopes the House would vote Friday on granting the President trade promotion authority had already waned, given that supporters haven’t rallied enough Democrats to vote for the controversial bill and ensure passage.
Environmental tests throughout the Capitol and in House and Senate office buildings were ordered, including in the ventilation systems. The 20,000 people working on Capitol Hill were offered anthrax tests. Lines at two testing sites snaked around corridors and the wait was long. Anyone tested was given an antibiotic, just in case.
Keeping calm and presenting a sense of resolve to maintain a semblance of normalcy was the attitude of the day, amid a rather confused situation. No one seemed to want to signal to already worried Americans that a seat of U.S. power was being thrown into upheaval by yet another terrorist incident.
“We will not let this stop the work of the Senate,” said Daschle.
Unlike in the House, Daschle decided to keep the Senate in session through Wednesday and today. However, Senate office buildings, like those on the House side, will be closed until Tuesday. Daschle is eager for the Senate to vote on several government-funding bills.
Capitol Hill and federal police have offered scant details about the origin of the anthrax letter, other than it was postmarked from Trenton, N.J., and was of similar handwriting as one sent to NBC News anchor Tom Brokaw in New York. The bacteria strain contained in the letter is considered a potent form of the bacteria, which can nonetheless be easily killed with antibiotics, officials said.
Lawmakers conversed about anthrax with familiarity, as they counseled against jumping to conclusions and spreading misinformation.
“This is hard for all of us,” said Sen. Hillary Clinton (D., N.Y.), sounding part lawmaker, part psychologist, who said she doesn’t expect to be tested for anthrax exposure and isn’t worried. “I’ve shaken millions and millions of hands in the last decades+and Lord knows what they have.”
How the anthrax scare will affect the congressional agenda is unclear. After the Sept. 11 terrorist attacks, lawmakers already narrowed the scope of legislation to complete before adjourning for the year. Most bills on deck now address the terrorist situation, or the economy, like the pending stimulus package.
Although the House is poised to vote on economic stimulus and it’s expected to pass, the bill won’t be its final form. The White House is questioning the size of the $100 billion bill and members of the Democrat-controlled Senate dispute some of the bill’s corporate tax cuts and lack of stimulus to prod consumers to spend again.
Federal Reserve Chairman Alan Greenspan, testifying Wednesday before the congressional Joint Economic Committee and before anthrax fixed lawmakers’ attention, gave no indication of when consumer spending might rebound.
“Nobody has the capacity to fathom fully how the effects of the tragedy of Sept. 11 will play out in the economy,” said Greenspan, forecasting he’ll have a better picture “in the weeks ahead.”
However, Greenspan cited slight improvements in certain sectors, like automobile sales, since the “initial shock” of Sept. 11. But, he noted, “chain-store sales are sagging.”
Meanwhile, the U.S. Customs Service has been on the highest stage of alert since the Sept. 11 terrorist attacks. The agency has deployed additional people to many of its 301 ports of entry and is spending an extra $5 million per week on overtime, according to a Customs spokesman.
He denied a report from one industry source who said that Customs is planning to quarantine all shipments coming in from overseas, but noted that inspectors are doing more thorough investigations of cargo, people, trucks and ships.
“If inspectors do detect something that may be a chemical or biological agent, they are trained to call in the experts,” such as the Federal Bureau of Investigation, local law enforcement authorities or the Centers for Disease Control, he said.
To date, Customs has not called in officials to test for biological agents in the cargo environment, but it has tested some international mail facilities, which proved to be false alarms, he said.
“If, hypothetically, we found something suspicious in a shipment of textiles and experts determined it might contain biological agents, they would have to make the determination to quarantine that shipment,” he said.
Recognizing that the mail has so far been a prime delivery vehicle for germ attacks, corporations across the industry have stepped up their procedures for screening envelopes and packages.
Unifi Inc., which has a facility outside of Belfast, Northern Ireland, had already developed a procedure for screening packages sent to that location. Michael Delaney, senior vice president of marketing and strategic planning, said the company has applied its lessons learned in Northern Ireland to its Greensboro, N.C. headquarters and other U.S. facilities.
“We’ve trained our people in how to look at packages and make a determination if they are likely to contain a threat,” he said.
Similarly, Greensboro-based VF Corp. has circulated a two-page memo that provides guidelines on what to look out for — including odd-shaped packages, letters with excessive postage, packages with oily wrappings and addresses that contain blatant misspellings or in other ways look unprofessional — as well as recommendations on how to deal with such packages if they are found.
Robert Fawcett, director of corporate security at Malden Mills Industries Inc., of Lawrence, Mass., said he’s tried to train his staff both to be able to identify likely threats and to rule out blatant hoaxes.
“We’ve provided training on what to look for and who to call if something suspicious is found. We’ve also put in place a procedure to screen out as many of the false problems as possible, to take the weight off of law enforcement so that they can concentrate on serious threats,” he said. “We want to turn to them when there is a real possibility of danger, not with every nickel and dime thing.”
While Malden’s mail rooms handle a large number of packages every day, company officials are putting more energy into screening them.
“We’re giving everything that extra 10-second look,” he said. “Something can look normal, but if the return address doesn’t match up with the postmark, we’re going to check it out.”
A spokesman for Levi Strauss & Co. said that the San Francisco-based company’s security staff last week updated its procedures for screening mail and packages and this week notified its staff that it had done so, in an effort to ease concerns.
“A lot of people came in on Monday worried about this,” he said. “We let them know that, indeed, security was on it as of last week.”
As is the case with many major U.S. companies, Levi’s is keeping a tighter security watch at all its U.S. and foreign facilities at this time, paying closer attention to procedures like checking and verifying employee identification cards, he added.
“This is not a time where security will be lax,” he said.
Reacting to the news Wednesday, industry executives expressed a mixture of concern over further erosion of consumer confidence and a feeling that the economy and the public would be resilient no matter what.
Michael Fitzgerald, president and chief executive officer of Delta USA, a unit of Tel Aviv-based Delta Galil, said: “I think all of this is going to have a very negative affect on fourth quarter business, the economy and the people’s willingness to spend money. It’s an era of uncertainty.”
Fitzgerald noted, “We’ve already received surcharges on freight from overseas, because the airlines and shipping companies are doing extra security.”
Richard Murray, president of Wacoal America, said: “It’s all become crazy. We can’t make any long-term plans — plans for next year. Business slowed up a bit after the Anthrax scare. I suspect people are very concerned about being in public places right now and it is having a negative affect on business in general. I’m sure people are just feeling more comfortable sitting at home.”
Designer Nanette Lepore said she was feeling nervous about the anthrax scares happening around the country, and is concerned that consumers might not feel safe going shopping.
“At first you think that everyone will want to shop because it will make them feel better, but then again it is going to take more than positive thinking to get the economy back on track,” she said. “People have to feel like their lives are not threatened.”
Josie Natori, chief executive officer of Natori Co., said: “There are so many rumors, scares and hoaxes teamed with existing problems that I think it certainly doesn’t help consumer confidence. But I am an eternal optimist — at the end of all of this, there will be a Christmas.
“I think the anthrax scare is definitely going to have an impact on shopping and people’s behavior,” said accessories designer Gerard Yosca. “People aren’t going to be going out as much and they don’t want to be in large crowds. I actually think this is the boost the Internet has been needing since more people may buy online.
“We are working on our company Web site right now. Also, many shoppers want to stay in their community and shop locally, so this may be great for specialty stores. Shopping for everyone is a form of giving back at this point and people want to put their money back into their own communities.”
“Everything affects everything,” said designer Elie Tahari. “Am I concerned about it? No. But if it happens in a mall, it will have an effect.”
“Of course it will keep people out of stores,” said Christian Knaust, president of Carmen Marc Valvo. “We’re all trying as much as we can to return to normal, but the media are doing a disservice by making it a big thing. [Consumers] are afraid of any public place. It makes them sit at home and do nothing and get depressed.”
Charles L. Nesbit, president and chief executive officer of Sara Lee Intimate Apparel at sara Lee Corp., stated: “My thought is it’s too soon to tell what’s going to happen. I was looking at Greenspan’s comments today, and even after Sept. 11, he felt it was too soon to predict the impact on the general economy.
“Obviously, this will cause anxiety with consumers — but it’s just more news on top of other news,” said Nesbit.
Ladenburg, Thalmann & Co. analyst Eric Beder said, “My gut is that this is not going to have a long-term impact on consumer confidence.” Since the Sept. 11 attacks, he said, the country’s been “at some level of a war footing where we’re thinking these things are going to happen.”
The effect of consumer confidence on retailing, though, “really becomes important at the end of this month when people start thinking about Christmas shopping,” said Beder. If at the start of the holiday selling season there are further incidents of terrorism in the U.S. and ongoing action in Afghanistan — effectively a war on native and foreign soils — Beder said, “The consumer will become very, very cautious. That’s kind of a worst-case scenario for the retailing world.”
Bob DiNicola, chairman and ceo of Zale Corp. said, “Any disruption is certainly not welcomed news. We all hope that this will settle down. But thus far, people [consumers] have dealt with it, and maintained a level of confidence and discipline about going about their lives.”
Arnold Aronson, managing director of retail strategies for Kurt Salmon Associates, said, “After the initial shock of Sept. 11 and consumers realizing that this is going to be a different kind of war and not short-term, the return to normalcy is something that is going to happen. What’s happened in Washington is unfortunate and unnerving, but it will not substantially affect customers return to shopping and normalcy.”
Ken Goldstein an economist with The Conference Board, said the anthrax cases are not causing people to panic. He said the scares “just deepen the uncertainties, but one death and 20 to 30 possible cases does not begin to match the impact of 5,000 bodies.”
He said the combination of stories on the labor market and the setting in of the new reality is not going to be good for consumer confidence, but said he does not believe it will be “horrifically” bad.
Sung Won Sohn, chief economist with Wells Fargo & Co. said he believes consumer confidence, which was going up since the terrorist attacks on Sept. 11, might relapse in a decline.
“Consumers are beginning to realize none of us is really safe from the terrorist attacks,” he said. “This is making us feel mad, not only because of the people it is directly affecting, but it is making us feel vulnerable. Not knowing the source of the anthrax is a problem. Once we identify the source and the rest of the culprits, we will feel better. What hurts is not the bad news, but the not knowing where the problem is coming from.”
Expressing a more positive feeling, Pat McNellis, president of women’s brands at Royce Hosiery Mills, said: “We have had a surprising stability in consumer confidence despite all the negative news of the last five weeks. Consumers are getting bad news every two to three days and though these are small nuggets of news, they are the type of information that can inflict reactions of terror.
“But the consumer confidence is still strong and that says a lot about the resilience of people, their patriotic nature and desire to support the country in its effort. Despite the latest news, I think that is going to continue. We are going to continue to be bullish about the rest of the year within our own brand. I would not expect to do that if the total consumer confidence had been eroded.”
The anthrax scare will have little impact on consumer confidence in the long run, according to Bud Konheim, chief executive officer of Nicole Miller. Konheim said he didn’t think the anthrax scare was as devastating as the World Trade Center attacks.
He added that Americans are not accustomed to events like the attacks of Sept. 11 and the current anthrax cases happening in this country. But as they look to nations like Israel that have to deal with terrorist activity as a matter of course, American consumers will eventually go on with their lives, he said.
“The 300 million people in this country will realize that more people get killed on the highway than were infected with the anthrax bacteria,” he said.”I think people are going to realize that the amount of anthrax cases is so small and it is so hyped up in the media right now,” said Roy Kean, president of handbag showroom Accessories That Matter. “They are also going to realize that the chances of dying in a car cash are far greater than terrorist activity and now people are starting to say ‘I am not going to live my life terrorized.’
“Shoppers are definitely being cautious, but if you are more focused in what you are offering consumers and giving them value, there are opportunities for business, and we have had seen some very good pockets of business lately.”