Hurricane Irene to have limited impact on apparel sales
New York prepares for Hurricane Irene - Photo credit: David Shankbone - Wikimedia
Hurricane Irene hit the US at the peak of the back-to-school shopping period, causing concerns it would negatively impact the already challenged apparel sector. But industry watchers suggest it will only have had a limited effect on sales.
"Americans in general are very resilient, and American consumers are remarkably resilient. It takes a lot to stand between the American shopper and her destination," Craig Johnson, president of Customer Growth Partners, told just-style.
He says that outside of grocery and DIY operators, which are likely to see a positive effect, either from stocking up ahead of the hurricane or repairs afterwards, other retailers would be expected to see a "net neutral" effect.
Indeed, while people may have rushed out ahead of time, or will go shopping this week or online, the "kids will still get their back to school clothing bought".
Johnson explains that storms over the past two Decembers failed to deliver the forecast negative impacts on sales in the North East.
"Each of the past two years there has been a major North Eastern storm, which some other companies suggested would depress sales by 2%. In fact two Decembers ago, sales were up 2.5% against a fall of 2.5%, and then in the past December, sales were up 6% against 2009 numbers. There was no real net impact, even on apparel sales."
McMillanDoolittle consultant Neil Stern believes the hurricane's impact would likely be "limited to a disrupted weekend", which "at most could take a half-point of sales off a national chain for a month". However, he adds that "it will be extremely hard to measure against all of the other 'noise' in the market".
Keybanc Capital Markets analyst Edward Yruma is expecting "some demand destruction" as spending shifts to items like gasoline, food and potentially home repair. Additionally, he says that Labour Day weekend is generally a promotional weekend, and that sales that move from this past weekend to Labour Day are likely to be done at a lower margin.
Yruma highlights companies with a heavy back-to-school focus, such as Abercrombie & Fitch, Aeropostale, Pacific Sunwear of California, the Gap and Ascena Retail Group. He says he also expects the hurricane to impact Urban Outfitters and Luluemon Athletica, "given their heavy focus on the North East affluent and urban consumer".
More downbeat is Stifel Nicolaus analyst Richard Jaffe, who describes the hurricane as being "not good news for retailers".
He estimates that around 25% of national retail sales occur in the hurricane-affected areas, and that around 25% of the week's volume was lost. He estimates this will result in a negative impact of approximately 1-2% to August comparable store sales.
While many retailers' lean inventory positions will possibly limit the negative impact to margins, Jaffe expects Labour Day weekend will be "even more promotional than usual, likely negatively impacting September margins".
But Customer Growth Partners' Johnson plays down the impact that Hurricane Irene will have on margins, describing them as a "secondary factor".
"Many of the stores have been highly promotional all the way through August. There have been some stores that have not been as promotional, the high-end stores and those that are frankly, doing better, and they've been to able to maintain full price on most of their goods, and are only promoting on a planned basis."
He says retailers like Macy's, which has had its summer clothes on promotion, "had them on promotion before the storm and will have them on promotion after the storm".
However, retailers like Gap Inc, which "is not doing so well, and has two-thirds of its store on sale," Johnson says, "might have lost a few sales over the weekend, but they've been losing sales all month."
"People who are already having a good August, will still have a good August. And people who were having lousy Augusts, will still have a lousy August, although the latter may use Irene as an excuse for their poor performance," emphasised Johnson.
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