Irma approaches the southwestern coast of Florida. Hurricane Jose is seen (right) near the Leeward Islands.
Credits: NASA/NOAA GOES Project

Irma approaches the southwestern coast of Florida. Hurricane Jose is seen (right) near the Leeward Islands. Credits: NASA/NOAA GOES Project

As Irma is downgraded to a tropical storm by the National Hurricane Center – yet still producing some wind gusts at near hurricane force – its potential economic impact on lost retail sales was increased to US$2.75bn yesterday (10 September).

Irma made landfall in Florida over the weekend as the second Category 4 hurricane to hit the US this year, with wind speeds approaching 130mph. Over 6m people were forced to evacuate the state of Florida, the most on record, with many more leaving voluntarily.

Last week, business weather intelligence company Planalytics said the potential economic impact for lost sales in the consumer and retail sector as a result of Irma would be $1.45bn.

Irma poses US$1.45bn sales hit to US retailers, worse than Harvey

This figure has now almost doubled to $2.75bn and is in addition to the damage caused directly by the storm.

Consumers will shift their mindset from "preparation" to "recovery", Planalytics explains, with traffic expected to be slow to return to shopping malls, speciality apparel stores, and other businesses not selling 'need based' categories.

FBR & Co analyst Susan Anderson notes the total impact from both Irma and Harvey is estimated at under 100 bps for most retailers.

The firm looked at the impact to sales based on stores in the areas affected by Irma and Harvey and found the impact to be "minimal" for most retailers. The estimate is based on sales per store per day: stores would be closed for five days due to Harvey and for five days from Irma in Florida and for two days from Irma in Georgia, North Carolina, and South Carolina.

Based on these assumptions, FBR & Co estimates a 19 bps impact to third-quarter sales on average. "Given both of these hurricanes occurred over the weekend, the impact could be double this (more sales occur over the weekend) but still puts it well below 100 bps, though we would likely use 100 bps as a benchmark given the potential for other impacts not in this calculation," said Anderson.

Other factors that could increase the estimated impact include lower traffic before/after the hurricanes as people prepare/rebuild, impacts to distribution centres/store deliveries (though likely minimal based on locations), and store closures that are prolonged due to damage.

Meanwhile, Anderson notes online sales could help to offset the store closures.