How Much Will Hurricane Harvey Cost Retail?

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How Much Will Hurricane Harvey Cost Retail?

By Apparel Staff - 08/28/2017

Harvey is first Category 4 Hurricane to make U.S. landfall since Charley in 2004. For reference, Charley's impacts were more than $15 billion. Harvey is poised to have the same, if not larger economic impacts, and is likely to be a Top 10 (if not Top 5) storm in these terms — but we won't know for sure until it's over.

Hurricane Ike in 2008 was one of the largest to impact Texas, with estimated impacts of $28 billion, although Ike also affected Louisiana and Mississippi. A good reference point for Houston is Tropical Storm Allison in 2001, which dropped 28 inches of rain in less than 24 hours, resulting in an estimated $5-billion impact to Houston. Remember that Sandy, which had losses of more than $50 billion, is not on the list as it was no longer a hurricane when it made landfall.

Planalytics' initial estimate on lost sales in the Consumer/Retail sector will be $1 billion. This represents revenue that is lost and WILL NOT be made up later.

All major businesses will be impacted.

  • Restaurants will take the biggest hit as these businesses do not make up for lost traffic.
  • Restaurants with a large percentage of stores in Houston include P.F Chang's and Brinker (parent of Chili's).
  • Mom-and-pop restaurants can take a devastating impact due to store closures and spoilage of foods.

Malls/apparel stores also take a big hit.

  • Consumers are focused on making 'need based purchases' right now -- shopping malls/department stores and specialty apparel chains all see negative impacts to traffic and sales.
  • Retailers with a large percentage of their total store base in Harvey's impacted areas include Dillard’s, Fred's Stores, Stage Stores, Cato Corp., 99 Cent Only Stores, and Hibbett Sports.
  • Home centers (Home Depot, Lowe's, Tractor Supply) likely had an increase in traffic before the storm and will aid in the clean-up efforts.
  • In the peak of the storm, these chains also lose business as stores are closed and people are unable to leave their homes.
  • The total impact will take place OVER TIME — not just now/this week.
  • Following major weather events such as this, the economic impacts are felt in the coming weeks and months as consumers and businesses look to repair/rebuild based on their own individual situation.

Near-term economic impacts will be felt outside of Texas.

  • More than 20 percent of all U.S. refineries are in the Gulf Coast region. Many of these have closed/shut down as a result of
  • Harvey. This can impact production of hundreds of thousands of crude oil production per day.
  • Reduced production can result in an increase to gas prices in the coming days/weeks.
  • A rise in gas prices can lead to less discretionary income for those impacted.

This can also result in less spending on apparel/back to School items in the near term.

Additional thoughts
We are approaching the peak of the Atlantic Hurricane season, which is typically early September. There is a system off the coast of Florida (threatening the Carolinas) which is projected to become Tropical Storm Irma and impact the Southeast coast.

Social media is playing an increasingly larger role in weather events. They help individuals and businesses to communicate with each other

About Houston:

  • It’s about 600 square miles – America’s fourth-largest city by population.
  • Drainage and flooding are a constant problem — it’s basically built on a swamp — it’s a very low city and has had flooding here for decades. It’s probably worse now than it has been due to all the development.
  • There's a fairly elaborate bayou system. Bayous are a little bigger than a creek and smaller than a river. Once the bayous are inundated, and the reservoirs get full, it just starts to back up.