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Irene Dampens Retail Sales

Source: WSJ - Karen Talley

Posted on 01 Sep 2011

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Retail sales ran into a headwind in August as Hurricane Irene caused retailers to end the month on a down note, even those that sell emergency supplies.

The hurricane came at an especially inopportune time for retailers because the last weekend before Labor Day normally sees heavy buying ahead of the start of school in some parts of the country the following week. Plus, "People procrastinate and this would have been the time these late buyers began coming out," said Jharonne Martis, retail analyst at Thomson Reuters.

Costco Wholesale Corp., the kind of retailer that sells bulk-up items for a severe storm as well as clean-up materials, said sales in August for stores open more than a year—or same-store sales—were slightly impacted by store closings in the Northeast, despite consumers stocking up ahead of the storm. The warehouse club did see 11% growth in same-store sales, which exceeded analysts' expectations for 9.3%.

Among teen retailers, Zumiez Inc. just missed analysts' expectations and said sales the week Hurricane Irene hit were lower than the prior week, a result of the hurricane. The company is cautious about whether it can fully recoup those lost sales given current economic uncertainty, Chief Executive Rick Brooks said on a conference call.

Conversely, fellow teen retailer Buckle Inc., which has a minor presence in the Northeast, posted a same-store sales rise of 8.3%, beating expectations of a 4.5% gain.

"What should have been the month's biggest week probably proved the month's biggest bust, and it will take more than a little something from the month," said Edward Weller, retail analyst at ThinkEquity.

The situation could lead to a more promotional efforts in September to try and lock in business.

The 24 retailers tracked by Thomson Reuters are expected to report same-store sales rose 4.6%, down from estimates of 4.8% on Friday, before the hurricane, and compared with 3.2% the year before.

Department stores have yet to be heard from, but they are expected to have been especially hit by the hurricane. Irene hurt retailers' August same-store-sales by 50 basis points to 150 basis points, Citigroup retail analyst Deborah Weinswig estimated, with Sunday, which starts fiscal September for retailers, taking as much as another 100 basis points out of comparable-store sales for that month.

The most exposed department stores were Macy's Inc. and Saks Inc., with about 30% of their locations in the affected areas; and Kohl's Corp. at around 25%, Citigroup said.