Deadly explosions in the Brussels airport and subway system on Tuesday morning continue to evoke angst across Europe and neighboring regions.
Headlines and accompanying stories have dissected the implications of the latest acts of terrorism for much of the past week, and the U.S. State Department issued its own warnings about potential risks of travel to and throughout Europe.
While human safety and security are the primary concern, long-term consequences of terror acts point to other issues such as slumping tourism and business slowdowns.
Here are three ways terrorism can impact retail.
Although this might be the more transient consequence, almost immediately after an act of terror is carried out in a particular region, tourism to the area slows to a near halt.
For safety purposes, it’s not a bad idea to keep the amount of people meandering around an area that’s been targeted to a minimum until first responders and experts give the all-clear. Still, many remain hesitant to visit a region for some time after the green light is given.
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Needless to say, retail is often dependent, in some capacity, on tourist traffic. In 2015, department stores such as Macy’s Inc. and brands such as Ugg felt the impact of FX fluctuations on tourism in key retail markets. The effects of slowing tourism in Nevada, New York and Hawaii were enough to take a decent chunk out of their sales.
These days it hasn’t taken a whole lot to usher in a stock market sell-off. While the stock market response to the Brussels attacks was minimal to muted, markets tend to respond quite quickly to global political unrest.
Still, with so much of the country’s spending dollars in the hands of stock market investors, when terror drags down investor mood, there could be a trickle-down effect on retail.
But for the most part, news on variables with a stronger macroeconomic correlation tend to weigh heavier on investors. A positive employment report from the Labor Bureau will quickly see the Dow and S&P 500 turn green, while news of another drop in oil prices will send the markets into a sea of red just as quickly.
The next Nike sneaker release is hardly top of mind for a panicked and fearful public. Acts of terrorism, as expected, often push retail spending — particularly on nonessentials — to the bottom of consumers’ priority list. Luxury goods are especially susceptible to a drop in spending following geopolitical unrest.
If the fear lingers or the acts of terror are recurring, long-term lags in spending on footwear and apparel can lead to inventory overages and even store closures for some brands and retailers.