Why Hurricane Harvey Is a ‘Double Whammy’ for Texas Retail

With a heavy blast of devastating rain and flooding, Category 4 storm Hurricane Harvey pummeled through some of Texas’ most populous cities leaving in its wake destruction and chaos.

While the safety of residents is inarguably a top priority in the near term, retail experts say that there could be some negative long-term consequences for businesses in the area. And, for fashion retail — which has been wading through a rough patch for nearly two years — the impact could be even more detrimental.

This comes as a double whammy,” said Marshal Cohen, chief industry analyst with The NPD Group. “In some parts of Texas, there is already a pullback from the Hispanic consumer [which has affected] some of the retailers that rely heavily on that customer base — that’s been a political issue for a couple months now. But, now you’ve got to add in the fact that there is this new environmental issue [which is] totally changing the focus of spending.”

For footwear-and-apparel retailers, the end of August and early September marks a critical time in the back-to-school shopping period. Cohen said many families have been purchasing stationery and other school supplies earlier in the summer — leaving the fashion items for the first few weeks of the school year. This means the Hurricane Harvey landfall coincided with — and essentially curtailed — a significant retail catalyst.

Many consumers have been waiting for the weather to break before they do their clothing, accessory and footwear spending,” explained Cohen. “The weather won’t break for a while — and by the time it does and the stores are up and running, the funds that they would’ve used on shoes and clothing have been shifted to spending on other things related to the storm.”

For now, it’s too early to determine the extent of retail losses and whether footwear-and-apparel sellers will be able to offset them.

For retailers based in that area, it is a crushing blow,” explained Jeff Van Sinderen, an analyst with B. Riley & Co. LLC. “The near-term business impact is brutal. We expect some impact on overall spending, but it will be mixed.  Some will replace items right away, but there will be an offsetting lag for others to make replacement purchases, and even for them to just get back to their normal purchasing behavior.”

Van Sinderen also said Hurricane Harvey only adds further pressure to brick-and-mortar at a time when the rise of e-commerce has already taken a significant toll.

Perhaps some consumers will decide to buy more of what they need through e-commerce, thereby further accelerating the shift away from brick-and-mortar relevant to [the Southeast Texas] region,” Van Sinderen said. “One has to wonder whether it will be worthwhile to repair damage in certain stores.  Maybe this will accelerate closures of some marginal stores, and then you have to consider the layoffs associated with that, which are not what Texas needs, especially in the wake of all of the lingering energy woes there.”

On the positive side, Cohen noted that while layoffs are almost unavoidable in the aftermath of the storm, the rebuilding efforts could be a boon to local businesses and the infrastructure of some parts of the state.

There’ll be a little bit of job loss, but when jobs get lost in retail, they end up getting opened up in other areas, like renovation,” Cohen explained. “You have more people coming in from out of town to renovate the damages, so restaurants pick up [extra business] and so do some stores. What you lose, you get back.”

Cohen said this is particularly true in situations where the government responds quickly to natural disasters.

“How the government intercedes and how quickly the communities join together are going to determine the success of the economic rebound,” he said. “It already looks to me like that’s not going to be an issue.”

The Texas-area retailers that were able to respond to Footwear News’ request for comment reported no damage to their physical stores — however, most saw a slowdown in business on the lead-up to the storm.

Rick Ravel, owner of Karavel Shoes in Austin, Texas and Red Rock, Texas, said the hurricane did not affect either area. “Business was the only thing that got hurt, since people didn’t [venture out],” he said. “They told people to stay away, and you don’t make that business [back] up.”

Officials told residents to stay inside as a precautionary measure, noted Ravel, although the area did experience rain. “We were on the back side of the hurricane,” he said.

But by Sunday, people had cabin fever and did come out to shop: “We probably lost $40,000 to $50,000 in volume between the two stores,” Ravel said.

At the center of the hurricane was Houston-based E.G. Geller, which operates a sister store in Dallas. According to Dallas assistant manager Sandro Aguilar, the Houston location was open on Saturday but did not experience any business. The store, he added, does not open on Sundays.

For more on what fashion-centric charities are doing to help, visit Two Ten Footwear Foundation, Soles4Souls  and Delivering Good.

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