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This Halloween, Don’t Be Tricked by Hurricane Retail Trade

As the markets re-open post Sandy and the damage is assessed, one of the topics discussed Wednesday was the retail hurricane trade. But this Halloween, I say Don't Be Tricked by the Retail Trade.

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Here is the reality. Weather events do not print money like the Federal Reserve. Instead, weather events do two things.

First, they pull sales away from discretionary purchases in the short-term. With already stretched consumer wallets, the stocking of emergency batteries, water and plywood last weekend may simply have come at the expense of Halloween costumes. Pre-Sandy estimates had Halloween pulling in $8 billion this year, according to the National Retail Federation.

But with diverted purchases and the event canceled for safety reasons in many areas, we may have to re-think that number. Pet costumes sales, which had been forecasted to hit $370 million, may just fall by the wayside this year. While Halloween is hardly a top-three holiday, you probably get my point.

Second, weather events pull sales forward. Some would argue stocking up on saws, drills, batteries and repair items should help the economy. I would argue these purchases might have limited incremental effect. It is more likely the hurricane might shift the timing of these purchases and simply steal from future months. (Read More: Is Price Gouging Reverse Looting?)

We have heard this before with non-emergency related events. Do 2012's early spring and resulting pulling of sales forward ring any bells for Home Depot, Lowe's and Autozone ?

We should also not forget that many consumers will not receive fat checks from an insurance company. Instead, they will be stuck paying for damage and with stagnating personal income, these repair dollars have to come out of another bucket.

That brings me to the slowly disappearing same store sales day. October's sales will be reported on Thursday. The month of October ended this past Saturday for retailers and Santa, no doubt, came early for some of the remaining reporting companies including Costco and Target.

Following Hurricane Irene's wrath, both companies reported strong numbers due to stockpiling. But in the end, business reverts to normal and those "pull-forward" sales may rear their ugly head.

(Read More: Scenes From Hurricane Sandy.)

Some retailers may simply use Sandy as an excuse. Weather is a favorite scapegoat for retailers to explain good or bad numbers, and retailers sometimes blame a slow end to October and a slow start to November on store closings etc. This was used post-Irene by Gap, JC Penney, TJX, Saks, and Macy's.

And then there were the retailers like Limited who just put up good numbers, no excuses.

Stacey Widlitz is the President of SW Retail Advisors Inc. She has worked at UBS, SG Cowen, Fulcrum Partners and in 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for 5 years. Follow Stacey on Twitter @StaceyRetail.

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