Here is how Hurricane Irma is set to impact retail in the Southeast

Key Points
  • A spike in sales for some companies will be offset by sales lost to store closures and the cost of any resulting physical damage.
  • Retailers that sell apparel and discretionary items will be most negatively impacted, according to Cowen & Co.
  • Home improvement retailers should benefit in Irma's aftermath, analyst Oliver Chen said.
A customer leaves a Costco store in Richmond, Calif.
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Hurricane Irma poses a mixed bag of good and bad for retailers across the Southeast, with the storm scheduled to make landfall in Florida beginning Sunday.

Sales are expected to surge for grocers, home centers and mass merchants ahead of the storm, Cowen and Co. analyst Oliver Chen wrote in a Friday note to clients. This would — at least in the short term — positively impact names like Wal-Mart, Target and Costco within the region.

Wal-Mart has 8 percent of its fleet in Florida, or 375 facilities. Costco has 23 stores in the state, and Target operates 122 locations there, according to recent filings with the Securities and Exchange Commission.

To be sure, a spike in sales will be offset by stores closing their doors and any resulting physical damage. Wal-Mart, for example, has already announced the temporary closing of more than 20 facilities in Florida. Chen noted that Hurricane Katrina, in 2005, had a negative 1 cent per-share impact on Wal-Mart's earnings for that quarter.

Target has also said it anticipates closing additional stores in affected areas this upcoming weekend.

Chen expects the most negatively impacted retailers to include those that sell apparel and discretionary items. Retailers in malls "are unlikely to recapture lost sales," he added. This would include companies like Gap, American Eagle and J.Jill.

Home improvement retailers, such as Home Depot and Lowe's, and Restoration Hardware parent RH, should benefit in Irma's aftermath, as houses are rebuilt, the Cowen and Co. analyst added.

"On a simple basis – retailers that sell items which customers need such as food and water and home improvement items are better positioned vs. retailers that sell discretionary fashion that's not 'deep-value''"

In total, the potential economic impact from lost retail sales in the "consumer/retail" sector is expected to be $1.45 billion, according to weather analytics firm Planalytics.

Here are certain retailers' exposure to Irma in the Southeast, as calculated by Cowen and Co.:

Source: Cowen & Co., company filings

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