MISCELLANEOUS - 26 September 2017 - by BlogLux
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Irma adds to US luxury retail woes


Hurricane Irma made landfall minutes before Victoria Beckham’s SS18 show in New York. As editors, critics and buyers sat for the collection, the question atop many minds was what, exactly, the damage would be. For an industry already struggling to vamp up growth, the hurricane proved a new foil. Beyond the closed stores, damaged goods and delays in inventory deliveries, Ken Downing, fashion director of Neiman Marcus, fretted about something more significant: will the tourists and snowbirds return to Florida when the region recovers? “It affects the psyche of the customer and their excitement to travel and their willingness to spend,” said Robert Burke, the founder of a namesake luxury brand consultancy of the natural disasters. “This accelerates the potential lack of traffic, which is a concern for hubs like Miami, which is heavily reliant on tourism.”
 
Financial markets were quick to mark down the prospects of many retailers in the days before Irma hit Florida, which followed a devastating blow from hurricane Harvey in Texas. Neiman Marcus, which is particularly sensitive because of its presence in both Florida and Texas, saw its debt prices fall to a record low. In late August, the cost to insure against a default by Saks Fifth Avenue-owner Hudson’s Bay hit its highest level since 2013. Both have recovered since, after the worst-case scenarios — a direct hit by the storm in Miami — failed to pass.

Karen Clark & Co, which models the financial impact of catastrophic events, had at one point forecast insured losses of more than $150bn. That figure has fallen to $25bn because the storm veered west. But the fear that at least two major US luxury markets could see a drop in the number of tourists throughout the winter season persists. Tourism can be a significant driver for brands, accounting for more than $110bn worth of sales in the country last year.

The Galleria, Houston’s high-end mall, home to Gucci, Saks and Neiman Marcus, was shut down for four days due to Harvey. Many retailers didn’t reopen for a full week, and customer traffic has remained slow in the weeks since, according to a spokesperson for the mall. Mr Burke noted that the longer-term effect on traffic would depend on how long it took for hotels to complete repairs and for consumers to regain confidence in travelling to the region. The effects have been felt from Bal Harbour to Orlando. He added that recovery could take months, with natural disasters often spurring customers to “reassess their priorities” on spending on luxury goods. But I think that the consumer will be back there,” he said. “They’re not going to take a year off.” Spokespeople for Saks and Neiman Marcus said their stores were reopening as conditions improved.

Simeon Siegel, a retail analyst at Nomura Instinet, noted that the damage from the recent natural disaster in Texas could even give some retailers an “excuse” when they report earnings this year, despite the other factors affecting the sector. “We truly apologise for sounding so callous,” Mr Siegel said. “But the reality is, ‘blaming’ the hurricane for a weaker fourth quarter may end up proving a helpful excuse for companies.”