Retailers are notorious for blaming the weather when things go south for their business. But the truth is it can affect sales big time. When you have an unnaturally cold Spring, summer clothing sales will not flourish but a natural disaster such as a hurricane can spell disaster for suppliers, buyers and the business as a whole.
To take a severe case, consider women’s apparel retailer A’gaci. In the year before A’gaci filed for Chapter 11 the first time, the Caribbean and U.S. had been pummeled by a series of some of the most destructive hurricanes in recorded history. This did not bid well for A’gaci.
A’gaci had the misfortune of operating the majority of its stores at the time in Texas, Florida and Puerto Rico — all places hit hard by hurricanes in 2017. The storms forced the temporary closure of 12 A’gaci stores in Florida, eight in Texas and four in Puerto Rico, two of which were still closed by the time A’gaci filed for Chapter 11 in January 2018.
In that list were some of A’gaci’s most profitable stores. That catastrophic season, combined with other issues, sent A’gaci’s profit into the negative. (The retailer recently filed for bankruptcy again, this time with plans to shutter its entire physical footprint.)
A’gaci was far from the only retailer impacted during that 2017 season. Hurricane Irma alone, which ravaged the Caribbean before slamming into Florida, had an estimated $2.8 billion impact on retail, while Harvey brought a $1 billion hit to retailers, according to weather intelligence firm Planalytics. Last year’s Hurricane Florence, as yet another example, was estimated to have cost retailers around $700 million.
With climate change predicted to increase risks from natural disasters like floods, hurricanes, and wildfires, retailers likely face more operational disruption in the future. Media coverage and tumultuous seasons have increased the interest among retailers in planning for disasters, say those who work in business resilience and risk management. After years of shrugging off disaster planning, many are now starting to take a closer look at managing stores through events and protecting their supply chains from existential threats from the climate.
“This isn’t a cool topic,” Damian Walch, a managing director of risk intelligence with Deloitte, said. “It’s not something that retailers have traditionally thought about.” But, he adds, “extreme weather events are increasing. So more and more retailers are saying, ‘We have to do something.'”There are some 26,000 stores at risk. Thousands of stores across the industry lie in the path of hurricanes and flood zones as well as coastal areas expected to experience sea level rises in the coming decades. More specifically, retailers have some 1,900 facilities exposed to hurricanes and typhoons, another 6,770 exposed to rises in sea level and more than 17,000 exposed to floods, according to data provided to Retail Dive by Four Twenty Seven, a climate risk data firm recently acquired by Moody’s. This was not even something retailers considered years ago, but it is most important in today’s ever-changing climate.
“The number of 100-year weather events is getting shockingly more prevalent,” Walch said. “Hurricane Sandy in New York, the wildfires in California — these are 100-year events. And unfortunately, we’re having them every four or five years now. And it’s forcing executives to think about it.”
“Now here’s the challenge,” he adds, pointing to a retail market that has plenty of challenges and disruptions already beyond climate events. “Those same executives are trying to figure out how to grow. They’re trying to figure out in some respects how to survive.” Let’s face it with all the store closings and the worry there add weather to it and it makes for a headache that is not going to go away soon.
Courtesy Retail Dive