Fires are Burning California Retailers

The California wildfires have been playing havoc with retailers’ businesses there, as well.

In a state already hit by declining home sales and mortgage woes that have cut into consumer spending, the disruption of normal activities – about 500,000 people evacuated, 1600 homes destroyed and closed roads – Southern Californians have had other things on their minds besides shopping.

Liz Pierce, an analyst at Roth Capital Partners (Newport Beach, Calif.), said that with California making up as much as 10 percent of the total store base at certain national retailers, even a short-term sales drop can hurt. “For lot of companies, California is a pivotal state,” she said, “but these days, people are more likely to say, 'I don't feel like buying, if anything I should be donating money.’ ”

Besides the obvious slow-down in traffic to shopping centers — one major mall in the San Diego area was shuttered for three days and two others were used as staging areas for emergency services — the fires have disrupted business at various Southern California-based companies. The Wet Seal Inc. (Foothill Ranch, Calif.) was one of the local retail organizations that had to shut down its headquarters.

Even before the fires, California’s financial woes were concerning retailers. “California itself has been the worst region for almost a year now,” said Charles Kleman, cfo of Chico’s FAS Inc. (Fort Myers, Fla.).

On the other hand, it has been speculated that some discount retailers could gain a short-term sales gain as those with damaged or destroyed homes shop for necessities, as Wal-Mart, Home Depot and Lowe’s did after Hurricane Katrina in 2005. “In the wake of a tragedy like this there are forces that would increase retail purchases and forces that would decrease retail purchases, notably a fall-off in tourism,” said UCLA economist Jerry Nickelsburg.