Katrina expected to hamper retail

SEPT. 9 | Many stores shut by Hurricane Katrina are back in business, but storm-related problems are expected to linger into the fourth quarter.

Opinions vary, but retailers believe Katrina could shave off between 5% and 10% from previously anticipated holiday sell-through and rental revenue. The flooded Gulf Coast region represents only a couple percentage points of the industry’s DVD business, and New Orleans is at the hub of a metropolitan area ranked just 43rd in market reach.

But steep gas prices, partly stemming from Katrina-downed oil refineries, should bite into retail activity nationwide through the end of the year. And Congress has projected the loss of 400,000 jobs as a result of the natural disaster, causing economic ripples sure to hurt retail.

“We’re estimating that we could see 10% of gross revenue gone from the industry in the fourth quarter,” Video Buyers Group president Ted Engen said.

Shortly following the 9/11 terrorist attacks, rentailers reported customer spikes as people looked for an entertainment escape from the horrific news coverage. But rentailers say there’s no such uptick apparent in the aftermath of Katrina.

In the days leading up to the storm, several Florida video stores did enjoy an uptick in foot traffic as customers were hunting for entertainment to wait out the weather (VB, 9-5).

“We saw normal patterns over the weekend,” Netflix spokesman Steve Swasey said. “Outside of the Gulf, people are contributing more money to their church or American Red Cross, but they’re still going about their daily life.”

By last week, retailers in the affected areas were increasingly able to specifically assess store damage. Many also were putting together game plans to deal with hurting stores and clients.

Wal-Mart has re-opened 40 stores from last count, with 17 still closed. Nine of the chain’s facilities have major damage, 41 moderate and 39 have either minor problems and/or loss of merchandise.

The chain’s estimated 34,000 employees displaced at some point by Katrina are eligible for Wal-Mart cash assistance, up to $1,000 each.

Ventura Distribution executive VP and general manager Jim Weatherson feels upbeat that many Wal-Mart stores are operational again.

“But who knows how and when [they will return to pre-Katrina form],” Weatherson added. “With the volume they move, [Wal-Mart] does impact your business.”

Blockbuster has opened 27 locations, with 34 company-owned stores and four franchisees still closed in Louisiana and Mississippi. A spokesperson said that Katrina-hit customers will not be charged for any checked-out, lost or damaged product.

Netflix is sending e-mails to Gulf Coast members informing them that they are likewise not responsible for returning copies. The online service is writing them off as lost. Netflix customers who fell victim to Katrina also are being told their monthly sub fees for August and September are being waived.

Phone calls are still not getting through to parts of Louisiana, Mississippi and Alabama, but Netflix officials are confident most e-mails have been received.

Wholesaler WaxWorks Video went back to servicing its eight Katrina-affected stores within a week. Its president, Kirk Kirkpatrick, hasn’t noticed or heard of any surge in rentals due to Katrina.

“There just haven’t been a lot of really good titles out there,” he observed.

Depending on chains’ wishes, wholesalers and studios are either stopping shipment of titles to closed stores or re-routing titles to working stores.

“If you look at the amount of people affected, it’s a very small percentage,” Ingram Entertainment executive VP purchasing and operations Bob Webb said. “But … people aren’t going to have as much disposable income. Some of that income will be going to charitable donations, [and] that’s going to affect people going to the movies and renting at home.”

Others were more sanguine.

“Our industry is not recession-proof, but it’s about as recession-proof as you can get,” Image Entertainment senior VP sales Richard Buchalter said. “I can’t totally dismiss what others are saying. But I think the effect will be minimal.”