Home-improvement retailers are expected to benefit from the initial sales boost caused by Hurricane Dorian, as residents of Florida buy generators, batteries and flashlights in preparation for the storm. But Home Depot Inc. /zigman2/quotes/208081807/composite HD -0.75% , Lowe's Cos. /zigman2/quotes/205563664/composite LOW +0.24% and Floor & Decor Holdings Inc. /zigman2/quotes/206904436/composite FND +2.46% also have exposure in the form of the stores that are potentially in the storm path, Jefferies analysts wrote Friday. Home Depot has 153 stores in Florida equal to 8% of its U.S. fleet, while Lowe's has 126 stores equal to 7% of its U.S., analysts led by Jonathan Matuszewski wrote in a note to clients. Floor & Decor has 18 stores, equal to 18% if its fleet. "While not all stores are in communities expected to be impacted, each retailer has clear exposure," the analysts wrote. The retailers are expected to enjoy demand for flooring once the rebuild begins after any damage, and the tailwind could be big, they wrote. Hurricane Matthew in the third quarter of 2017 lead to an initial sales lift of $100 million for Home Depot, they noted, while Lowe's cited a 60 basis point lift from weather. In the third quarter of 2019, Hurricanes Irma, Nate and Harvey generated a $282 million sales lift for Home Depot and a 140 basis-point comp lift for Lowe's. Still, "similar to past significant weather events, storm-related expenses will be incurred,' said the note. "Recall, HD reported costs of $167M to drive $650M in hurricane-sales during F'2H18, encapsulating the months Irma/Nate/Harvey hit and the next quarter. Some degree of gross margin deterioration for home improvement centers is likely given the profitability profiles of in-demand SKUs like plywood and generators." Home Depot shares were up 0.3% Friday, while Lowe's was flat. Floor & Decor rose 1.2%.
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Home-improvement stocks mixed as hurricane expected to both help and hurt