By James Rogers
As Florida braces for Hurricane Ian’s landfall, a range of companies — from providers of rebuilding supplies to food retailers and parts of the insurance sector — will likely feel the impact.
The hurricane is expected to cause catastrophic storm surges, winds and flooding on the Florida peninsula starting Wednesday, the National Hurricane Center warned in a bulletin released at 8 a.m. Eastern time. The hurricane has been intensifying as it approaches Florida’s southwestern coast, with top winds of 155 mph.
A range of companies will also likely feel the impact of the hurricane, but for them, it won’t necessarily be negative.
“Hurricanes are of course disasters for those in the path, but can have positive impacts on retailers’ sales, even as most companies go out of their way to help [affected] communities,” wrote D.A. Davidson analyst Michael Baker in a note released on Wednesday. Home Depot Inc. /zigman2/quotes/208081807/composite HD -2.21% , Lowe’s Cos. /zigman2/quotes/205563664/composite LOW -4.11% and BJ’s Wholesale Club Holdings Inc. /zigman2/quotes/203668982/composite BJ -1.85% should see the biggest top-line bumps due to geographic and product exposure, he said.
Home Depot shares, which have fallen 36.7% this year, rose 2.4% on Wednesday, and Lowe’s, which has declined 25.7% in 2022, was up 2%, both outpacing the S&P 500 Index’s /zigman2/quotes/210599714/realtime SPX -1.88% gain of 0.7%. However, B.J’s, which has risen 13% this year, was down 0.4%.
The S&P 500 Index is down 23% this year.
Historically, Home Depot and Lowe’s have seen hurricane-related bumps of several hundred million dollars, according to Baker. Hurricane Isaac increased Home Depot’s sales by $377 million in 2018, he added, mostly in the fourth quarter, due to cleanup and rebuilding efforts.
“Food retailers also usually see a positive top-line bump around these events — this is mostly in the pre-buying phase, and with some impact during the immediate aftermath,” Baker wrote. “Sales are not as impacted during the rebuild phase.”
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This includes Target Corp. /zigman2/quotes/207799045/composite TGT -5.32% and Walmart Inc. /zigman2/quotes/207374728/composite WMT -1.45% , as well as clubs such as BJ’s Wholesale Club and Costco Wholesale Corp. /zigman2/quotes/201191698/composite COST -1.65% , the analyst said.
Target shares, which have fallen 34.6% this year, were up 2% on Wednesday, while Walmart, which is down 9.2% in 2022, was up 0.3%. Costco, which is down 15.7% this year, gained 0.2%.
“Home Improvement could see pre & post-storm lifts,” wrote Wells Fargo analyst Zachary Fadem in a note released on Wednesday. “Historically, home improvement retailers (and TSCO) benefit from pre-storm preparation as consumers purchase items such as generators, lumber and provisions.”
Following major storms, cleanup, repairs and rebuilding efforts tend to affect Home Depot, Lowe’s, Floor & Decor Holdings Inc. /zigman2/quotes/206904436/composite FND -4.05% , Tractor Supply Co. /zigman2/quotes/202009274/composite TSCO -1.93% and auto-parts retailers Advance Auto Parts Inc. /zigman2/quotes/202065737/composite AAP -2.79% , AutoZone Inc. /zigman2/quotes/209114484/composite AZO -1.63% and O’Reilly Automotive Inc. /zigman2/quotes/207206119/composite ORLY -1.81% , according to Fadem. “In the event of a replacement, auto dealers such as Carvana Co. /zigman2/quotes/206651606/composite CVNA -11.15% could benefit,” he wrote, but noted that major weather events could also reverse recent improvements in the supply of used vehicles, which is an important potential headwind.
The insurance sector could also feel the impact of Hurricane Ian. “According to the National Hurricane Center, significant storm surges pose the highest risks across Fort Myers to Tampa, with Tampa particularly vulnerable stemming from low-lying properties and coastline accentuating storm surges,” wrote KBW analyst Meyer Shields in a note released Tuesday. “Homeowners’ policies generally exclude flood coverage, but personal auto (a flooded vehicle is typically a total loss) and commercial property policies cover flood.”
KBW has compiled a list of the primary insurers with the most direct written premium for catastrophe-exposed lines in states in the hurricane’s projected path. AllState Corp. /zigman2/quotes/201974803/composite ALL -2.27% has the most category-exposed market share at 6.7%, followed by Progressive Corp. /zigman2/quotes/202480455/composite PGR -1.02% and Travelers Cos. Inc. /zigman2/quotes/206313935/composite TRV -1.13% .