An analyst breaks down how natural disasters like hurricanes and fires impact Home Depot and Lowe’s (HD, LOW)


Home Depot

Home Depot and Lowe’s tend to benefit from natural disasters because of the nature of the home-improvement business.
Both companies also have centers dedicated to emergency preparation and response, and they donate millions of dollars and a robust assortment of resources to disaster relief.
Business Insider spoke to Seth Basham, the managing director of equity research at Wedbush Securities, about how different natural disasters affect the home-improvement retailers.

We’re living in an age of natural disasters.

Hurricanes are becoming stronger and more devastating. Thanks to a warming atmosphere, these storms are capable of driving deeper and deeper inland, leaving an even wider swath of destruction in their wake.

Meanwhile, on the West Coast, deadly wildfires are so increasingly common that some experts have argued that the very concept of a “fire season” is a relic.

And it’s not going to get any better. In its summary of the The National Climate Assessment, the Weather Channel reported that extreme weather brought about by global warming has “already become more frequent, intense, widespread or of long duration.”

Read more: Americans are pumping the brakes on home remodeling, and that might spell bad news for Home Depot and Lowe’s

These extreme weather events typically result in casualties and shattered lives. But two retailers in particular could, in some instances, benefit from damage wrought by natural disasters: Home Depot and Lowe’s. And, as the rise of extreme weather shows no sign of abating, this trend is only going to continue as consumers flock to home-improvement stores in order to repair their damaged properties.

Business Insider spoke to Seth Basham, the managing director of equity research at Wedbush Securities, about how the Camp Fire — which claimed at least 86 lives as it raged across California in November — stood to impact the two home-improvement retailers.

“The rebuilding effort will obviously require a fair amount of goods that Home Depot and Lowe’s sell,” Basham told Business Insider. “To the extent that you have homes burn down and you’re rebuilding, there’s going to be a lot of activity in Home Depot and Lowe’s’ stores.”

Basham added that not all storms have the same effect on the home-improvement market. Wildfires are hard to predict, but a trackable disaster like Hurricane Harvey can bring about a “pre-catastrophe preparation” boost to the stores, in addition to recovery-related spending. In 2017, the Associated Press reported that hurricane-related sales for both companies spiked in the aftermath of the hurricane season.

Read more: A look inside Lowe’s emergency command center, where employees monitor natural disasters like hurricanes and deploy supplies to devastated parts of the country

In the case of a sudden disaster like the Camp Fire, or even a random calamity with no relation to the weather like the recent Alaskan earthquake, the retailers won’t even feel the bump for a few quarters.

“It typically lags one to two …read more

Source:: Business Insider

      

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