Katrina Could Cost Dealers $300M In Q4

By John Laposky -- TWICE, 9/26/2005

LOUISVILLE, KY. — Hurricane Katrina's devastation of the Gulf Coast could impact CE and majap retailers to the tune of about $300 million in lost fourth-quarter sales, according to a study by TWICE research partner The Stevenson Company.

With an estimated 285,000 housing units and their contents destroyed, Stevenson also projects that $1.36 billion in consumer electronics and appliances will eventually need to be replaced, with a price tag of about $4,774 per household.

Based on U.S. Census Bureau data, Federal Emergency Management Agency (FEMA) information and Stevenson's own internal tracking measures, the report examined the effects of the storm on the eight hardest-hit metropolitan statistical areas throughout Alabama, Louisiana and Mississippi, populated by almost 3.5 million people and more than 1.3 million households.

The area in the storm's wake accounts for about 1 percent of total U.S. CE industry sales and 1 percent of major appliance sales. Lost sales for the rest of the year for CE dealers projects to between $235 million and $270 million. Losses for majap dealers projects to about $30 million.

Traditionally, the fourth quarter is the biggest selling quarter of the year for CE dealers, with between 35 percent and 40 percent of annual sales occurring from October through December. Fourth–quarter appliances sales make up between 26 percent and 28 percent of annual sales.

Approximately $680 million in CE products and $683 million worth of appliances were washed away with their households. That estimate is for hardware and does not account for lost products such as DVDs, CDs, software, media and accessories.

If not for the fact that the devastated areas have some of the lowest household-income averages in the nation, the replacement number could have been much higher. For example, while the household ownership of laundry appliances is pegged at 90 percent nationally, in the impacted area it is estimated at 75 percent.

The report acknowledges the difficulty in calculating the effects of such a devastating event. Stevenson's estimate of $1.36 billion of lost consumer electronics and appliances “is only a small piece of the economic toll on this region,” the report states. “Previous experience with other large hurricanes shows that it takes months and years to rebuild from these storms. Due to the unprecedented magnitude of the destruction to the infrastructure of many of these towns and cities, it remains to be seen how quickly the economies will be able to bounce back.”

4th Quarter Sales Impact Of Katrina

Product category	Q4 % of annual sales	Annual sales in impacted area	Lost sales in Q4
CE	35%-40%	$1.5 billon	$235M-$270M
Majaps	26%-28%	$250 million	$29M-$32M
Source: The Stevenson Company ©TWICE 2005

Areas Impacted

Intensity of Impact	Metropolitan Statistical Area (MSA)	Population (1,000's)	Households (1,000's)
Extreme	New Orleans, LA	1,300	500
Significant	Gulfport, MS	250	100
	Pascagoula, MS	155	60
Considerable	Baton Rouge, LA	730	270
	Houma, LA	200	70
Moderate	Lafayette, LA	250	83
	Lake Charles, LA	195	73
	Mobile, AL	400	150
TOTAL REGION		3,480	1,306
Source: The Stevenson Company ©TWICE 2005

Housing Units To Be Replaced

Intensity of Impact	Metropolitan Statistical Area (MSA)	Households to be Replaced (1,000's)
Extreme	New Orleans, LA	256.1
Significant	Gulfport, MS	10.1
	Pascagoula, MS	5.8
Considerable	Baton Rouge, LA	2.1
	Houma, LA	8.2
Moderate	Lafayette, LA	0.9
	Lake Charles, LA	0.8
	Mobile, AL	1.5
TOTAL HOUSEHOLDS TO BE REPLACED		285.5
Source: The Stevenson Company ©TWICE 2005

Cost of CE Products To Be Replaced

Type of Product	Products Being Replaced	Total Replacement Market ($ millions)
Video	TV's, VCR's, DVD players, satellite equipment	$320
Audio	Radios, stereos, portable players, etc.	40
Computer	Desktops, notebooks, PDA's, printers, etc	175
Camera	Digital cameras, camcorders 35mm cameras, etc.	100
Telephone	Telephones – corded, cordless wireless, answering machines	45
TOTAL		$680

Appliances To Be Replaced

Intensity of Impact	Metropolitan Statistical Area (MSA)	Appliances to be Replaced (1,000's)
Extreme	New Orleans, LA	1,362
Significant	Gulfport, MS	53
	Pascagoula, MS	31
Considerable	Baton Rouge, LA	43
	Houma, LA	11
Moderate	Lafayette, LA	5
	Lake Charles, LA	4
	Mobile, AL	8
TOTAL APPLIANCES TO BE REPLACED		1,517

Replacement Costs Per Household
($ in millions)

Appliances Replacement Costs	CE Replacement Costs	Total $'s	Cost per Household (285,500 HH's)
$683	$680	$1,363	$4,774
Source: The Stevenson Company ©TWICE 2005

Costs Of Replacement

Average Cost of an Appliance	Number of Units to be Replaced	Total Replacement Market ($ millions)
$450	1,517	$683
Source: The Stevenson Company ©TWICE 2005