Home Depot Reaps a Hurricane Windfall

Climate change and more extreme weather events are boosting the retailer’s bottom line.

The Numbers Don't Lie: Home Depot's Tepid Sales Forecast

No storm is perfect, but for Home Depot they’re all pretty good, at least financially.

Tuesday morning, the retail giant said Hurricane Matthew and its subsequent flooding poured an additional $100 million into sales coffers in the quarter ended Oct. 30. The retailer rung up big transactions on both ends of the October storm, the country’s first Category 5 hurricane since 2007. Before the winds hit, residents across the Southeast streamed into Home Depot for plywood, flashlights, tarps, and generators. After it passed, they stocked up on drywall, chainsaws, sump pumps, and lots and lots of trash bags 1 Home Depot spent about $15 million cleaning up its own storm-ravaged stores. .

Matthew killed hundreds of people in Haiti and at least 15 in the U.S. It wreaked havoc in Florida, Georgia, South Carolina, North Carolina, and Virginia. As climatologists warn that global warming is intensifying storms, retailers such as Home Depot find themselves in the critical position of helping those in need and the somewhat awkward position of benefiting financially. With massive, speedy supply chains and cavernous aisles, big box stores excel at major weather events in a way that smaller hardware stores can’t. “Through strong collaboration, we were able to get product to our communities in their time of need,” Edward Decker, vice president of merchandising, told analysts on a call Tuesday morning. 

In the grand scheme of things, Hurricane Matthew alone was no great moneymaker for the company. Representing about .5 percent of Home Depot revenue in the recent quarter, it wasn’t nearly as critical to earnings as rising home equity and a surge in big-ticket purchases were. As homeowners splurged on flooring, new roofs, and appliances, transactions over $900 increased by 11.3 percent, according to the retailer.

Still, remodeling activity is expected to taper off in the new year, according to Harvard University’s Joint Center for Housing Studies. Intense storms such as Matthew, however, are not. This may give stores like Home Depot an unplanned boost in the years to come that they may be loathe to forecast. Call it the generator indicator.

The National Oceanic and Atmospheric Administration said that from 2005 to 2016, the U.S. had an annual average of 5.2 weather and “climate disaster” events, each causing more than $1 billion worth of damage. However, from 2011 to 2015, that average jumped to 10.8 events. From January through September 2016, U.S. residents had already prepped for and cleaned up after 12 such calamities, from tornadoes to droughts to biblical hailstorms. Four of those events were inland floods, “a notable record,” according to NOAA.

Reinsurance giant Swiss Re said the insured losses from natural and manmade catastrophes across the globe surged by 51 percent in the first half of 2016, to $31 billion. Earthquakes in Japan and Equador, along with wildfires in Canada, fueled the fast-rising tab. 

Climatologists may be unable to sway skeptics when it comes to global warming’s role in exacerbating storm cycles, as United Nations Secretary General Ban Ki-Moon has been trying the past few days with U.S. President-elect Donald Trump. But they can buy shares of Home Depot and other companies that sell plywood and generators.

If the storms keep rolling through, the investment gains may be enough to cover Home Depot’s $7,000 “life pod,” better known to Wizard of Oz fans as a storm shelter. The pod is made out of “yacht quality” materials and holds 10 occupants—of your choosing, of course.

 

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