Los Angeles, Oct. 25 - Wildfires in Southern California are exacerbating a difficult retail environment in a state already hit by declining home sales and mortgage woes that have cut into consumer spending.
With about 500,000 people evacuated, 1,600 homes destroyed, and roads closed as some 20 fires blazed at the height of this week's catastrophe, Southern California has certainly not been focused this week on shopping at the mall.
Liz Pierce, a Newport Beach-based analyst at Roth Capital Partners, said that with California making up as much as 10 percent of the total store base at certain national retailers, even a short-term sales drop can hurt.
"For lot of companies, California is a big state. It can't be a good thing," Pierce said. "People will say, 'I don't feel like buying, if anything I should be donating money."'
Besides the obvious slow-down in traffic to shopping centers -- one major mall in the San Diego area owned by Westfield Group was shuttered for three days and two others were used as staging areas for emergency services -- the fires have disrupted business at various Southern California-based companies.
Foothill Ranch-based teen retailer Wet Seal , and Callaway Golf, for example, both had to temporarily shut down their headquarters. Callaway Chief Executive George Fellows as of Thursday was still evacuated from his home.
"For us it's affected business. We shut down for three days," said Callaway spokeswoman Michele Szynal.
National chains have pointed to the wildfires as affecting sales in the state, especially in the San Diego area, as did Brian Woolf, the CEO of women's clothing retailer Cache during an earnings conference call Wednesday.
"It seems that most of these stores from (Los Angeles) down are being affected by the fires," he told analysts.
Even before the fires began, many analysts feared that slower consumer spending would hit the retail industry even during the normally buoyant holiday season. "I have been pretty negative on the holiday and this doesn't help," Pierce said of the fires.
Currently estimated to have caused hundreds of millions of dollars in damage, the fires have hit the most economically significant U.S. state that is already reeling from declining home prices and record foreclosure activity.
The state's woes had not gone unnoticed by retailers even before the fires began burning.
"California itself has been the worst region for almost a year now," said Charles Kleman, chief financial officer at women's apparel retailer Chico FAS Inc, during a presentation last week.
Other consumer companies that had complained even before the fires about difficulties from housing pressures in California include boat maker Marine Products and car dealership chain AutoNation, where new vehicle sales fell 11 percent in California and Florida in its most recent quarter.
Still, some discount retailers could gain a short-term sales gain as those with damaged or destroyed homes shop for necessities, as Wal-Mart Stores did after Hurricane Katrina in 2005.
"In the wake of a tragedy like this there are forces that would increase retail purchases and forces that would decrease retail purchases, notably a fall-off in tourism," said economist Jerry Nickelsburg of the UCLA Anderson School of Management.