The Windfall of Hurricanes

With all the tropical storms hitting the U.S. recently, many in the Southeast can't wait for the 2004 storm season to end. The boarding up of windows has become an all too familiar routine in Florida. With all the destruction to homes and businesses, some companies are helping Floridians protect their property and rebuild.

For example, Georgia-Pacific (NYSE: GP  ) , a major suppler of plywood, has boosted its production volume since early August, when Hurricane Charley hit. The Atlanta-based company has shipped more than 3 million pieces of plywood (double the normal volume) to Florida. That is a ton of bonded cellulose, and with thousands of home repairs needed from coast to coast, more is on the way to the Sunshine State. Despite short supplies and high demand, Georgia-Pacific has said prices would remain at pre-storm levels.

The run on plywood and generators at home improvement stores such as Lowe's (NYSE: LOW  ) and Home Depot (NYSE: HD  ) during the past month of hurricanes has kept stores near the affected areas open around the clock. For Home Depot, it's being called the biggest resupply effort in the company's history. Shipments of building supplies are running five times the normal rate as more people begin to rebuild. One store located in South Florida reported more than $50,000 in lumber sales in just one day. Many people waited in long lines for storm preparation items, and some stores served free pizza and water to help ease the stress of weary customers. I would like to suggest perhaps coffee and doughnuts for the early-morning arrivers.

Sales have surged as folks in the path of the storm stocked up on survival supplies such as flashlights and batteries. With widespread power outages, the need for generators has risen faster than the incoming waves. Briggs & Stratton (NYSE: BGG  ) , which supplies generators for Lowe's, has tripled its production of generators to keep up with the increased demand.

Both Home Depot and Lowe's have said there would be no price gouging to take advantage of hurricane victims. Lowe's has activated its "natural-disaster price suspension policy," meaning prices in affected areas are locked in for 30 days.

The stocks of all these companies have done well over the past few weeks, with Home Depot reaching a new 52-week high last Thursday. Unlike many retail establishments in the hardest-hit areas, the home improvement retailers may actually find the storms to be a boon for them. Sales are on the rise, and this could translate into healthy earnings gains this quarter. There are two months left in the 2004 hurricane season. And with the threat of more storms on the horizon, the need for protection and survival supplies won't subside any time soon.

For more Foolish talk, check out Hoarding Home Depot and Lowe's Builds on Trends.

Fool contributorKelvin Taylordoes not own shares of any of the companies mentioned.


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