A carnival atmosphere prevailed at our local Home Depot (NYSE:HD) this past Saturday as scores of shoppers snapped up storm-preparedness items like flashlights, headlamps, batteries, and bottled water. Employees were on the scene, setting up new displays as quickly as the old ones were depleted. People were buying, not frantically, but consistently and in mass quantities. It sure looked to me like a profit-padding dream come true for the home improvement retailer.
Big-box home supply centers inundated with shoppers
Both Home Depot and Lowes (NYSE:LOW) were the storm-supply stock-up destinations of choice for shoppers preparing for Hurricane Sandy, aka Frankenstorm, this past weekend.
Storm supplies such as batteries, flashlights, and generators were already low or non-existent by Saturday morning at a Home Depot in Norwalk, Conn., while battery-powered sump pumps sold out quickly, and bottled water supplies were fast approaching critical levels in Cherry Hill, New Jersey.
Lowes had its fair share of activity, too. Just about anything battery-powered was hot at the store in Springfield, Mass., while lanterns, generators, and gas cans were among the first items depleted. Generators were a big seller for the retailer, and lines of people waited at various store locations over the weekend waiting for new shipments to arrive.
Not all businesses will prosper from Sandy
Property and casualty insurers, spooked by the predicted caliber of the storm, are in full preparation mode. Both Travelers (NYSE:TRV) and Chubb (NYSE:CB) have a heavy presence in the Northeast, where Sandy is expected to cause some of the billions of dollars of damage experts are predicting, and have put claims adjusters on high alert.
Although storms like Sandy are becoming more common, insurers reported a brighter Q3 recently due to lower weather-related catastrophes this year. Travelers posted record profits this past quarter, blowing past estimates while reporting higher prices for its insurance products and losses down 85% year over year. For Chubb, losses shrunk to $17 million compared to $420 million last year.
One Fool's take
For Home Depot and Lowes, already riding the wave of a surging housing market, storm clouds truly do have a silver lining, and predictions regarding future severe weather due to climate changes present an excellent opportunity for profit and growth. What I see as especially important is the fact that people consider these retailers the preferred source of storm supplies, whether because of the lack of smaller hardware stores or simply because of these two chain stores' ubiquity. They need to keep their shelves stocked during such emergencies, though, or they will squander this opportunity -- there were, in my opinion, too many reports of both stores running out of critical supplies.
For insurers, research on climate change indicates that the industry needs to plan better as well, improving on the current modeling techniques for weather-related risks, as well as becoming more involved in the push for cleaner, less carbon-based energy sources. Although insurers were able to gain some ground this year, changing weather patterns appear to be here to stay, and being better prepared is the industry's only option if it is to thrive -- and keep its investors from running scared.