U.S. Consumer_ LA Fire Exposure Analysis across Consumer Discretionary (Hardlines, Softlines & Restaurants)

Summary of the Conference Call on LA Fire Exposure Analysis Industry Overview - The analysis focuses on the U.S. Consumer sector, specifically within Consumer Discretionary categories including Hardlines, Softlines, and Restaurants due to the ongoing wildfires in the LA area [1][2]. Core Insights - Impact of Wildfires: Historical data indicates that natural disasters like wildfires can lead to an immediate negative impact on sales, followed by a potential recovery in certain categories [1]. - Current Situation: As of January 12, 2025, the LA wildfires have been ongoing for six days, with significant destruction reported, including over 12,000 structures and more than 150,000 residents under evacuation orders [2]. - Store Exposure Analysis: The analysis categorizes companies based on their proximity to fire sites and areas affected by air pollution, using government data and company store location data [3]. Sector-Specific Findings U.S. Broadlines, Hardlines & Food Retail - Exposure Level: Minimal direct exposure to fire zones; no stores are located within the fire zones, and only a few are within a five-mile radius. Indirect exposure to the greater LA metro area is low to mid-single-digit percentages [8]. - Sales Impact: Expected slight negative impact on comparable sales due to store closures and reduced customer traffic from evacuations and air pollution [8][9]. U.S. Specialty Retail, Apparel & Footwear - Exposure Level: Limited direct exposure with only one store inside the fire zones. Certain retailers like JWN, ROST, and URBN are more susceptible to indirect exposure due to their locations in the greater LA area [13][14]. - Sales Impact: Anticipated slight sales headwind and negative impact on comparable sales due to store closures and reduced traffic [13]. U.S. Restaurants - Exposure Level: Most restaurants have minimal direct exposure, with only a few in the fire zones. However, some companies like Del Taco (~23% exposure), Kura Sushi (~18%), and Jack in the Box (~13%) have higher indirect exposure due to their presence in California [17]. - Sales Impact: Expected slight negative impact on comparable sales due to potential closures and reduced customer traffic from evacuations and air pollution [17]. Additional Insights - Recovery Potential: Some sectors, particularly home improvement and furnishings, may recover lost sales over time as consumers seek to rebuild and repair homes post-disaster [9]. - Geolocation Data: Specific retailers like RH have a higher exposure, with 7.5% of its U.S. store base located in areas affected by air pollution. Other notable retailers include TGT and COST, both with over 5% of their stores in the affected area [10]. Conclusion - The ongoing wildfires in LA present both immediate challenges and potential long-term recovery opportunities for various sectors within the U.S. Consumer industry. The analysis highlights the need for companies to adapt to changing consumer behaviors and market conditions in the aftermath of natural disasters [1][9].