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Retailers Bulk Up to Rebuild the Gulf Coast

Katrina's damage has created a huge business opportunity for Lowe's and Home Depot. Both are boosting inventory and staff in the region.

October 18, 2005|From Associated Press

Ronald Hill was moving quickly on a recent morning at a Home Depot in Biloxi, Miss., loading a trailer with slabs of sheet rock. He had a house to rebuild after Hurricane Katrina ripped through his neighborhood.

Hill, who has already spent $13,000, will spend an additional $47,000, buying "basically, everything but the studs and bricks."

Katrina's devastation has created a huge business opportunity for home-improvement retailers Home Depot Inc. and Lowe's Cos. With both companies expected to sell billions of dollars in lumber, sheet rock and other supplies to homes and businesses, they plan to increase their staffs in the region, and Home Depot, the nation's largest home-improvement merchant, is thinking about opening more stores.

"There is going to be a whole new network to support the rebuilding along the Gulf Coast," said Jim Neal, a strategist at consulting company Kurt Salmon Associates. He foresees the retailers adding new distribution centers and increasing their store count beyond what they currently operate in the area pummeled by both hurricanes. Home Depot operates about 60 stores in the afflicted region, and Lowe's has about 45.

Already, Home Depot -- which set up six temporary sites stocked with lumber and other supplies along the Gulf Coast -- is searching for more locations in New Orleans, Port Arthur, Texas, and Lake Charles, La., said Executive Vice President Carl Liebert.

"This is a sustained effort," Liebert said.

Meanwhile, No. 2 Lowe's has created new selling areas adjacent to its stores in the region and stocked them with additional lumber and other related products.

"We need to build the best level of service possible," said Karen Cobb, a spokeswoman at Lowe's. Cobb declined to say whether Lowe's would be adding more stores beyond the three it had already planned before Katrina hit Aug. 29 -- in Waveland, Miss.; South Metairie, La.; and Crowley, La. All three are expected to open next year.

Analysts couldn't put a dollar estimate on the rebuilding, but Burt Flickinger III, managing director for New York-based Strategic Resource Group, estimated that there was a $4-billion potential sales opportunity for all retailers in the region just for cleanup and minor repairs.

The big companies are incurring higher expenses to increase their Gulf Coast presence and to transport workers and merchandise to the area. But those costs should be offset long-term by sales that will grow out of customer loyalty, analysts said.

"The public confidence and trust in Home Depot and Lowe's is at an all-time high, where public confidence in the government is at an all-time low," Flickinger said. Their efforts are providing a "halo effect," he said.

Over the last few years, Lowe's and Home Depot have refined the way they respond to natural disasters, and after last year's four hurricanes in Florida, they further adjusted their emergency procedures. Within 24 to 48 hours after hurricanes Katrina and Rita struck, the retailers were able to reopen most of their stores. As of Monday, only two Home Depot stores remain closed -- one in New Orleans and the other in Chalmette, La., a suburb of New Orleans -- while Lowe's has one unit, located in New Orleans, that remains shuttered.

Home Depot credits its speedier response in part to the consolidation of its crisis command center on one floor at its Atlanta headquarters. In the past, the staff, which includes teams from its logistics, human resources and merchandising departments, was dispersed on different floors. Since the days before Katrina, Home Depot has dispatched more than 4,000 trucks packed with supplies such as generators, tarps and plywood and almost 2,000 employees to help out.

Meanwhile, Lowe's, based in Mooresville, N.C., turned to its hurricane war room in nearby Wilksboro, N.C., to coordinate the delivery of supplies to the affected region in the days before and after the hurricanes. Cobb noted that the company has been able to better use its regional distribution centers to maximize the speed of deliveries.

At a Lowe's in Biloxi recently, people were streaming in and out of the store, clutching everything from paint and toasters to chain saws. Flatbed trucks filled the parking lot. Ed Harrington, an assistant store manager, said the store was getting 15 to 20 deliveries a day, and his employees were working six days a week to keep the shelves stocked.

"They're waiting at the door when we open and waiting when we close," he said.

But even with such efforts, the retailers are finding that keeping up with customers' demands is a challenge. The Lowe's and Home Depot stores in Biloxi are usually packed with customers, and merchandise sells out fast. The crowds are only expected to get bigger as insurance checks arrive.

"[The stores are] getting it in, but there are so many people coming in to get the materials," said Carl Christensen, a professional carpenter and painter who was at the Home Depot in Biloxi recently. He says getting the items he needs hasn't been easy at Home Depot or Lowe's; he's looking for wood and other supplies to rebuild his 3,000-square-foot home in Saucier, north of Gulfport.

Christensen said he had about $20,000 in repairs to do on his house. He expects to do the work himself.

"The way I'm doing it, I can't afford to hire it out," he said. "I'm probably looking at two to four months."

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