The destruction of the Gulf energy infrastructure will drive up prices people pay at the pump and for their heating bills, shrinking discretionary income. That will knock down by a full percentage point retail sales growth in the fourth quarter previously forecast to range from 4% to 6%, according to retail consultant Neil Stern. The brunt of those after-affects will be borne mainly by retailers catering to low- and even middle-income consumers.
"That's where things are headed," said Mr. Stern, noting that fast-feeders also likely will feel the pinch as people travel less.
Others were equally pessimistic. "Even prior to Katrina ... a lot of retailers already were feeling the pinch of rising gas prices," said Ken Perkins, president of the research firm RetailMetrics. "That's only going to get worse."
Some factors, such as good job growth and consumers' willingness to borrow, may insulate retailers. But analysts are eyeing downward revisions of retail sales estimates.
Prior to the hurricane, Economy.com was forecasting total retail sales to grow by 8% in the third quarter and 5.3% in the fourth quarter. "Those numbers will come down," predicted Scott Hoyt, director of consumer economics at Economy.com.
Indeed, No. 1 retailer Wal-Mart Stores, while reporting a same-store sales increase for August of 3.3%, last week projected sales growth of 2% to 4% for September "subject to the ongoing impacts of Hurricane Katrina and higher oil prices." But a wide range of retailers are vulnerable beyond Wal-Mart, including those that cater to lower-income consumers such as Dollar General and Dollar Tree.
"It's going to affect retailers who cater to low- and middle-income consumers," said Anthony Chukumba, an analyst for Morningstar, singling out JCPenney and Federated.
contributing: kris oser, kate macarthur