November 3, 2012 in Business

Corporations predict storm losses

Too soon to put price tag on damage, but Delta, Verizon say they’re taking hit
Matthew Craft Associated Press
 

NEW YORK – Corporate America is just starting to add up its losses from Superstorm Sandy, expected to be one of the most expensive storms in U.S. history.

Delta Air Lines and Verizon were the first two major companies to state the obvious, saying Friday that they will lose money because of the storm.

Delta had to cancel thousands of flights, while Verizon had cell towers blown out of commission and its offices flooded. Early estimates say Superstorm Sandy may have caused up to $50 billion in economic damages, after shutting down the country’s largest transportation system and knocking out power for millions of homes and businesses.

As companies turn the lights back on and employees return to their desks, experts say more companies will follow Delta and Verizon in the coming weeks as they tally the storm’s costs.

“We know trees are down, power is out and houses have been swept away,” said Dan Greenhaus, chief global strategist at the brokerage BTIG in New York. “But it’s going to take a lot of time to assess the damage. This could be a story well into the first few months of next year.”

Transportation around New York City slowed to a crawl in the days before the storm hit. Airlines stopped using the region’s airports, causing a chain reaction of cancellations in other cities across the country. More than 20,000 flights were canceled, according to FlightStats.

Atlanta-based Delta Air Lines Inc. said Friday it lost $45 million in sales from canceling more than 3,500 flights in the final days of October.

Verizon Communications Inc. is still working to restore services for many of its customers and warned that Sandy could put a “significant” hit on its results. The New York-based company, however, cautioned that it’s not yet possible to put a specific dollar figure on the costs.

Some companies such as Lowe’s Cos. and Home Depot Inc. could see sales pick up as people load up on generators and other supplies needed for rebuilding.

In Brooklyn, customers have crowded into Leopoldi’s True Value Hardware on a bustling stretch of Fifth Avenue. “Business has tripled,” said Joe Leopoldi, the store’s owner. But it’s not the kind of business he’s happy about.

People have started making the trip to his store from nearby Red Hook, a neighborhood ravaged by floodwaters, where many homes and businesses remain without power. These new customers are buying candles, air mattresses and camping stoves. Leopoldi said he’s now out of gas barbecue grills and has sold six chain saws to customers needing to cut up downed trees.

“That’s more chain saws than we normally sell in a year,” he said. “This isn’t a typical hardware week.”

Retail stores, excluding restaurants, stood to lose at least $25 billion in sales during the week of the superstorm, according to Burt Flickinger III of the retail consultancy Strategic Resource Group. Because of the storm, he cut his forecast for holiday sales to a 2.1 percent increase over last year from the 3.2 percent increase he had predicted earlier.

Orlando, Fla.-based Darden Restaurants Inc., parent of Olive Garden and Red Lobster, by Friday had reopened all but 21 of the 260 restaurants it had closed Monday. Flooding kept two restaurants closed, while the rest had no power. Of the 21 still shuttered, 20 are in New York and New Jersey, and one is in Connecticut.

During their monthly sales reports on Thursday, Costco Wholesale Corp., Nordstrom and Rite Aid all said they expected their November sales would suffer.

© Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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