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NEW YORK (CNN/Money) -
Wall Street should've seen this one coming.
Quite often retailers shamelessly pin the blame on the sun, snow, sleet and every other climatic condition whenever their sales don't measure up to analysts' expectations.
So why not add a catastrophic Category 4 hurricane to the list as well? In some cases, Hurricane Katrina will have a legitimate, quantifiable impact on a company's business, analysts say.
For instance, restaurant and fast-food operators with significant presence in the Gulf States suffered costs due to damage sustained to their stores and loss of operating days from site closures.
In a note to clients earlier this month, Citigroup Smith Barney analyst Deborah Weinswig said she expected some discount and department store chains with notable exposure to the Gulf state region to be "negatively impacted" by the storm.
Among them, Wal-Mart (Research) and Family Dollar (Research), which both have 13 percent of their respective store base in the affected states.
Value-priced chain Dollar General (Research) has about 18 percent exposure. Federated Department Stores (Research), owner of the Macy's and Bloomingdale's chains, operates 15 percent of its total stores in the Gulf states.
The storm ate my homework
The "act of God" excuse, however, starts to look strikingly disingenuous for other companies.
Case in point: Make-up and perfume sellers Avon (Research) and Estee Lauder (Research).
Both cosmetics companies warned on their profit outlooks, partly blaming Katrina for their business woes.
Are investors really to believe that suddenly consumers are shunning lip glosses, eye shadows, nail polish and fragrances because of Katrina?
Ummm....not quite.
Retailers masking less than stellar results by using the storm as an alibi is a cheap shot, says Burt Flickinger, retail analyst and consultant with Strategic Resources Group.
"About 95 percent of the time, weather is an unrealistic excuse," Flickinger said. "Less than 5 percent of the time, there's either a very low or no relationship at all between weather and a dramatic decline in sales and profits."
Why?
Because of the seasonal nature of the industry, retailers and suppliers typically have a long-term strategy to plan out inventory.
Everything is carefully calculated, even taking into account long-term weather forecasts that could affect shopping behavior six to 10 months down the road.
"Retail planning has a very long lead time and it's tightly controlled," Flickinger said. Since plans are laid so far in advance, most companies have the wiggle room to adopt an emergency plan in the event of a natural disaster.
Observers say Wal-Mart and home improvement chains Home Depot and Lowe's demonstrated that well by implementing in-store storm readiness and response plans, including 24-hour store openings in affected areas. In fact, these retailers should see surge in buying in the post-storm period.
Another reason that Flickinger believes Katrina is a "nonfactor" in Estee Lauder and Avon's warnings is the income demographic of the region where the storm struck.
Mississippi, Louisiana and Alabama are among the most underperforming states in terms of consumer spending, he pointed out.
Said Flickinger, "After Arkansas, Louisiana and Mississippi together have one of the lowest per capita incomes in the country. This is not a huge market for a high-end cosmetics company like Estee Lauder which sells its products in upscale chains like Nordstrom and Bloomingdale's."
Morningstar analyst Lauren DeSanto said she wasn't aware of either company using the weather excuse in the past.
"I can understand the skepticism, particularly regarding Estee Lauder," she said. Avon has a more mass-market appeal compared to Estee Lauder, and perhaps a bigger market among consumers in the Gulf states.
"Avon sells to these consumers with disposable income of about $50,000 a year," DeSanto said. "As gas prices rose after the storm, it cut into their discretionary income and a bit of a pullback of products like cosmetics would follow."
In a statement Wednesday, Avon said higher fuel costs were negatively affecting its sales representatives and their customers. At the same time, both Avon and Estee Lauder have been struggling with other business challenges prior to Katrina.
Avon said it faced slowing sales in its international markets, including China, Europe and Latin America.
"Estee Lauder's seen sluggish sales for a while in the U.S.," said DeSanto. "They've had supply-chain issues, where they haven't been sourcing effectively. Some new product launches in Asia weren't particularly successful."
Additionally, the ongoing consolidation in the department store arena -- primarily Federated Department Stores merger with May earlier this year -- resulting in store closure means fewer stores for the company to sell its products, she added.
"Is weather entirely a bogus excuse? Maybe not but both these companies have been struggling for a while," she said.
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