The last winds of Hurricane Katrina were whipping the loblolly pines of southern Mississippi when Greg Newman showed up before 5 a.m. to open the Home Depot store he runs here. He found six customers huddled at the door in pitch darkness, wanting generators, and that afternoon, the line grew to 600.
He hit the phones to reel in truckloads of the precious machines. The store itself came to life on generator power, and soon the cash registers were ringing. By evening, Newman's customers had their lights and refrigerators working. "Nobody went home without a generator that night," he said.
In the days since Katrina hit, his store's sales volume has quintupled.
It's an unsettling but inescapable fact about natural disasters on the scale of Hurricane Katrina: Even before the tears stop flowing, the money starts churning. For companies in the right place with the right products and services to offer, disasters can be amazingly good for business.
Hurricane Katrina is shaping up as the largest natural disaster in U.S. history, and it has sparked huge disruptions to the economy, crimping energy supply lines and leaving up to 1 million people homeless and out of work.
No one can be certain about the long-term consequences. But some economists say the rebound effect of disaster recovery can be so powerful that it lifts the national economy. Standard & Poor's predicts a hit to economic growth from Hurricane Katrina in the next month or two, followed by a hurricane-induced boom that should peak late in the year.
"After the hurricane, after the disruption and damage, what we are going to see is a big bounce back," said Beth Ann Bovino, a Standard & Poor's senior economist. "You've got to rebuild the homes, so construction will get a big boom. You need engineers to repair damage to pipelines and industrial plants. You are going to need health care workers to tend to people."
A boom is still the furthest thing from the minds of many business people in the disaster zone. Some haven't been able to reopen, and many businesses near the Gulf Coast, including the critically important casinos of southern Mississippi, were wiped off the map. Not only have lives been lost, workers displaced and families traumatized, but the economic pain is acute, and will total billions of dollars in lost revenue in the near term.
But experience has shown that companies that weather disasters and the first few weeks of poor cash flow stand to benefit in the long run as people start spending huge sums to get their lives back in order.
After Hurricane Andrew hit Florida, Mississippi and Louisiana in 1992, insurance companies paid out nearly $21 billion in claims in today's dollars. That's a sum larger than the annual economic output of 96 countries. Hurricane Katrina is a bigger disaster, and early indications are that the insurance payout could hit $35 billion. The government will spend many billions of dollars more.
Surviving companies find themselves in a delicate spot. Those that have reopened are already finding potential business opportunities. But they're not keen on being seen as exploiting friends and neighbors in a time of tragedy. Many have pulled all advertising and are scratching their heads about how to proceed.
The big national chains -- always among the first beneficiaries of a disaster boom -- have gone out of their way to donate goods and money and lend their expertise to disaster relief. They're also enforcing strict policies against price gouging. Home Depot Inc. has frozen the prices of items such as roof tiles and lumber, and even if wholesale prices go up, company policy is to sell the items at a loss rather than anger customers. Wal-Mart Stores Inc. has donated $23 million in cash and goods, drawing wide praise.
Wal-Mart, whose stores have become a lifeline throughout the Gulf Coast, operates a massive distribution center in Brookhaven, a small, bustling city near Interstate 55 in south-central Mississippi. The storm inflicted heavy damage in the town, but nobody died, the buildings can be repaired and power is back on in most neighborhoods. Brookhaven is thus well-positioned to serve as a forward base for the reconstruction effort to come, and it may wind up settling hundreds of evacuees for months or years.
Betsy Penn Smith, a local Realtor, has been working 16-hour days since the storm, fielding queries from displaced people needing houses. But when local shelters and hotels called asking for printed real estate listings to hand to hurricane victims, she held off, not wanting to seem exploitative.
"It's not the character of this town" to take advantage of people, she said. "We're still just trying to cut the misery. We're going to be privileged to integrate a lot of new people into this community. We may wind up being a little more diverse, which won't hurt us one bit."
A. Lavelle Sullivan, president of the Brookhaven-Lincoln County Chamber of Commerce, owns Ford and Mazda dealerships in town, and his business is a microcosm of the mixed effects of the disaster. His new-car sales volume plunged after the storm, and he's laid off a few part-time workers.
But storm-damaged cars and trucks needing repair are starting to turn up at his body shop. Larry Lofton, body-shop manager, spent the Labor Day holiday writing estimates -- and figures he may have to add an employee or two to handle a boom in repair work.
Sullivan, who stopped all advertising after the storm, is bracing for a flood of new-car sales as people start replacing destroyed vehicles. His biggest problem may well be securing enough inventory to handle the demand. "It could be huge," he said.
In the worst-hit places, people are still struggling to get their hands on food, water and medicine. But on the fringes of the disaster zone, the incipient boom is already apparent.
Stores in places as far away from the coast as Memphis and Little Rock are reporting huge sales spikes as people drive hundreds of miles to stock up. Recreational vehicles suddenly are striking many people as an appealing form of temporary housing, and RV sales lots are buzzing. Every hotel in the afflicted region that wasn't destroyed has people pleading for rooms at any price. Restaurants are packed.
Wal-Mart and Home Depot are in a class by themselves, going to extraordinary lengths to keep their customers supplied. Consider the case of the Aqua-Tainer, a 7 gallon plastic jug good for hauling water or gasoline.
Four weeks ago, as the hurricane season approached, Wal-Mart's emergency-preparedness division ordered 10,000 of the bright-blue items from Reliance Products LP, a small Canadian manufacturer, to create a stockpile for its 3,500 U.S. stores. As Hurricane Katrina took shape -- and a full week before it touched ground -- Wal-Mart ordered 40,000 more, giving Reliance time to ramp up.
After the storm and subsequent fuel shortage, stores across the nation sold out of gas cans. Not Wal-Mart. It's selling Aqua-Tainers like hotcakes for $7.82 apiece. Over the past week, from Memphis to Mobile, Ala., people could be seen filling the big canisters with gasoline. Sales have been "incredible," said Linda Lemer, general manager at Reliance.
The chain stores acknowledge they'll make money on the storm, but they contend it isn't just about that -- they're well aware that customer loyalty is at stake in a disaster on the scale of Katrina. "You remember the people who took care of you in a crisis situation," said Newman, the Brookhaven Home Depot manager.
In some ravaged communities, store sales are "off the charts," said Home Depot spokesman Yancey Casey. "You see booms in sales growth when a disaster strikes. It's not something you root for, but it's something you see."
Gillis reported from Brookhaven, Barbaro from Washington.