The aftershocks of the Japanese earthquake reached the shores of the U.S. today as investors and financial analysts started assessing the damage that Japan's devastating earthquakes and tsunami would have on U.S. businesses. In the first day of trading after Japan was ravaged by earthquakes and tsunamis, shareholders of all sizes were selling off stocks of the American companies that were predicted to suffer the worst collateral damage from Japan's natural disaster.
Included in the post-earthquake stock sell off were U.S. luxury brands like Coach (COH) and Tiffany (TIF), both of which derive as much as 20% of their sales from their Japanese retail operations. Besides the Coach and Tiffany stores that were physically affected by the earthquakes and tsunami, investors were worried that consumer sentiment in Japan would plunge in a way that is similar to how American consumers responded after Hurricane Katrina and 9/11. It's easy to understand why high-priced purses and diamonds might not be high on anyone's priority list when they're distracted by constant news reports about death, destruction, and nuclear meltdown.
U.S. luxury retailers have been singled out so far, but Coach and Tiffany are definitely not the only members of the U.S. retail industry that will suffer from Japan's natural disaster.
The Gap (GPS) operates 131 namesake stores and 29 Banana Republic stores in Japan, and at least 6 of those stores were physically located in the hardest hit Japanese cities and prefectures. American Apparel (APP) has 6 stores in Japan, Apple (AAPL) has 7 stores in Japan, and Abercrombie & Fitch (ANF) has two stores in Japan. It won't be a surprise to hear references to the earthquake and its negative sales impact in future conference calls.
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Costco (COST) has nine warehouse stores in Japan, and Wal-Mart (WMT) operates 414 retail stores in Japan, including namesake hypermarkets and Seiyu supermarkets. In contrast to high-end and luxury retailers, it's easy to see how Wal-Mart and Costco might actually benefit as displaced victims have to relocate and rebuild.
Toys 'R Us (TOY) has 45 stores in Japan, and L.L. Bean has 20 Japanese stores, all of which could be negatively impacted by Japanese citizens who are not in the mood to hike and play.
The company with U.S. ties that will undoubtedly be the most devastated, however, is Seven & I Holdings, the parent company of 7-11 Inc. in the U.S. There are 13,232 7-11 stores in Japan , and about 25% of those are physically located in the cities and prefectures that suffered the most earthquake and tsunami damage. Surely Seven & I lost a significant number of locations, and for those stores that are left standing, their supply chain and customer base will surely be severely compromised.
While it is somewhat heartless to worry about the sales of luxury leather, and Japanese slurpees in the midst of tragic human suffering, life is business and business is life. And in case we all need any more gentle reminders, the Japanese disaster makes us all mindful that whatever happens anywhere on the globe affects everyone on the globe. There are many things we'd like to forget about the Japanese earthquake and tsunami of 2011, but the responsibilities and interdependence of global citizenship is not one of them.
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