Houston’s massive problem

BY Ken Clark

Hurricane Harvey’s destructive stall over southeast Texas has converted Houston, the nation’s fourth-largest city, into a dangerous flood zone. The home improvement industry is reacting all along the Texas coast, with closings, disaster recovery efforts and, most immediately, accounting for the safety of their employees.

Five deaths have been reported so far. And authorities expect the torrential rains to continue for days.

The impact on the home improvement industry is likely to play out in the coming months, if not years, in a variety of ways. Already, Home Depot and Lowe’s have pledged financial support. Both companies are also providing relief or financial assistance to employees caught in the storm’s crosshairs.

One image broadcast on Twitter shows a powerless Zarsky Lumber warehouse in Victoria, Texas. A wall is ripped from the building.

Despite the damage, the store in Victoria remained open on Monday, thanks to a couple of generators supplying power. “The store took a hit here, but nothing we can’t fix,” said an employee. Even better news for Zarsky, which has six of its eight locations on the Gulf coast of Texas: all the employees are safely accounted for, he said.

Meanwhile, Houston – the nation’s fourth largest city – has come to a halt, according to Craig Cowart, formerly of HDW’s Houston division, and now with Tyndale Advisors. “The entire city and all surrounding cities are basically shut down,” he told HBSDealer in an e-mail. “And individuals are sheltering in place as roads are blocked and there is no real outlet for evacuation.”

Shreveport, Louisiana-based Hardware Distribution Warehouses closed its Houston DC on Monday out of concern for the safety of its employees. Several of HDW's employees lost their homes and suffered property damage, the company said in a press release. 

The natural disaster is likely to turn into an economic disaster, as well, with early estimates of the damage exceeding $30 billion. That would make Harvey one of the 10 most damaging on record.

“A historic event is currently unfolding in Texas,” wrote Aon Plc, in a research note to clients, according to this Bloomberg article.

According to retail-specific weather forecasting service Planalytics, retailers will suffer in general. “Planalytics' initial estimate on lost sales in the Consumer/Retail sector will be $1 billion,” the company wrote on Monday. “This represents revenue that is lost and will not be made up later.”

Home centers and farm-and-ranch stores will fare better than most, seeing sales boost before the storm, and demand for clean-up supplies in future weeks and months, the report said.


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Regulatory Wrap-Up

Regulatory Wrap-Up: A wage-raise veto in Illinois



Illinois: As expected, Gov. Rauner vetoed legislation seeking to raise the state’s minimum wage to $15/hr by 2022. While not likely, the legislature could override the veto with ten additional votes in the house and six in the senate. While the statewide minimum remains at $8.25/hr, the city of Chicago is currently at $11/hr with a rise to $13 by 2019. Cook County, the largest county in the state, has an increase scheduled to reach $13/hr in 2020, however over 80% of municipalities have opted out of the increase.

Missouri: Minimum wage protests are occurring in both Kansas City and St. Louis. Protesters are calling on businesses to voluntarily maintain higher wages despite a recently passed statewide law that prevents cities from setting rates higher than the state’s $7.70/hr rate. Protests are likely to continue through the weekend.

Flagstaff, Ariz: A lawsuit that sought to remove a wage-related initiative from the ballot was dismissed by a judge this week. The current law calls for the city minimum wage to increase to $15.50 by 2020. The dismissal allows the initiative language supported by the Greater Flagstaff Chamber of Commerce to appear on the 2018 ballot. It would peg the the city's wage rate $0.50/hr higher than the state rate and link the city’s annual increases to the state’s timetable ($12/hr by 2020).

Montgomery County, Md.: County Executive Leggett reaffirmed his concerns regarding a countywide increase to a $15/hr minimum wage. Leggett vetoed $15/hr legislation earlier this year; however, several of the council members who are running for higher office have reintroduced the legislation. Leggett’s comments come as the county awaits a revised economic impact study that he commissioned. The original version contained methodology errors.

Paid Leave

Pennsylvania: A state senator reintroduced legislation for the third time that seeks to mandate employers provide 12 weeks of paid leave for new parents.

Labor Policy

NLRB: Peter Robb, a management attorney from Vermont, will be selected to fill the position of NLRB General Counsel, pending a background check. This position is one of most important within the agency and plays a critical role in determining what cases the board reviews. An NLRB General Counsel that leans towards management is a helpful development for employers. The outgoing general counsel’s term ends Oct. 31.  

Missouri: Missouri allows residents to call a referendum on new legislation by collecting signatures from at least 5 percent of voters (over 100,000) from six of the state’s eight congressional districts. Unions appear to have completed that task by submitting 300,000 signatures to the secretary of state in an effort to overturn a right to work measure that passed during the 2017 legislative session. The secretary of state has suspended the law the while his office confirms the validity of the signatures. If more than 100,000 signatures are deemed valid, a referendum to overturn the state’s right to work law will appear on the 2018 ballot.

Labor Activism

Labor Day: Both the AFL-CIO and the SEIU are focusing their Labor Day PR efforts in midwestern states that went for Donald Trump. The AFL-CIO-backed Good Jobs Nation is organizing statewide rallies in hopes of highlighting the need for worker protections in the president’s ongoing trade negotiations and other policy initiatives, including an Indiana event aimed at highlighting Carrier plant job losses. President Trump previously pledged to keep Carrier jobs in the United States. The SEIU announced that it will spend $100 million organizing in rust belt states beginning this weekend and ramping up into 2018. On Sept. 4, operators should expect SEIU strikes and protests in major metros across the country.

Menu Labeling

New York City, N.Y.: As a result of a case brought in federal court by the National Association of Convenience Stores and the National Restaurant Association among others, the city announced an agreement to postpone implementation of the city menu labeling law and defer to the enactment dates established in the federal regulations. The federal law goes into effect on May 7, 2018 and applies to restaurant chains with twenty or more outlets.

Health Care

Wellness Programs: The U.S. District Court ruled that the Equal Employment Opportunity Commission’s regulations regarding wellness programs were arbitrary and need to be revisited. The issue at hand is a regulation that allows employers to raise premiums up to 30% for employees that elect not to participate in employer-sponsored wellness programs. While the court found that the EEOC rules did not adequately defend the rationale for the 30% threshold, the current rules still remain in place. The federal judge determined that rescinding the rule at this time would cause ‘disruption and confusion’ in the market and directed the EEOC to revisit the rule. There is no announced timeline for future EEOC action.


Massachusetts: The Department of Revenue heard testimony this week on the recently issued regulation that establishes apps and/or files on a customer’s computer or smartphone constitutes physical presence in the state for sales tax collection purposes.  Public comments on the regulation remain open until Aug. 30.

New Jersey: The division of taxation announced a voluntary disclosure program for online retailers that is similar but distinct from the Multistate Tax Commission’s previously announced program. The program runs from Aug. 21 to Nov. 21 and applies to any non-compliant businesses that fall under the ‘affiliate nexus’ law passed in 2014. That law applies to sellers with contractual ties to any state-based entity from which the seller receives some form of compensation for referral sales.

South Dakota: The State Supreme Court is set to hear oral arguments on Aug. 29 in the landmark “economic nexus” case that could ultimately rise to the U.S. Supreme Court. The first-in-the-nation law was signed by Gov. Dennis Daugaard in March 2016 and went into effect on May 1, 2016. The law mandates sales tax collection from out of state merchants with over $100,000 in sales (or 200 transactions) per year into the state. Should the Court find for the plaintiffs, the case may be reviewed by the U.S. Supreme Court during the 2018 session.

Key Takeaways

  • A D.C. restaurant, Oceanaire which is part of the Landry’s chain, added a 3% surcharge to checks noting it was “due to the rising costs of doing business in this location, including costs associated with higher minimum wage rates.” The story was picked up in the press and on social media and the high volume of customer complaints caused the restaurant to reverse course and rescind the surcharge. The public response was predictable and the company unnecessarily created a media event. Other companies would be wise to learn from this episode.
  • Union executives and labor leaders are calling into question the SEIU’s announcement this week to “double-down” on electoral politics in 2018. The union’s leadership slashed the Fight for $15 organizing budget in late 2016 and appears to be redirecting at least some of that money toward 2018 political races. Resource allocation weighted toward electoral politics versus traditional organizing efforts is indicative of the union’s current priorities – demonstrating that the need to have friendly politicians in office is viewed of greater importance than organizing more workers into the union.
  • As the relationship between the President and Republicans in Congress continues to deteriorate, Trump has recently stated that he wants to tie funding for a border wall to the government spending bill which will be negotiated in September. A continued impasse could trigger a government shutdown. While a shutdown may have minimal impact on daily operations, further chaos at the federal level could cause consumer unease and continues to block progress on the business agenda.

Legislature Status for Week of 8/28/17

  • The United States Senate is in recess with pro forma sessions every 3 days until Sept 5
  • The United States House is in recess with pro forma sessions every 3 days until Sept 5
  • Ten state legislatures are currently in regular session: California, Illinois, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania and Wisconsin.


We've recently launched a podcast that focuses on politics and policy for the restaurant industry. You can listen to the "Working Lunch" podcast by clicking here or subscribe on iTunes here.

The Regulatory Wrap-Up is presented by Align Public Strategies. Click here to learn how Align can provide your brand with the counsel and insight you need to navigate the policy and political issues impacting retail.




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Market Recap: RISI Crow’s Construction Materials Cost Index


A price index of lumber and panels used in actual construction for Aug. 25, 2017.

Western: regional species perimeter foundation.
Southern: regional species slab construction.

Crow's Market Recap: A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow's Weekly Market Report.


The activity level in SPF picked up late Wednesday and flowed into Thursday as the date for the CVD-free period approached. After running inventories low while waiting out price declines, buyers came back in, shopping the market for major volumes in some instances. Other buyers continued to simply fill in holes and check on shipments, maintaining low inventory levels.

  • Southern Pine pricing continued to trickle down. Traders noted minimal change from prior weeks. Lower quotes appeared in a wide range of items and producers discounted deeper where excesses appeared. Buyers sensed plenty of availability and purchased accordingly.
  • Downward price pressure persisted in Coastal species. Production outpaced demand to varying degrees, depending on the items. Green Doug Fir discounts were considerably deeper than dry.
  • Inland lumber was split. Fir-Larch continues to ride the force of strong demand to firmer prices. Hem-Fir, on the other hand, shows ongoing weakness, especially in the narrows of #2&Btr lumber. Across all markets and items, stud prices remained some of the weakest.
  • Mills continued to discount, trying to sell volumes into a market where interest among buyers is limited. Nevertheless, traders noted that some prices have now reached levels where buyers can feel more comfortable.
  • Radiata Pine Mldg&Btr shows some potential market weakness because more pruned logs are being processed.
  • Ponderosa Pine industrial lumber shows stability in Mldg&Btr but weakness in all low grades of Shop and Commons. Ponderosa Pine 4/4 Selects remain very stable, with no changes in either C&Btr or D grades. Ponderosa Pine #3 Common has been softening over the last few weeks.
  • The sales pace in Western Red Cedar remained pedestrian as the market awaited the CVD-free gap period and its ramifications. Producers reported discounting a few items, but they were not widespread and did not influence market prices negatively.


What began as “cracks” last week in the OSB market opened into some holes in price levels this week in western zones. Buyers have been uncomfortable with high OSB prices for weeks, and have been waiting out the market as mills tried to stand firm.

  • Southern Pine plywood sales activity improved in the latter half of the week. Early-week discounts were sometimes deep, as producers tried to move excesses or push order files into September. By Thursday, quotes steadied and even bumped higher.
  • Western Fir plywood production continued to outpace demand, forcing mills to lower prices once again. Low inventories out in the field kept buyers in the market, but purchases often only covered immediate needs and little else.
  • Canadian plywood activity was reported steady this week, with buyers trying to stand mills off. Some limited discounting was reported but relegated to “special deals.” Low inventories underpin the market. A source said the market consisted of “a lot of chasing and changing” orders.
  • MDF producers generally reported healthy order files, although the perception that business could be better was common.
  • Producers in the West reported some weakness in particleboard, with the week’s orders shy of production levels. Hopes for an uptick in fall demand were prevalent.

For more on RISI, click here.


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