With a historic drought now in its fourth year, California residents and businesses are facing mandatory water cutbacks. The impact on retail appears uncertain.
Big 5 Sporting Goods, which has 437 stores on the West Coast with about half in California, recently addressed the potential fallout on its first-quarter conference call.
Steven Miller, president and CEO, said the drought affects the local economy, particularly the farm communities the chain serves. From a recreational standpoint, snowpack this year is "down significantly" from historic levels and that's going to lead to lower water levels in lakes and rivers.
With the water-use restrictions and the publicity around conserving water, water recreation products such as pool toys and inflatable pools may be affected. Campground use may decline if showers and flushing toilets aren't available or if the facilities are closed entirely.
Big 5 is monitoring inventory levels around affected categories. Said Mr. Miller, "It's a bit of a wait and see issue. Hopefully, it has a minor impact on our business, but it is certainly not helpful."
Source: big5sportinggoods.com
The measures call for cities and water agencies to reduce water usage by amounts ranging from eight percent to 36 percent. Plans call for fines for offenders, higher prices for bigger water users, and lawn-watering limits. The mandatory restrictions came after a voluntary reduction failed.
Water-intensive sectors — including life sciences, brewing and soft drink bottling, laundry services, food manufacturers and construction — are expected to take a significant hit.
Agriculture is exempt from the new rationing measures but farmers have already been forced to fallow fields and lay off workers after their access to water from reservoirs was reduced. California farms provide more than a fifth of the country's fruit, tree nuts and vegetables.
California Governor Jerry Brown has said a bigger conservation commitment will be required to handle likely longer periods of arid weather conditions than in the past.
The California Grocers Association said in a statement that the Governor's "comment that 'it's a different world' and so 'we have to act differently' will likely characterize much of the discussion for the remainder of this year and into 2016."
- Big 5 Sporting Goods Corporation Announces Fiscal 2015 First Quarter Results - Big 5 Sporting Goods
- Big 5 Sporting Goods' (BGFV) CEO Steve Miller on Q1 2015 Results - Earnings Call Transcript - Seeking Alpha
- California drought may be felt in Pittsburgh restaurants, groceries - Pittsburgh Tribune
- California board approves emergency water rules - USA Today
- Jerry Brown Warns Drought Means California Must Adapt to Drier Future - Bloomberg
- Drought cutbacks threaten several local industries, study says - Fox 5 San Diego
- California Gov. Brown hears business concerns about drought plan - Reuters
- Proposed Statewide Water Restrictions - California Grocers Association