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TheStreet Open House

Sozzi: Earthquakes Could Shake These 3 Californian Retail Giants

NEW YORK (TheStreet) -- Ninja-like investment strategists such as yours truly are trained at investigating the root causes of large expected, or unexpected, events either in the economy or at a company. Now, I'm no geologist, and haven't studied rock formations since ninth grade earth science class, but the series of earthquakes that have hit California in March do appear to be pointing to the possibility of one significant earthquake in the not too distant future.

According to geologists, there is now a 5% chance that these recent events lighting up Twitter (TWTR) foreshadow a more worrisome quake to strike shortly. To freak you out even more, a recent study by the California Geological Survey noted the "Big One" is looming for California, bringing with it a tsunami that could cause north of $70 billion in damage. BTW, don't think the San Andreas fault is the only source of concern in the state; the less publicized Cascadia fault system, where there have been six quakes of magnitude 7.0 or greater in the last 100 years, is being looked at as a potential epicenter.

It's time to research the amount of exposure a company you own has to California, and the disaster prep work being done by execs. The obvious is to immediately think of Apple's (AAPL) and Twitter's close proximity to San Francisco Bay via Silicon Valley. However, there would clearly be other businesses impacted should California get the Big One. For instance:

  • Costco (COST) has 23% of its store base in California. Further, it cites this in its annual report as a material risk factor: "natural disasters, such as hurricanes, typhoons, or earthquakes, particularly in California or in Washington State, where our centralized systems and administrative personnel are located, could affect our operations."
  • Kroger (KR) is the largest traditional supermarket in California, with 13% of its store base in the state under the Ralph's, Food for Less, and Foods Co. banners.
  • Dollar Tree (DLTR) is the largest dollar store in California, with 10% of its store base in the state. Additionally, it operates two distribution centers, one in San Bernadino and the other in Stockton.

I am off to buy cans of soup just in case. Brian Sozzi out.

-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

At the time of publication, Sozzi held no position in the stocks mentioned.

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